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A Killer Feature For PFM On The Eve Of PSD2

Personal Finance Managers and Mobile Money Management Apps (herewith “PFM”) have been around for over a decade. So far, PFM has focused on budgeting by offering tips to save money on everyday expenses such as the proverbial $5 coffee. For reasons highlighted in Innovative Fintechs Don’t Need No Open Banking Regulation, PFM's value proposition has so far been disproportionate to the level of account access it has demanded. On top of that, it has called for change in behavior.

Changing consumer behavior is hard in any product category. But it's virtually impossible in PFM because consumers think the category can add a lot of value on top of their existing behavior. IMO, this explains the lukewarm reception received by PFM so far.

Will PSD 2 / Open Banking change this?

That depends on how well PFM uses the new regulation to enhance its value proposition.

I can think of at least two ways for PFM to do that.

First, do what customers are asking for.

Second, exceed customer's expectations.

Here's a partial wishlist of what customers and prospective customers are expecting from PFM:

  1. Earn $$$ by sweeping X amount from a checking account to a savings product - My blog post Innovative Fintechs Don’t Need No Open Banking Regulation
  2. “Moven are not telling me that, by moving credit card with provider X to provider Y, I would be Z pounds a year better off based upon my usual behaviour. That would really add some value.” – Comment from anonymous Finextra Member on “HSBC moves into open banking
  3. “Not generic offers, but ones that use your data to *show* you how much a service saves (or makes) you.” – Bradley Leimer via Twitter.

As you can see, the common theme is, make money by capitalizing upon external factors.

If PFM can uncover ways to help consumers to do this without needing them to change their behavior, its value proposition will go up one level.

With the kind of banking information that would be available under PSD2, it should be easy for PFM to deliver personalized offers that make (or save) money for its users.

Until recently, I thought that was all PFM could do.

But I changed my mind after a recent experience with my Mobile Network Operator.

My current mobile phone connection was given to me by my then employer 15 years ago. When I quit that company, I transferred the connection to my personal name for the sake of continuity. I use it now exclusively for business and charge it to my company’s account. The bills started attracting 18% Goods and Service Tax from 1 July 2017. As a B2C connection, the tax was a net cost. I heard that B2B connections were eligible to reclaim the tax by way of Input Tax Credit. In other words, I'd be able to earn a few $$ by transferring the connection to my company's name.

I approached the MNO for the transfer. I was asked to cancel the connection on my personal name, place a purchase order for the same number from my company’s name, and fulfill KYC for my company. The entire process took three visits to the MNO’s store, two visits of its representative to my office for doing physical verification and tons of documentation.

Long story short, the transfer proved to be far more cumbersome than I'd anticipated.

Why is it far more painful to get a mobile phone connection, debit card or Internet Banking in the name of a company than an individual?


I've one more connection in my personal name but I've decided to forego the money-making opportunity because it's not worth the hassle of transferring it to my company name.

This is when it struck me that PFM-like technology could help execute the transfer.

I had a repeat of this epiphany moment a few days later when my credit card issuing bank called me to offer a free upgrade to another credit card that provided more rewards. This mirrors #2 in the above wishlist, just that the opportunity to make money was surfaced by a bank and not PFM. I've placed my existing credit card on file with my website hosting provider and many other merchants who follow recurring billing for the services they provide to me on an ongoing basis. If I change my credit card, I'd have to update my card on file with all of them. I thought that's too much trouble and declined my bank's offer.

If only PFM changed my card on file with all those merchants. I'd accept my bank's personalized offer in a jiffy.

It's not just this MNO or this bank.

With the constant closure of branches and dumbing down of remote channel staff, changing plans and service providers has become very painful.

That depends upon the caliber of live human agents. I can think of many brands whose CX will improve if they replaced their humans with chatbots.


I'm sure many readers regularly come across opportunities to make / save $-$$ by switching from one product / plan to another or $$-$$$ by switching from one service provider. I'm equally sure that they let many of those opportunities pass because of inertia, lack of time or the disproportionate amount of efforts required to actually effect the switch - remember the old saying about switching banks being more painful than root canal surgery?

If only PFM does the heavy lifting by switching the product, plan, and service provider on our behalf.

This would surely be a killer feature.

By executing its recommendations automatically, PFM can take its value proposition to a totally different league.

I’m not sure whether the access provided by PSD2 will be sufficient for PFM to execute all of its recommendations entirely automatically. To that extent, I may just be eating my own dog food by being aspirational.

But I do believe there are many recommendations that could be executed by PFM with little or no user intervention. Take the one about switching credit cards described above. With the account access provided by PSD2, it can't be rocket science for PFM to parse through my transaction history, figure out who are the merchants automatically charging my existing credit card, and update my new card on file with them.

By delivering this killer feature, PFM should be able to charge a fees equivalent to a certain percentage of the gain it delivers to its customers. This would provide PFM providers with a sustainable business model.


Comments: (3)

Dharmesh Mistry
Dharmesh Mistry - AskHomey - Reading 05 December, 2017, 07:45Be the first to give this comment the thumbs up 0 likes

We have account switching mandated here in UK... but its really not driven many more customers to start changing even though there are aggregators like that show you the best deal.

Bottom line generally is that there is little difference in benefits/quality of service so customers do not bother...

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 December, 2017, 10:561 like 1 like

UK account switching just empowers people to switch accounts. It doesn't spell out the benefit of doing so. It does not carry out the switch for them. People evaluate the switch at high level and conclude that all banks are the same. At the high level, they're right. So the benefit of switching is negligible. The effort involved in making the switch is not negligible. Ergo cost exceeds benefit and UK account switching has met with lukewarm reception.

OTOH, PFM goes a little deeper and makes a recommendation to switch only if the benefit of switching is significant for the given consumer. By executing the switch automatically, PFM eliminates the cost of switching. Ergo benefit exceeds cost and switch is more likely to happen.

As things stand, benefit of switching could be significant for credit card, mortgage and other banking products. Admittedly, they're negligible for a basic checking account. But that's only if you restrict the field to the legacy banks. If you thrown in the challenger banks, the situation may change, especially if the ones in UK / Europe take some tips from their counterparts in India on how to become more aggressive by negotiating better funding and valuation terms with VCs.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 December, 2017, 17:31Be the first to give this comment the thumbs up 0 likes

EARNY is a great example of a niche-PFM that supports the killer feature: Recommend-and-Execute.

Credit card redemption startup Earny raises $9 million

After reading about Earny, I thought of one more item on the PFM wishlist:

"Never let my rewards lapse". PFM alerts customer to reward points about to lapse, offers to place the redemption order and follow up with the bank to ensure that the gift is delivered. 

As I highlighted in Bank Insources Credit Card Reward Redemption Theft, the redemption process is full of friction and PFM can help ensure that customer doesn't lose out on their rewards. 

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