Past

Software to help people manage their money has been around almost as long as PC’s. Intuit was one of the first to provide such a solution and was founded in 1983, with Microsoft following 8 years later with MS Money. As PC’s got better, so did these solutions both in terms of functionality and data visualisation. (Note “Home Banking” solutions based on PC’s and a phone line first hit the scene in 1981 from the likes of Citibank and Chase Manhatten Bank.). Fast forward to 1999 and Yodlee was setup to aggregate data from multiple banks using the internet.

Yodlee was one of the first to provide what has been known as Personal Finance Management (PFM) solution and who also pioneered aggregation of banking data, allowing customers to view account data from multiple banks in one screen. Another key innovation within PFM was the categorisation of transactions to enable better analysis of transactional data and additional applications that leveraged this data such as budgets and goal setting.

A lack of standards for 3rd party access of bank data, security, poor categorisation of data and poor customer experience held back the widespread adoption of PFM.

Present

Today providing PFM is no longer innovative or a differentiator on its own, and indeed a more proactive approach to PFM is finally starting to provide real benefits to customers. The ability to aggregate data securely through Open Banking standards, automatic accurate categorisation (95%+accuracy) and more proactive customer experience have led to PFM2.0 or now called Personal Money Management (PMM). Better security and open banking has increased confidence in linking accounts from multiple banks into a single view. Better categorisation has meant that users spend more time understanding their finances than trying to correct or complete categorisation. Most solutions provide much richer visualisations of transactions for example using maps to show where you physically transacted or on a calendar showing both historic and forecast view of spend.

However the shift to proactively push useful insights has to be the best of the new features. Beyond simple balance updates insights such as when your salary has come in, when you might go overdrawn or that you have exceeded a budget you set for entertainment spend. PMM has also moved out of being a specific “thing you do” and accessed from a menu, to being embedded into almost every banking experience, thus lifting the overall banking experience to something much better than traditional self service banking. So it’s no surprise that PMM has become table stakes for banks, challengers and fintechs.

The innovators are already here with PFM’s next evolution, which I call a Personal Financial Coach (PFC). A PFC proactively helps you to achieve goals, whether it is for saving, investing or managing day to day spend better. For example Finn from JPMC provides a number of ways to help you meet savings goals such as rounding up transactions or suggesting additional saving when it identifies your usual spend has dropped and you could easily afford to put more money into your savings. A PFC not only proactively notifies you of insights to reach your goal but will seek permission to take action e.g. “You spent $50 less on entertainment this month, should I transfer $25 to your savings and let you keep the other $25 for other unplanned entertainment?” Thus another element of PFC is the introduction of conversational banking. The two are not necessarily linked, but are so much more powerful and engaging when combined. Clearly Ai is part of the mix now also.

Future

Having started at PFM and evolved to PMM and PFC what next? Surely having a personal financial coach for saving, spending or investing is all we need from a bank? This is what we have come to accept from banks, but digital is changing behaviours. Millennials already expect more and are ready to jump to alternatives, the next generation of banking has to move beyond banking and towards making our lives simpler and easier. It has to remove stress and friction making complete customer journeys easier than ever before.

So could banks go beyond banking to help manage our life stages or life styles better? BBVA thinks so, it has apps that help you plan buying a house or having a baby. Carvana and TrueCar help you get the best price for the car that you want and provide finance for it. All of these go beyond banking and the financial transaction itself. They have a data, product and services partner ecosystem to orchestrate a more complete customer journey and not just a financial transaction.

Alpha Bank in Russia were first to tie a Fit-bit device to a savings account, helping you to save as you exercise. However managing a healthy lifestyle has many more financial implications like better insurance and planning for long lifetime, so the bank could go much further by providing a broader ecosystem of providers that could help manage your healthy lifestyle.  

Such services overtime will assess much broader datasets and include emotional detection to further improve engagement to the point the service is empathetic to your personal circumstance. They will be an honest broker able even to differentiate what you say you want versus what you really feel you want. Monitoring visual clues in your tone, face and other biometric indicators like sweating or raised heart rate to truly understand you.

And as your trust grows, you share more and permission more so that the service becomes much more like a personal assistant than something that only helps you with money. So maybe the final transition is to Personal Assistants (PA). This does raise the challenge of how these would be positioned with the big tech players, would the banks PA compete, collaborate or coexist with Alexa, Siri, or Google? Either way the future for banks and money management is evolving to much more than just transactions.