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The problem with PFM

I love online Personal Financial Management tools. These web based services which allow people to visualize and manage their financial lives in one place, using pretty graphs to show where their money goes, set budgets and alerts, have shown how money should be viewed and interacted with in a richer way than most banks currently provide. The problem with them though is that getting data into them, certainly in the UK, is a real pain in the...

First a bit of background, Personal Financial Management tools need data to exist. There are a number of ways to get this data;

1. Users manually download data from their accounts to a file in a recognized financial data format e.g. Open Financial Exchange (OFX), and then upload to their online tool of choice. 

2. The tool scrapes the data from the bank i.e. a script logs on for you and downloads the data, this involves handing over your password and logon and probably invalidates your account’s terms and conditions. If your bank uses a physical device to generate an access code as part of the logon then scraping will not work.

3. You are lucky and live in a country where banks provide some sort of automated feed directly to your PFM from the bank, such as Germany. No need to handover your full logon details to Internet banking just authorization for a data feed. Your postman does not need a key to your house to deliver a letter.

Clearly option 3 is the most convenient from a user point of view and is also much more secure than option 2.

In the UK none of the high street banks currently provide automated feeds from their personal current accounts. Nationwide used to have an OFX server running but I believe it was switched off a few years ago. Because of this lack of automated data feeds the UK PFM market is pretty stagnant. Kublax closed down a few years ago. Wesabe partnered with the Telegraph but to no avail as they also closed their doors soon after. Mint have threatened to launch in the UK many times but I have still not seen a date. There are some still running of course, Love Money, Money Dashboard and Money Toolkit being fine examples of the genre but I have a feeling their usage remains niche due to the issues with getting data into them as highlighted above.

On the business side of things the situation is a little better with automated feeds for HSBC (my employer) working with Xero and Barclays recently announced an automated service with Freeagent. The problem is that these are both bespoke implementations, much like the automated feeds from banks in other countries which vary by instituion. In Germany they are lucky enough to have the FinTS/HBCI system which is an attempt at a standard protocol and delivery mechanism but from my conversations with people in Germany it is a little elderly and not implemented consistently across banks. I think it is pretty safe to state that for the majority of the financial services world no standard exists today for the automatic feeding of any transactional data to the web. This means for the majority of users we are left with the hardly enticing choice of either manual and onerous data uploading or very risky data scraping options. 

Isn’t this a problem for the banks to fix?

Yes it probably is but I don’t believe there is much chance of use seeing all the banks in the world coming together in the next few years to agree a standard form of automated data exchange with web services, to be primarily used by PFMs who they see as competitors. The fact that the banks would benefit from these standards themselves as it means they could pull in competitor data into their own online banking services but I think the number of perceived issues prevent this from becoming reality. Reasons such as fear of the data feed being a security risk that would attract crackers from far and wide, the thought of transaction data being plugged into places that could lead to non-regulated financial advice being or more accurately the handing over of valuable customer data for others to mine. There are many implications to opening up a customer controlled data feed from banks.

As customers demand more from their online financial interfaces the desire to connect their tools of choice with their financial data is increasing. The banks that are smart enough to realize this is an enticing interface for some customers will perhaps offer some feeds but will they get behind an open standard that all banks and web services can use and integrate with? I can’t see it happening anytime soon due to the complexity of the banking industry let alone the perceived threat to competition from new entrants.

What about the Government? There is a chance in the UK that Government proposals may speed up the provision of standard automated feeds in the form of the MiData project, which aims to free customer usage data from various industries and return it to people for them to use as an aid to get better offers for products and services. I am a fan of the MiData project and what it is trying to achieve but Governments like Banks are not renowned for their speed to market.

This is why I think the future lays in the hands of the PFM providers and other financial services startups. They have built their tools on the open standards and open source code that the pioneers of the open web have built. Can they give something back to the web community and build some open standard financial data services? Build services that link to other services, for example could I use Mint and integrate it with FreeAgent?

Today we have a wealth of PFMs that have solutions for getting data in but they are not so great at sharing that data outwards, like the banks, so they are effectively just creating a single layer on top of the banks when I think they should be joining together to create an ecosystem, an ecosystem that the banks would find it increasingly difficult to ignore.

We see more and more new PFM tools enter the market every year and I think we are reaching peak PFM. An ever prettier array of pie charts, graphs and budget calculators offering similar functionality but all bound by the issues of getting data inside them and no real integration between them.

What I would like PFMs and other financial startups to focus on is a wider ecosystem otherwise they are just making new silos; we have more than enough of those in the banking world. Today Yodlee is the major player in this space due to the fact they have integration and data feeds from the largest number of banks. If a standard for data distribution were put in place then no one player would have the upper hand, be that a bank or an aggregator. Is it not in the interest of the wider PFM market to come up with open standards?

Where are the open standards in banking?

There does seem to be a lack of open standards in banking that can be used by the wider world. There are standard formats for financial transaction data, such as OFX mentioned above; the issue is that there are no standards for moving that data between banks and the web. The OFX consortium did provide a client server method for the transfer of data but the world has moved on and newer methods are required. Whatever happened to OFX? Could someone resurrect this?

The web for me is better when we have smaller things loosely coupled and backed up with a lovely dollop of open standards. Where are the open source initiatives around financial APIs?

The big players in the PFM market are readying their app stores and development platforms. Yodlee's platform announcement was reporteed recently on Finextra, and Mint are also planning to make their APIs (Application Programming Interfaces) public soon. This is a great thing as it will allow for ecosystems to flourish. My only concern is that we are potentially building powerful single players. Will these new APIs be compatible with each other? Will data be in the same format? I hope they will.

Old world or new world?

PFM tools have shown the traditional financial industry how to display information about money on the web. They have given people more insight and control over their money. I think it is in their hands to show how data about money can be part of the wider web and not just locked in silos. I think they can show the way with standardized automated feeds that can fuel a wider ecosystem that will benefit people further in how they interact with money.

The banks can and should play a part in this. They clearly hold the keys to the data and may be reluctant to let go but I think it is in their interest to do so for the benefit of their customers as well as themselves. Making themselves a key part of this new ecosystem not only shows they are willing to open up it also shows they understand the web. 

So, who will fix the problem with PFM?


Comments: (5)

A Finextra member
A Finextra member 04 May, 2012, 10:51Be the first to give this comment the thumbs up 0 likes

"I think the future lays in the hands of the PFM providers and other financial services startups" - this. 

Lack of central data standards and access is only a problem as long as the banks remain centre of our personal finance universe. At a recent Mashup Payments event there was an interesting debate about the opportunity for currency to reside within each of the individual retailers we use (be it Pret, Amazon or National rail), and for a far more utopian money landscape that perhaps didn't need the bank; or a utopia where banks serve as holders of our identity and little else (saw Dave Birch present an excellent TEDx talk recently on real-life psychic paper).

Not sure if this will happen in my life-time, but it's exciting to think of problems like mistrust, competition and complexity as hurdles that could be easily sidestepped by simply evolving (or devolving) our concept of payment. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 May, 2012, 12:41Be the first to give this comment the thumbs up 0 likes

I'd covered this subject last year in my personal blog post How Many More PFMs Do We Need? Only individual companies jockeying for market leadership will fix the problem with PFM. 

To me, Mint has fixed this problem and has been rewarded with market leadership for its efforts. While I personally refused to share my Internet Banking credentials while registering for Mint, I can't deny that (a) over 5M users of Mint have done so (b) the thousands of involved American banks haven't protested about infringement of their standard terms and conditions nor have they implemented 2FA en masse which will render this method infeasible. When it's in such a position, I'm not sure why Mint would want to promote an industry standard which will result in diluting its competitive advantage, besides anyway going the same way as OFX.

Talking about elusive industry standards, in his sayanora blog post, the CEO of WeSabe admitted that one of his chief mistakes was to delay embracing a proprietary platform like Yodlee in the quest for a vendor-independent industry standard.

A Finextra member
A Finextra member 07 May, 2012, 20:31Be the first to give this comment the thumbs up 0 likes

Ross: Do you not think when we have a mutlitude of currencies to pay with this problem will be multiplied tenfold? The majority will still be linked to your bank account for quite some time. How to correlate what you buy if your account just shows £50 Starbucks, £50 Barclays Wallet etc. I also look forward to this utopian dreamworld but I agree we are both too yo9ung to see it.

Ketharaman: So you are saying Mint have won or are you saying Yodlee have won? Either way I think both are acting as silos. I would say Yodlee are in a more powerful position than Mint especially as Mint have no real userbase outside North America. 

I am interested in how much of a problem internet banking fraud is in the US as it seems to have a much more relaxed attitude to logon technology and data feeds. Do you have any data?

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 08 May, 2012, 19:00Be the first to give this comment the thumbs up 0 likes


Clearly, Mint is the winner in PFM and Yodlee, in account aggregation. Their respective leadership positions are not necessarily mutually exclusive. While a PFM user might perceive them as silos, they're not standards organizations. Their silos are the source of their competitive advantage and are bound to be there. 

Your observations about relatively lax security standards in the US apply for more than just Internet Banking: I haven't come across a single merchant in the US who uses VbV or other 2FA security for CNP transactions; It's the only market I know in which there's an ACH transaction - called TEL, if I'm not mistaken - that allows a merchant to pull out money from someone else's bank account with the mere knowledge of the account details (only if there's a dispute later does the merchant have to provide evidence of having obtained those account details legitimately). Yet, I've never come across any figures stating that fraud loss as a percentage of transaction value is higher in the US than other nations that use much greater security.

We've this extremely interesting situation in India where the banking regulator is purportedly making online and mobile payments more and more safe for consumers by adding layer after layer of security and consumers using 'cash on delivery' as #1 method of payment for online shopping!

A Finextra member
A Finextra member 01 June, 2012, 14:08Be the first to give this comment the thumbs up 0 likes

Good point of view.

I believe in US, Yodlee was the backbone of Mint aggregating all account & transaction data of 3 million Mint customers until Jan 2011. Post Intuit's acquistion of Mint, their relationship with Yodlee ended and Intuit replaced Yodlee's standards with their own framework of data extraction & aggregation from all financial institutions that were tied up with Mint originally. Over the years, Intuit has enhanced their business and have become North america's market leader in PFM.

I am sure Intuit would want to expand their market leadership across the globe. However they are extremely dependent on regulations, consumer behaviour and financial institutions' readiness in respective Geos to embrace them. In Geos where the before mentioned factors are not favourable, there is no real business case for PFMs (in the real essence as it exist in US) to exist. I believe in current european economic climate, none of the UK banks would like to gamble on consumers' perception on security by experimenting standardised account aggregation using consumers' online credentials. Further, with most of the banks using 2FA, PFM market leaders in North America have to spend additional costs in customizing their framework to suit UK banking standards. And on top, FSA's approval for the same can be extremely hard to come by.

In essence - In current european economic climate, UK banks and regulators may not welcome this idea and PFM leaders like Intuit also may not see a real business case.

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