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Bank can’t tell the difference between a yoghurt and a brush

Did you know “The Man Who Mistook His Wife for a Hat” book? Written by Oliver Sacks, the book tells stories of individuals afflicted with fantastic perceptual and intellectual aberrations. It includes the story about a man who sometimes patted the heads of water hydrants and parking meters, taking them to be the heads of children.

Personal finance management (PFM) tool that banks are providing suffers a similar disease. Products that you buy in shops should be automatically categorized by a PFM into categories (milk into “food”, knives into “kitchen equipment”, tires into “car parts” etc.) and then shown as a structure of your expenditures and incomes.

- “Ok, so my car is a piggybank responsible for 50% share in my monthly budget. I will sell the car and buy one that is more cost efficient or maybe try public transport for a while. Thanks to saved money I will go on a trip through Africa ”.

Very useful, right? Nope. If you use PFM provided with your mobile banking it most probably won’t categorize your shopping correctly and your shoes may as well be recognized as “dog food”. Why?

  1. First of all – a bank doesn’t have a sufficient amount of data to categorize your shopping, because data it receives from shops is limited. In some cases the only thing bank knows about is when the product was bought and who sold it. In other cases the data may  also be incorrect. If Tesco (this is only an example) employee decided to assign a toaster, a towel and candles into grocery category than they  will also be wrongly categorized by your PFM.
  2. It is getting even worse if you pay through 3rd party payments, like PayPal, Google Wallet or A bank knows only which payment provider handled the transaction and so does the PFM – the whole shopping list lands in one bag called “other purchases”.
  3.  Even bigger problem for a PFM is when you pay with cash. Paper money historically has large share in our daily spending and little expenses like taxis, parking tickets or snacks are traditionally paid using cash.


All in all, the result is that a PFM monthly summary doesn’t reflect the reality and a user has to categorize his shopping himself. Let me use a quote: “Ain't Nobody Got Time For That”!.

A bank must be able to monitor as large part of costumer shopping as possible in order to collect more data about the products a consumer bought.

Bank Zachodni WBK, the biggest Santander’s bank in CEE, took first steps in collecting data from almost every aspect of its customer shopping. Its mobile wallet allows users to make in-app purchases directly from shops and services embedded in the app (bus tickets, groceries with home delivery etc.), make bank transfers or mobile payments (incl. in-store payments coming this year).

Similar (but limited to in-app purchases) solutions can be found in ICIC Bank’s or Privat Bank’s offers. PFM solutions have been on the market for more than a decade now, so it is the right time to make them useful… and stop patting the heads of water hydrants.


About the author:

@krajewskitomasz, head of mCommerce at eLeader,


Comments: (2)

Melvin Haskins
Melvin Haskins - Haston International Limited - 16 June, 2014, 08:16Be the first to give this comment the thumbs up 0 likes

As a bank customer, why would I want my bank to have details of my expenditure? Of what value is it to me? Neither of the two main credit cards that I use are provided by either of my bank account providers and a number of my savings products are with yet another bank. Quite rightly, my expenditure is my affair.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 June, 2014, 19:41Be the first to give this comment the thumbs up 0 likes

According to this brilliant FORBES article, many retailers themselves don't classify SKUs into the finegrained categories that PFMs require. That's the real reason for a PFM's inability to accurately classify shopping at a multibrand retailer and provide meaningful insights. Unless a mobile wallet uses a catalog and taxonomy that are granular enough for PFMs - and I don't know a single one that does - I don't see how it can solve this problem. This is why, when you get past the hype, PFM and targeted offers based on purchase history work in actual practice only in single brand retail where the merchant ID alone provides a reliable-enough indicator of the item and category. The information already received by banks for card transactions includes merchant ID even without mobile wallets.

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