PFM: The New New Year’s Resolution

NetBanker notes that for personal financial management (PFM) sites:

Total September traffic was 1.2 million unique visitors compared to less than 400,000 a year ago. The big three newcomers last year: Mint, Wesabe, and Geezeo saw combined traffic increase by 450,000 users, up nearly three-fold increase from 2007. Geezeo was the star percentage-wise growing more than six-fold. But Mint accounted for three-fourths of the net gain across the existing players with 330,000 more visitors.”

My take: It used to be that come the end of December, we’d make New Year’s resolutions to lose weight, get in shape, stop smoking, etc. The increasing PFM traffic is a reflection of a new resolution to add to the list: Get one’s finances in order (or maybe start budgeting, or something like that).

OK, maybe this isn’t a truly new resolution for some people. But the number of sites that offer PFM functionality is growing, and there’s a confluence of forces coming together to make the firms offering these tools feel like this is their time: 1) the economy sucks; 2) entering account data into the PFM tools is less labor-intensive than in the past; and 3) Gen Yers are coming of age.

The combination of these forces is bringing us the new year a few months early — at least as far as making the PFM resolution is concerned.

Will the online traffic for the PFM continue to see strong growth? Sure. While the number are strong, there are still plenty of people who have yet to make their PFM resolution.

But as I’ve implied in a previous post, raw site traffic is a deceiving measure. The real key to this market is how many people keep to their resolution.

Over time, factor #1 will have a seesaw impact on this market. As the economy improves (which it will, it’s just a matter of when), people will feel less pressure to watch every penny — and be less inclined to use PFM tools.

The impact of factor #2 has a short-term effect. Ease of data entry (through account aggregation) makes it easy for people to start using the tool, but I believe that the gee-whiz impact of graphing and charting everything to death will wear off for many people, leading to diminished use.

Factor #3 is the key to success for the PFM market. Gen Yers display a much stronger desire to manage their finances than Boomers or Seniors did at that age. And research from one of the analyst firms found that a suprisingly high percentage of Gen Yers are already saving for retirement — something a lot few Boomers did at that age.

In the end, the winners in this space will be the ones that help the greatest number of people keep their PFM resolution. Not necessarily the ones with highest site traffic.

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5 thoughts on “PFM: The New New Year’s Resolution

  1. I said most of what I have to say on the other post about this topic, but two specific points here:

    1) The Gen Y effect is huge. We do rather a lot of user testing here at Thrive with young people in New York City and I think the results have surprised even me, who should be mostly used to this population and the concerns it has.

    2) I’d love it if we could find a common metric that personal finance companies could use to make their results public. Granted, that would be asking business to be like science and some companies would refuse to participate because it wouldn’t reflect well on them.

    It would be important for the metric to be one that is per user, since some sites have more users than others, which I put very little faith in: until the market for these products settles out, number of users will be based almost entirely on amount of marketing budget, not actual feature set. This is too important of an area to let a company with good image but bad features force others out of the marketplace – I don’t mind ending up with an inferior video technology but we’re talking about people’s financial lives here.

    @Ron: I’d love to see you propose a suggestion for the above metric, by the way. It absolutely seems a discussion worth having and I’m sure Thrive would participate.

  2. PFM per se has always been and always will be a peripheral tool for consumers. Wesabe and Mint changed the rules by making it easier, but they still suffer from being “yet another log in”.

    Look for wesabe/ mint/ etc to be fully integrated with online banking, so that the consumer goes to one place, and gets all the benefit.

  3. @colin I totally agree with you. Wesabe/Mint/Thrive/Geezeo/Quicken Online, etc. will be fully integrated with online banking in the near future.

    Quicken’s parent company Intuit owns an Internet Banking division, Yodlee has a relationship with Mint (and maybe Thrive) and they provide internet banking. Additionally, I expect all the core processing companies Internet Banking groups are developing their own PFM products.

    It is going to be a very interesting next 12 months in this space.

    @dmgerbino

  4. @Matt: Thanks for your comment(s). I’ve got some thoughts on some metrics, will respond in more detail later.

    @Colin: While I would agree that PFM “has been” a peripheral tool, I find it hard to conclude that it will “always be” one.

    Banks have spent the past few years doing everything they could to make sure their customers paid their bills online on their sites, and not biller sites. If PFM and OL banking are truly integrated, then isn’t it conceivable that some customers will just bypass their bank’s site altogether? If so, this would make the PFM site anything but a peripheral tool.

  5. i dont know when, im not sure why it is taking so long, but when the PFM sites integrate bill payment, account-to-account transfers, mobile, and alerts, the banks may become the peripheral tool and the PFM sites may rule supreme.

    why would it matter who my bank is if i can essentially manage (not just look at) all of my money in all of my accounts from a single site?

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