What PFM Providers Need To Provide

Apologies for the sports analogy which I know so many of you hate.

But there it was — the easy layup, the slow ball just waiting for me to knock out of the park….and I blew it. Whiffed. Failed to sink the basket. On the CU Chat Up the other day, @clagett set me up, and I failed to deliver.

He asked:

What do PFM (personal financial management) providers need to provide?”

My response was that PFM providers had to help FIs understand: 1) the ROI of PFM investments, and/or 2) the role of PFM as a component of a customer relationship infrastructure.

Maybe that wasn’t a terrible answer, but it wasn’t the best answer.

The better answer: PFM providers need to help FIs understand how to use the data. How to get the data out, how to store it, how to deploy it, and when to deploy it.

The challenge isn’t simply a technology challenge, it’s a business challenge. Many marketers are used to determining what offers to make based on demographic and purchase data, so they don’t know: 1) how to incorporate behavioral data, and/or 2) how to provide advice or guidance messages (and not just offers).

Unica recently released the results of a study of marketers that found that 75% of respondents say they use — or plan to use — online behavioral data when making decisions about marketing offers (15% of respondents were banks). I would have been interested in seeing what percent are currently using online behavioral data. I would bet the percentage is a lot lower, and “planning” to use it is not something I’d take to the bank (pun intended).

The PFM market is in its really early stages. Way too early to call winners and losers. But the ability to use the data will become a competitive factor.

Anyway, had to set the record straight here. My answer’s been bugging me.

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13 thoughts on “What PFM Providers Need To Provide

  1. Great follow-up answer. I really thought your segment on Carla’s show was the best live radio interview yet from all of the live credit union stuff that has popped up. You have definitely done your homework on PFMs and it shows. Well done.

  2. Ron, I am so glad you beat yourself up over how you answered the question by http://twitter.com/clagett (Bryan Clagett, CMO & Investor @ Geezeo). Your first answer was good. Think of it as answer 1.0.

    Your follow-up to the question is spot on. Think of it as answer 1.5. Your are right when you say “But the ability to use the data will become a competitive factor.” Using the collected data is very important at driving the the factors that will affect the ROI of the PFM initiative.

    However, I believe there are still missing pieces. Your research clearly shows that the people using these tools love them. They become better customers of the bank by buying more products/services, share of the customers wallet will grow, and the customer loyalty increases. None of this addresses the bulk of the available universe who will not use these services. The first PFM service provider (or FI) that figures out the way to get the next few tiers of customers onboard to the product, will reap the most rewards. That will be answer 2.X


  3. Ron – dead on and exactly where I would hope most FIs go with this. No question that PFM is a powerful customer/member engagement tool, I’m hopeful that institutions (and the really successful ones will) take that behavioral data and use it to identify opportunities to open deeper discussions with their customers/members. It’s that “next step” that I still see far too few institutions doing. For example, many still aren’t identifying members/customers that have brokerage accounts (through deposits, ACH transactions, etc.) and approaching them to initiate discussions about that piece of business. How long have we been processing those types of transactions? More importantly, how long is it going to take before marketing starts to realize the value and importance of this activity?

  4. Mike: You nailed it with the last question: When will marketing realize the value/importance? The answer: When marketing realizes it’s more important to build a magnet than a megaphone.

  5. DG: I’m reluctant to put the onus of driving adoption on the PFM providers. Did banks blame Checkfree for their (initially) low EBPP adoption rates? No. Banks learned that there were things they had to do to drive adoption. I think (to its credit) Checkfree helped compile and disseminate best practices in doing this. But the responsibility to drive adoption should be on the FIs’ shoulders.

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  7. Glad I sparked some discussion. Data is one thing. Information I (the FI) can use, is another. Bring on the magnets.

    I do think the online providers have a responsibility to better educate the FS industry. And reports like Ron’s certainly help.

    Things are going to get fun.



  8. Ron, the way CheckFree helped, I expect the PFM/OFM providers to help. It is all about data. I am not saying the onus is on the service provider to do all the work. Additionally, I partially agree with your statement that “…the responsibility to drive adoption should be on the FIs’ shoulders.” I feel the service provider should not sell the solution and walk away but continue to work with their clients to make their solution a success.


  9. DG: Agreed. I will say this (and hope the message gets across to the PFM providers): In hindsight, I think that while Checkfree did do an admirable job of helping to drive adoption, I’m not sure they moved early enough to provide that assistance. PFM providers have to do this from the start. One thing that I’m afraid might happen is that FIs will see rapid initial adoption (the CUs who were on the CU Chat Up call seem to be enjoying great initial success), and assume that they’ve got adoption locked up. Maybe that’s that the way it will play out. But — like OL banking and bill pay before — FIs need to distinguish between adoption and use.

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  11. Look for more perspective on this discussion from an experienced credit union PFM user in the April 19 Credit Union Journal Technology Report.

  12. Pingback: Interesting post by Ron Shevlin on what core value should be provided by PFM providers | Living a life distracted by shiny objects

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