Giving Away iPads Doesn't Solve PFM Challenges

In about 20 words, NetBanker takes a machete to PFM, cutting it down with three swipes:

  1. It’s hard to get started
  2. It’s a pain to keep up
  3. It’s disconcerting to view spending summaries

But, as NetBanker notes — and I agree with both the swipes and the rebuttal — there are “obvious benefits” to PFM use.

NetBanker goes on to say that “one way to tackle the first problem is to offer a sweepstakes or bonus to induce trial,” and highlights Truliant Federal Credit Union’s attempt to do just that by giving away iPads to members who sign up for using PFM.

My take: Truliant is wasting its money.

If you need to lose weight, you can: 1) Read up on which foods to eat; 2) Eat those foods; and 3) Exercise more. Doing only #1 — reading up on which foods to eat — will do little good in actually reducing your weight. Step #1, without #2 and #3, is a failed strategy.

This is analogous to what Truliant is doing: Trying to solve the three-pronged PFM problem by addressing just the first prong. 

PFM is the new New Year’s resolution. It used to be that when the new year came around, we resolved to lose weight and/or stop smoking. Now we resolve to get our financial lives in order. And just as we used to join a gym to realize our weight loss resolution, we sign up for a PFM to to realize our financial resolution. 

When March rolls around, we’re not going to the gym as often, and not long after we start using a PFM tool, our enthusiasm and commitment wanes, and we stop using it. 

Realizing the “obvious benefits” of PFM requires committed use of the tool over some period of time. Simply incenting people to sign up for using the tool does absolutely nothing to encourage or ensure continued use. 

In fact, if you read the fine print of Truliant’s contest, members don’t actually have to enroll in PFM to participate. (I’m tempted to enter the contest to see if they even really limit it to members). 

My prediction: A large percentage of Truliant’s online banking members will enter the contest and sign up for PFM. Truliant will then boast about their high PFM enrollment numbers. And then we’ll never hear again whether or not those members continued to use the tool and reaped the benefits. 

What should Truliant do?

Think Foursquare for PFM. 

Despite what a lot of people think, Foursquare isn’t about location awareness or the mobile channel. It’s about gamification. It’s about earning badges and becoming mayor. And if there are rewards for doing those things, great.

People like to play games. We like friendly competition, and we like to turn routine things into games to spice them up, and make them more interesting.

And that’s what banks and credit unions need to do with PFM — make a game out of it. Points for setting up a budget, points for categorizing your spending, even more points for keeping to your budget. Points for sharing tips and tricks regarding the management of one’s financial life with other PFM users.  And giving away iPads to the people who amass the most points.

In other words, incenting customers and members to deal with the “pain of keeping up” with the use of PFM.

If you can address challenge #2, challenge #1 takes care of itself. 

As for the disconcerting nature of seeing your spending patterns, I can’t help you. I’m a consultant — not a miracle worker.


How To Differentiate Your Credit Union

On the CU Water Cooler site, William Azaroff wrote:

“When I look at many credit unions, I’m troubled by their blandness, their inoffensiveness. They used to stand for something, but now they’re moving away from differentiation and towards sameness. And many credit unions are doing this at the precise moment when differentiation is a necessity. The question is: do some people hate your brand? If some do, then I would say you’re doing something right. If not, then I’m guessing your organization is trying to be all things to all people, and should take a stand for something and embed that into your brand.”

My take: To quote former President Clinton: “I did not have sex…” No, wait, that’s the wrong quote. I meant this one: “I feel your pain.”

William is spot on that many credit unions aren’t differentiated in the marketplace. What William didn’t get into, however, is why few credit unions are effectively differentiated. There are (at least) three reasons why undifferentiated credit unions are that way:

  1. They don’t know how to differentiate themselves.
  2. They think they’re differentiated, but don’t know better.
  3. They don’t want to be differentiated.

The last reason might surprise you, or strike you as wrong. But after 25 years of being a consultant, I can’t even begin to count the number of times I’ve made a recommendation to a client to do something, only to be met with the following question: “Who else is doing that?” Risk adversity runs deep in the financial service business.

There are also a fair number of CU execs who think that their CU is differentiated. Almost to a man/woman they give the same description of what differentiates their CU: “Our service.” This is often — I’m inclined to say always — wishful thinking. Why? First, service may be what your firm does best, but it doesn’t mean your service is comparatively better. And second, because service means different things to different people.

The most prevalent reason why so many CUs are undifferentiated, however, is probably the first reason: They don’t know how to differentiate themselves. 

I’m not looking to pick a fight with William — I suspect he would agree with me here — but approaching the topic of differentiation from the perspective “what can we do to tick people off and be hated by some of them?” is not the right way to go about it. 

And with all due respect to my friends in the advertising business, the last thing a credit union should do is bring in the advertising people to help them figure out how to differentiate the CU. 

Why? Because there’s a prevalent — but misguided — mindset among advertising people that differentiation comes from “the story you tell.” (If you need proof, go read Seth Godin).

But the story you tell doesn’t differentiate you. What differentiates you is the story that your members tell. That they tell to themselves inside their head, and that they tell verbally to their family and friends. And those stories only come from their experiences with the credit union, not the advertising. 

Which means this: Differentiation comes from something you do

That “something” must be meaningful to members. And that something must be something that: 1) only you do; 2) you do measurably better than anyone else; or 3) you do measurably more often than anyone else.

Differentiation doesn’t come from standing for something, and it doesn’t come from your branding efforts (your differentiation drives your brand, not the other way around).

William’s credit union Vancity “stands” for community development and improvement.  So do plenty of other CUs. What differentiates Vancity is that — time and again — they do something about it. They can count the number of times they’ve done something about it, and they can measure the impact of what they’ve done.

Differentiating on service is tenuous. What does that mean? That you fix your mistakes better than anyone else? That the lines in your branch aren’t as long as they are in the mega-banks down the street? That Sally at one of your branches greets everyone by name and with a smile when they come in?

If you’re going to differentiate your credit union, you have to do something. Different, better, or more. None of those options is particularly easy to do. Technology initiatives intended to gain a competitive advantage — mobile banking, remote deposit capture, etc — are often easily (I didn’t say cheaply) copied. Better is hard to prove. And “more” requires strong commitment from the management team for an extended period of time.

This isn’t to say that aren’t opportunities for differentiation, just that they require commitment — and a lot of it.

So what can you do to differentiate your CU? I think it comes from committing to differentiate in one — and only one — of the following areas:

1. Advice. Managing our financial lives is tough and getting tougher. People need help making smart financial choices. But the advice available in the market tends to be focused on asset allocation and stock picking for the relatively affluent, or focused at the very lowest end of the income spectrum for people who need help with serious debt problems. What about everybody else in the middle? What about providing help with all those everyday/week/year decisions that have to be made? PFM holds the potential to provide and deliver this kind of advice, but the tools aren’t quite there yet. If this is the path you choose, you’re going to have to make some investments to develop them and get them to point where they can deliver on this promise.

2. Convenience. There’s one bank in the Boston marketplace that advertises itself  as the “most convenient” bank. Hooey. Having extended branch hours and free checking isn’t “convenience.” Making people’s financial lives easier — i.e. more convenient — to manage is a complex and difficult proposition. But when you’re really doing it, people know it. And you’ll be differentiated.

3. Performance. You might not be the easiest FI in the market for me to deal with, and you might not provide me with any advice (maybe because I don’t want any), but if the performance of my financial life — that is, the interest I earn, the fees I pay, and the rewards I get and earn, are superior to everyone else out there, than I will consider you to be differentiated in the marketplace.

I didn’t say differentiation is easy.

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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Math By Mint

Someone once said that there are lies, damn lies, and statistics.

Personally, I think that there’s a hierarchy there. Anybody can lie. If you’re good, you can tell a damn lie. But you have to be really good to use statistics. Alas, I don’t think makes it to the top tier.

At the Finovate conference in NY, presented and shared some numbers that piqued my interest. It claims that it “manages over $12 billion in transactions” and that 50% of its users have changed their spending behavior by using Mint.

Manages transactions? Perhaps “tracks” would be the more accurate word. And how does Mint know that the behavioral changes have come as a result of its tools — and not the general economic conditions?

Then there’s Mint’s boast that it has identified more than $100 million in potential savings for its users. This is ridiculous. Imagine if Capital One claimed that it has provided more that $100 gazillion in consumer financing by adding up the credit lines offered in the marketing offers it has sent to customers and prospects.

And finally, according to its CEO, currently has 500,000 users, enjoying a sign up rate that has “more than doubled” in the past 3 weeks.

Sounds pretty impressive. When Aite Group spoke with Mint in April, it had 220,000 users, and (we were told) was signing up 10,000 people each week. In its August 18th press release, it said it had 400,000 users. So in the eight weeks leading up to the Finovate conference, it added 100,000 users. Which, my calculator tells me, is 12,500 users per week, and just 25% more than the weekly rate from April.

I’m not calling a liar. I believe that it has doubled its sign up rate. After all, with the economy going the way it has, who isn’t more concerned about managing their finances? It doesn’t surprise me at all that the sign up rate is increasing. The enrollment rate might have dipped during the summer for all I know.

But let’s put’s numbers in perspective. It may very well be the largest “online personal finance service.” Online. On Javelin Research’s blog, Mark Schwanhausser implies that there are 9 million Quicken users. If grew by 40,000 users per week from here on out, its user base wouldn’t equal the Quicken population until we’re ready to throw the next president out of the White House at the end of October 2012. At 20,000 users per week, the 9 million figure will be attained while you eat your Thanksgiving turkey — in the year 2016.

But this is a silly discussion. Enrollment isn’t the critical statistic — the percent of enrollees that are active users is the critical factor (any online banking exec will tell you that). Intuit will tell you that, too — it has sold a lot of copies of Quicken to people who don’t use it. At least the firm got paid for each copy it sold.

Here’s my request of If you present at the next Finovate, please don’t share BS statistics (that’s not “Bachelor of Science” by the way). Instead, tell us, of the people who have enrolled, how many are active? How many use the site on a daily or weekly basis? How many site features do they use? How many accounts have they aggregated? How does usage change over time? How many of the saving offers that have been presented to users have been accepted? We’d be a lot more interested in finding out how much Mint users have realized in savings from Mint offers — not just those that the site has identified.

The reality of the PFM space is that while money is really really important to us — and getting even more important with the economic uncertainties of the day — the process of managing our money is something that few people want to do, or enjoy doing.

Quicken has succeeded by finding a segment of the population that likes to track, trend, graph, and forecast their financial lives. has done a great job of replicating a lot of that functionality, and going beyond Quicken by making it easier to get data in (through aggregation), provide offers for savings, and engage users with its blog.

This segment is small. is deluding itself (and trying to delude others) when it says its tools are for the masses, and sites like Wesabe are for the hardcore PFM users.

The key behavioral change that will determine the success of the PFM space is not how many dollars in transactions it “manages.” It’s getting more people to become more disciplined about managing their financial lives. There’s no doubt that tools like those offered by the PFM vendors can help people become more disciplined. But this is not an inconsequential change in behavior. Effecting this behavioral change is as tough as quitting smoking, losing weight, or something like that.

Which PFM site or business model will be the one that is most successful in helping to effect this behavioral change? I have my bet, which I won’t share here. But I will say this — for all of’s chest thumping, the PFM game is far from over.

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