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Personal Finance Management—The Double-Edged Sword for Banks to Succeed in the Digital Age

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Right from the time money was invented it has been an essential part of our everyday existence. And with the many spheres of our daily lives moving online it is inevitable that financial interactions too have turned digital—and will increase in the coming years.  In the recently conducted June 2021 PwC Global Consumer Insights Pulse Survey[1] 50% of global consumers say that they have become more digital. In such a scenario, banks are presented with the unique opportunity to offer their customers with digital ‘money management’ or Personal Finance Management (PFM) tools that fits in with their digital lifestyles.

So what exactly is PFM? And how can it work as a double-edged sword for banks?

PFM, the abbreviated form of Personal Finance Management, is a software application that helps you manage your personal finances efficiently and enables you to make better financial decisions. In simple terms, it is a digital extension of the ‘household accounts notebooks’ or ‘excel sheets’ maintained by the previous generations to manage personal finances. Artificial Intelligence (AI)-powered modern PFM solutions do more than categorize your spending and transactions. It can add accounts from multiple banks (multi-bank PFM), facilitate family spending/saving goals and even integrate social channels so that you can make financial plans for special occasions. Most personal finance software are also are built with data visualizations which help provide actionable insights that help consumers easily navigate their financial lives and make informed financial decisions.

Most importantly, personal finance and wealth management tools work as a double-edged sword for banks as they bring advantages to both the consumers and the banks themselves!

PFM Platforms—Providing the Essence of Digital Banking to Customers

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In an April 2020 survey, it was found that 75% of consumers prefer to use PFM tools from their primary financial services provider, which is typically the retail bank they bank with.[2] This is because the level of trust they have in their bank is high. The same survey also reported that 71% of the Gen Z generation expected the brands they interacted with to help them achieve personal goals and aspirations. Customers today want connected experiences—and this extends to their financial lives as well. In this context, PFM applications form a critical element of providing that positive financial experience that consumers are looking for. Powered by the Open Banking ecosystem and future technologies like AI and machine learning, banks today can provide their customers with an end-to-end PFM tool which offers:

  • Automatic categorization of transactions with transaction analysis across multiple accounts
  • Intuitive visualization for effortless money management
  • Budgeting, expense planning and goal setting & tracking
  • Omnichannel accessibility for instant payment and transfer
  • Contextual offerings and card-lined offers
  • Net worth analysis and wealth management
  • Proactive notifications to improve financial health
  • Social, peer and community financial health comparison

PMF Brings Banks Multiple Benefits as Well!

Apart from providing customers with a value offering for their digital lifestyle, PFM also brings several benefits for retail banks themselves. Banks can specifically gain ROI on their PFM investments by:

  • Increasing customer retention and customer lifetime value by offering a user-friendly Financial Management tool to their customers
  • Gaining financial share by indirectly influencing customers to use digital payments/card payments
  • Facilitating marketing efforts by cross-selling and up-selling savings products such as Goal-based Savings (Financial Planning) and Micro Savings
  • Promoting the various digital touchpoints of the bank to customers seeking an omnichannel PFM experience

Banks need to place PFM at the core of their digital banking experience

Retail banks need to realize that PFM is no longer an optional personal finance management tool that adds to the digital offerings. Rather it has emerged as a core offering of the digital banking experience that will act as a double-edged sword bringing a plethora of benefits to both customers and banks.

How can Clayfin help?

To help banks deliver what their customers truly need in these uncertain times, Clayfin is offering a New Financial Lifestyle Management Platform with advanced financial planning, spending insights, cash flow management, gamified personal finance fitness, and much more. With a complete financial understanding of their customers, banks can approach their customers sensitively, gain valuable customer insights, generate leads, adjust internal policies, optimize sales, and offer tailored financial solutions and services to their customers that make sense for their current situation.

[1] https://www.pwc.com/gx/en/industries/consumer-markets/consumer-insights-survey.html

[2] https://www.businessinsider.com/personal-finance-management-report?IR=T

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