A new study by International Data Corporation (IDC) discusses European consumers' attitudes toward adoption of personal finance management (PFM) solutions. The study, The Evolution of the Personal Finance Management Market (IDC #EMEA42964717, August 2017), is based on IDC's European Consumer Banking Survey, 2017. It highlights that the concept of a PFM solution has existed for a few years without ever reaching mainstream acceptance. However, it has always had backers in the consumer banking industry who see improved analytics capabilities as an opportunity to provide more value-adding information through PFM portals, view the mobile channel as a new way of reaching customers and building relationships, and think PFM will provide opportunities for cross-selling.

The study finds that even though currently only 4% people are using PFM solution, around 40% are open to using it in the future. More people prefer using PFM through the online channel than through mobile. This is in line with the generally wider adoption of online than mobile banking. PFM cuts across the mobile-centric strategy of several newer PFM players, which must work out how best to deliver PFM-style insights through the mobile form factor.

IDC Financial Insights believes consumers will generally acquiesce to the growth of PFM solutions and as PSD2 account aggregators come on stream. A mass move on the part of banks toward account aggregation will see existing mobile banking portals integrated with PFM concepts — this way, PFM might become part of the fabric of everyday banking.

If banks are interested in moving into the PFM space, striking a balance between being useful to consumers in terms of providing spending and saving analyses plus helpful insights, while being easy to set up, automated, and generally unobtrusive is likely to see a gradual recognition of PFM's value by a growing number of consumers.

They must also weigh the benefits of working with an existing PFM vendor against building out their own PFM-style tools using existing data analytics and through their existing channels.

"Customer experience is set to be a crucial battleground for retail banking in the next few years as PSD2 takes effect. Banks, their technology partners, and new players in the industry all stand to gain from a careful examination of consumers' attitudes when it comes to account aggregation, personal financial management, and related concepts which are set to go mainstream in the next few years," said Lawrence Freeborn, research manager for European banking, IDC Financial Insights.

Further insights from this survey can be found in IDC's European Consumer Banking Survey, 2017: CX From the User Perspective (IDC #EMEA42428717, August 2017).

Michael Allen, VP EMEA, Dynatrace:

IDC’s research reveals that a large number of European consumers are willing to embrace personal finance management software. It highlights that as open banking gathers pace in response to PSD2,  account aggregation could see existing mobile banking portals integrated with PFM concepts and therefore become part of the fabric of everyday banking.

The challenge is that if banks offer the ability to manage multiple accounts from one place, who is responsible for the customer experience? What if there is a problem and certain information doesn’t load? Who should be blamed the bank that is providing the information or the organisation providing the PFM service? Without full control and visibility into where service problems originate, organisations could find themselves blamed for anything and everything that goes wrong.

As such, the ability to automate problem resolution through AI to monitor the myriad of dependencies, many of which lie upstream or downstream in the delivery chain and therefore outside of their control, will be essential to protect the customer experience and apportion accountability when services don’t perform as they should.

Senthil Ravindran, Head, FinTech Lab, Banking & Financial Services, Virtusa:

IDC is absolutely right and PSD2 is going to be a major wake-up call for the industry. This shows that customers want to take control of their finances but most PFM tools available now only provide basic budgeting functions. Designing a PFM is more than putting an Excel spreadsheet report into an app. Fortunately, the Holy Trinity of Open Banking, mobile devices and AI is set to radically advance the functionality of PFMs.

By putting customers best interests at heart and analysing their habits, behaviours, competencies and knowledge to build individually tailored financial targets, PFMs can put control back in the hands – or mobiles – of customers. They can provide round the clock advice on everything from investing to budget management, helping people manage their finances better. By using the data banks already hold, PFMs can help customers work towards a specific goal – be it a holiday in Barcelona or a deposit on a house. This research clearly shows that the demand is there and, if designed properly, PFM tools can be more than just a sales channel for banks, they can be a financial mentor.