Personal Financial Management Tools: A Growing Opportunity for Building Relationships

Personal finance management tools (PFM) are being touted as the latest tactic for financial institutions to cement the member relationship, and the momentum is building. While only 29% of credit unions surveyed currently offer PFM tools, 40% expect to offer it during the next two years.


A recent Internet Strategy Consortium online member survey of more than 10,000 members revealed a strong desire for ways to track expenses online. Member feedback shows that this issue is top of mind for them, and many are concerned about their ability to save, refinance loans, and obtain credit in the future. Members across all age and income segments cite a desire to save more. Many want additional tools and information from their credit union to help them in their efforts.

While members are currently focused on the issue of savings and financial management, many have not taken the right steps to increase savings. Barriers can include low credit union interest rates, a lack of knowledge regarding ways to budget and save, as well as a lack of personal discipline.

Members are interested in a wide range of online tools to budget and track spending, combined with savings products that make saving as easy for them as possible, as these recent member observations attest:

"Tools to automatically save money from paycheck, Separate savings accounts that can be named for specific goals, Budgeting tools, Articles/tips on saving money, Tool for inputting goals and tracking progress, Online tools for tracking expenses, Tools for identifying and tracking retirement goals, Alerts/reminders through email. These are all great services that I would DEFINITELY take advantage of, especially if it was through the CU website."

"I like the idea of a separate savings account for needs. Maybe one that cannot be touched until the goal is met or the month has come. For instance if I wanted to save for a car for three months it would be nice to be able to put money into an account and not be able to access it until that month has arrived or until the goal amount is reached."

Credit unions should view the development of interactive and personalized savings tools as another opportunity for trengthening the member relationship. Ongoing messages related to their savings goals can help members become more aware of credit union products and services, and increase reliance on the credit union with their primary transaction account. For members already using their credit union bill pay service, it is easier for them to enroll in the credit union PFM tools rather than going to another provider. They may also be more familiar and comfortable with their credit union’s online security features.

What exactly is PFM?

PFM tools, currently offered by both financial institutions and independent websites, enable consumers to easily track and plan their spending. Typically free, these tools allow consumers to more effectively manage their finances by creating budgets and tracking specific expenses using their debit and credit cards. PFM tools have two main components: access to member accounts to download transaction data, and the ability to group transaction data into budgets and reports to monitor spending. PFM tools typically include these features:

  • Ability to categorize spending
  • Spending reports to track spending habits
  • Set savings goals
  • Customizable alerts
  • Create budgets
  • Aggregate accounts

While many credit cards currently offer the ability to create spending reports, PFM tools typically include the ability to gather expenses from a wider range of accounts and payment options, including bill pay and debit transactions. Some of the major third party sites such as Wesabe, Mint, and Geezeo provide a social networking component, including blogs, message boards and comparative data to help consumers understand where they can cut expenses.

While the third party PFM sites have gained a significant number of users so far, their growth may be limited given a consumer preference for managing their finances in one place and online security concerns. While these services are free for consumers, their revenue is obtained via advertising to users. Both Geezeo and Wesabe recently announced plans to offer their PFM software to banks and credit unions. These customized credit-union branded versions of their current tools won't include advertising from other financial service providers, but will allow full access to their respective communities and comparative transaction data.

The ROI of PFM

Similar to online bill pay, PFM tools provide a significant opportunity to further cement the member relationship. Members using PFM tools will spend a greater amount of time each week on the credit union website. The benefits of the service will enhance member relationships, as the credit union helps them manage expenses and improve their inancial position.

Most financial institutions do not charge consumers for PFM tools. Given the availability of free PFM tools, members are not likely to pay for similar services at their financial institutions. PFM tools target consumers who are already cost-conscious. Credit unions should consider the features enabling target marketing to members based on their spending habits as a key advantage. For example, some PFM tools include the ability to place banner ads for credit union services, such as a credit card, to members who have included another issuer's credit card in their spending reports.

Credit unions may link this service to relationship benefits, such as requiring the use of other efficient online services. They can also offer PFM tools based on different membership levels, such as account balances or the number of services used. However, credit unions should ensure that the relationship requirements are appropriate for the target segments. For example, if the credit union is trying to attract Gen Y members to this service, e-account services or debit usage requirements would be best.