Last week Novantas, a banking analytics firm, published a 3,000-person survey that demonstrated how personal financial management (PFM) apps are on the rise.
Here are a few key points from the survey:
- Interest in PFM grew by 19% over the last year among consumers looking for a new financial institution.
- Nearly half of millennials who are looking to switch banks want their new institution to offer PFM.
- Users who log in to their mobile banking app daily are 58% more likely to use PFM tools than users who only log in once a week.
This last group — users highly active on mobile — are part of a segment that Javelin Research calls Moneyhawks. According to Mark Schwanhausser, director of omni-channel financial services at Javelin, Moneyhawks “have the greatest appetite for personal financial management.” More importantly, Schwanhausser says Moneyhawks are “the most profitable customers that we see and study.”
The connection between profitable users and PFM can’t be overstated. Moneyhawks want PFM because it helps them keep on top of their money, which in turn gives them the ability to take out high quality loans with your financial institution.
In other words, these aren’t users who merely have a few hundred bucks in a checking account, draining your institution with maintenance costs month after month. Instead these users are among the very small portion of your users who are highly profitable. In order to maintain a successful business model you need to cater to their desires, and they desire PFM.
It should be clear, then, why big banks are adopting PFM at rapid rates. According to Celent Research, 21 of the top 50 U.S. banks are set to offer it by the end of the year.
Based on data like this, Celent Research claims that “from a relationship perspective, PFM will be the most important" current innovation for financial institutions.
Senior decision-makers at large financial institutions mirror this enthusiasm. Joy Marshall, VP of Internet Services at Wells Fargo, says that PFM "is absolutely central to our online strategy," and Dottie Yates, VP of Online Design at Bank of America, says that "the concept of PFM is driving everything we do.” These decision-makers have done the research and have realized that PFM is a worthwhile investment — especially since the users who are hungriest for PFM are also the users who are most profitable for financial institutions.
Before we wrap up, let’s circle back to millennials. It’s worth noting that millennials are more likely than any other age group to choose big banks for their financial needs, according to Aite Group analyst Ron Shevlin. Millennials value convenience over the desire to bank local. They want banking to be as effortless and as accessible as the other apps they use on their mobile phones. PFM can help round out that experience.
These two groups — millennials and Moneyhawks — are the most important user segments to target when you’re looking to increase market share and stay relevant. The data increasingly shows that PFM is a crucial benefit for these segments.
For more on Moneyhawks, see our introduction to Moneyhawks.