White Papers

Traditional PFM Is Dead. Welcome to the New World of Digital Money Management.

The financial services industry is in the throes of the digital revolution. Large banks are spending upwards of $500 million a year on mobile alone, global fintech investment grew 201% between 2013 and 2014 and a CEO of a major bank predicts that up to half of the world’s banks will disappear through the cracks caused by digital. In addition, Accenture believes that these changes, combined with deleveraging and squeezed margins, will put 30 percent of traditional banking revenues at risk by 2020.

Right now, the best way for financial institutions to grow is to provide extraordinary value to account holders. For more on this, check out our Battle to Be the Primary Financial Institution white paper.

In the past, many banks and credit unions have attempted to provide value to account holders by offering conventional personal financial management software. Unfortunately, more often than not those attempts have failed to live up to expectations. As Dan Makoski, VP Design from Capital One said, “There are few spaces as ripe for technology and human-inspired re-imagination as how people relate to their money.”

Welcome to the new world of digital money management. Digital money management represents a fundamental re-programming of how financial institutions engage with their account holders in a digital world. It is not a stand-alone feature hidden away, but a fully integrated experience. If financial institutions want to be competitive, make up for lost revenues, and remain their account holders’ primary financial institution, they need to focus on creating an advocate-led strategy by empowering account holders through products like digital money management.

In this digital white paper we explore how this success can be achieved with digital money management. More specifically, we will address:

  • The importance of empowering account holders’ financial lives
  • Why traditional PFM hasn’t been effective
  • How digital money management is different
  • What account holders are looking for in digital money management
  • Strategies to get the most from digital money management

Let’s get started.

The Importance of Empowering Account Holders’ Financial Lives

On a macro level, it is abundantly clear that the United States has large financial challenges. Total student loan debt is now over $1 trillion and growing rapidly still. Healthcare costs are also soaring as baby boomers shift towards retirement. On a personal level, 62% of Americans do not have an emergency fund to cover even minor calamities.

However, post-recession consumers are becoming increasingly more careful with their finances, and a new study from Bankrate found that 82% of consumers now budget. While this is great news, it’s alarming to find that 54% of consumers only budget through either pen and paper or in their head. See the chart here:  

This situation opens up an opportunity for financial institutions to empower consumers and win their loyalty. Just think of what account holders might say if you were to truly help them overcome their financial struggles by making the experience simple, intuitive and rewarding. What if you could provide legitimate financial guidance and advice? There’s an enormous opportunity here to solidify the account holder relationship by adding real value to the banking experience.

Analysts across the industry are starting to recognize this. For instance, Oracle Financial Services says, “To excel, a bank must not be a mere transactional body; rather it must push the boundaries on the services it provides. Standing-out means becoming a personal ‘financial guru’ to customers; providing advice and guidance at the convenient tap of a touchscreen.” And Forrester Research says that digital money management is essential to “quash the disruptive threat from digital banks” and “garner the loyalty of younger customers.” Taking this a step further, Accenture found that 67% of millennials "are interested in their bank providing tools and services that help them create and monitor a budget."

As you can see, money management plays a key part in winning consumer loyalty. So why hasn’t PFM already caught on?

Traditional PFM Hasn’t Lived Up to Expectations

PFM software has existed since the earliest days of the personal computer, and yet consumer adoption of the products has often been lackluster. Rick Claypoole, Director of Retail Product Management and Marketing at Cadence Bank, tells one reason for the low adoption. He says, “Looking back at early PFM solutions, the only consumers who would really use those tools were the hardcore budgeters... And while the early solutions were pretty cool for those users who wanted to do a lot, they were not very user friendly. In reality, almost nobody wants to do a budget, so the potential market for the solution was limited. It’s a chore, it’s laborious, and it’s not fun.”

In addition to Rick’s points, there are a number of other reasons why traditional PFM hasn’t been effective. Namely, it has been:

  1. Hidden away, deep into a tab
  2. Limited to single-source aggregation
  3. Ineffective at cleansing and categorizing transactions
  4. Too much work for the user
  5. Weighed down by unimaginative design

See our blog post here to learn the in-depth reasons why traditional PFM is dead.

How Digital Money Management Is Different

Digital money management is different from traditional PFM because it fixes the broken areas of PFM and completely redefines the experience. Specifically, it is:

  1. Fully integrated into the digital banking experience
  2. Reliant on multiple aggregation sources
  3. Effective at cleansing and categorizing transactions
  4. Instant and effortless, requiring little to no work for the user
  5. Enriched with imaginative and enjoyable design

Let’s explore each of these points in detail.

Fully Integrated Into the Digital Banking Experience

Digital money management is fully integrated into the online and mobile banking experience. To illustrate what this kind of solution might look like, one of our clients implemented a private-label digital money management solution called My Money Manager, and they saw adoption rates of more than 40% just five months after launch — a 1,200% increase compared to their old traditional PFM solution.

The true gains, however, came when they integrated My Money Manager directly into the homepage of online banking. Rather than placing the product in a separate tab, they now show users a breakdown of their spending immediately upon signing in. After full integration, the number of external accounts being added daily more than doubled, with the total number rising by 18%. In addition, the number of users seeing the product within online banking each month went up by a factor of six, and active users saw the product 10.9 times per month, up from 5.8.

Due to the success they experienced, they decided to pre-load all users onto the platform in an effort to foster even more engagement. This means that every account holder who logs into online or mobile banking is enrolled in My Money Manager and immediately sees and interacts with the spending widget. The decision has paid off. The number of external accounts being added daily increase by more than 5x within five days of implementation.

Matt West, Global Account Executive at MX, summed up what a fully integrated experience looks like when he said, “The most critical change consists of tearing down the walls between digital banking and financial management. No more product silos. No more of the fractured digital experience. Third-party providers work in tandem better than ever for the benefit of the end user, and in turn financial institutions understand why digital money management is so critical.”

As you can see, the level of integration deeply impacts the success of digital money management. The deeper you can go, the greater the ROI you’ll achieve.

Reliant on Multiple Aggregation Sources

Consumers demand the ability to view all of their accounts in one place. They don’t want the hassle of logging into five different financial services sites to try and work out where they stand financially. In fact, Celent Research has found that 75 percent of account holders said that the ability to view all their finances in a mobile banking app was “highly valuable” — more valuable than remote deposit capture, person-to-person payments, and the ability to pay a merchant in-store or online (e.g., Apple Pay).

The best way to enable users to see all their finances in one place is to rely on multiple aggregation sources, which is exactly what digital money management solutions do. Relying on multiple sources means that end users enjoy a more reliable aggregation experience since any failed account connection can be rerouted to one that is running smoothly.

In the end, for digital money management to be effective, all of a user’s accounts — even accounts they have with your competitors — need to be displayed in your app. For more you can read our Aggregation White Paper or our Battle To Be The Primary Financial Institution white paper.

Effective at Cleansing and Categorizing Transactions

Anyone familiar with transaction feeds knows that the raw data isn’t pretty. The feeds typically consist of a messy string of random-looking characters as shown below:


What is an account holder supposed to do with that mess? In many cases, all they can do is dial in to the call center of that financial institution and ask what the feed is supposed to mean.

When users come to your site, they want data that’s insightful and easy to understand — with the least amount of effort required on their part. Ideally, the transaction feed shown above should be cleansed to its simplest and clearest form:


If you’ve ever used a standard PFM solution, you also know the pain of poor categorization. When a transaction such as a dinner is categorized as ‘electronics’ as opposed to ‘food & dining,’ it kills the entire money management experience. Effectively categorizing this data is challenging. As you can see below, the categorization from two large incumbent PFM providers isn’t very effective. Even at 69 percent accuracy, users are still having to re-categorize 3 out of every 10 transactions:

There’s no wonder adoption rates never took off. The experience requires too much work.

Digital money management solutions like MX, on the other hand, reach cleansing and categorization rates of 90 percent and above. For more on how this is possible and to see how the numbers above were factored, read our white paper on cleansing and categorization. 

Instant and Effortless, Requiring Little to No Work for the User

As we discussed in our UX white paper, consumer expectations have been shaped by the digital interactions they have with leading tech giants everyday. Google has redefined the idea of simplicity with an incredibly clean homepage that focuses on the task you want to do: search. Netflix and Facebook have reinforced the idea that it’s ‘all about me,’ by providing personalized experiences for each user. Amazon has demonstrated convenience through quick delivery to their customers’ home or office.

It’s clear that consumers don’t want technology that makes them work. Instead, they want the financial institution do the heavy lifting for them. Because of this, digital money management automatically analyzes historical data and enables users to build budgets with the click of a button based on that data. Bingo. All the work is done, just like that.

Users also want an effortless experience on the smartphone, as they now have an ‘always-on mentality.’ Furthermore, consumers now have the expectation that ‘there’s an app for that.’ They want digital money management to be available regardless of the channel they use. If you don’t have customizable notifications or UX designed for smaller form factors, they will not be afraid to go the app store and ‘find an app for that.’

Like all aspects of financial services, you can no longer shrink desktop versions of your digital experience down to mobile. You need to reinvent your entire mindset to be mobile and digital first. For digital money management to take off it needs to embrace that mindset.

Digital money management also needs to embrace the ability to take action straight from the phone. At our recent Fintech Festival, Mark Schwanhausser coined the phrase, “view it and do it.” By this he meant consumers no longer want to scroll through pages of data or analyze complex charts. Instead they want clear, concise insights where they can see how their finances are tracking and then easily be able to take action.

Mapa Research adds to this by saying, “PFM service offerings in general naturally fall under one out of three levels of progressive user sophistication. Starting at a basic level, progressing to an analytical level, and ending with an action-taking level.” This action-taking level should mirror GPS guidance, as we talked about in a MoneySummit blog post. Not only should users be able to view insight and take action, but they should also be able to see suggestions they may not have otherwise considered.

Again, it’s all about making the experience effortless. Consumers want proactive advice from their financial institution in regards to other products they should be using. If a financial institution can offer a loan at a better rate than consumers are currently paying, consumers want to know about it. See the chart below from Accenture, which demonstrates the desire consumers have for their financial institution to proactively recommend useful products:

Anthony Thomson, the Founder and Chairman of Atom Bank, the new UK mobile challenger bank, talked about this desire for predictive analytics in an interview with us. He said, “Banks traditionally provide historic data, such as last month's bank statement. On the contrary, we focus on predictive information, such as next month’s bank statement. We want to help our customers predict what their spending habits and income will look like.” This is what’s possible with digital money management. 

Enriched with Imaginative and Enjoyable Design

All of the features mentioned so far don’t add up to much if the user doesn’t enjoy the experience. They’ve got to feel an emotional connection with the product, and that largely comes down to employing an imaginative and enjoyable design.

One company that does this well is Moven, the neobank based out of New York. Mohammad Khalil, the Head of Product, Data & Marketing at Moven, describes their work by saying, “Our emphasis has been rethinking financial service UIs to accommodate new paradigms that are eerily familiar.  These paradigms attempt to simplify complex data or processes into highly consumable interactions that are intuitive to the user.” And Brett King, Founder and Chairman of Moven, adds to this by saying, "Consumers just want solutions to their day-to-day financial problems... We surveyed customers and 95% of them said they couldn't remember ever receiving any good advice from a bank in a branch. Banking has to work when and where they need it. The best advice and the best service in financial services happens in real time and is based on customer behavior, using principles of Big Data, mobility, and gamification."

Alpine Jennings, former SVP of Retail Marketing Director at First Niagara Bank, agrees with this notion. He says that we’re entering the era of Mobile 3.0, which “focuses much more on engagement and relationship management, with a deep integration of digital money management that is highly personal to the user.” This shift allows users to conduct everyday banking activities wherever and whenever they want.  

Alpine conducted a user focus group when he was at a different financial institution and he recalls, “the results were astounding. When users saw mock-ups with different screen flows of what Mobile 3.0 may look like, 85% of the group said they would switch financial institutions, if another financial institution could offer that functionality.” That’s the kind of result financial institutions crave, and it comes from offering the industry-leading design features at the heart of digital money management.

Strategies to Get the Most from Digital Money Management

From everything we’ve covered so far, you’ll get a good understanding of what a great digital money management experience looks like. In this section we’ll discuss three strategies to get the most from digital money management, increase adoption, and create more advocacy for your customers.

Adding to what we’ve already discussed, in this section we’ll discuss ways to get the most from a digital money management solution, including:

  • Marketing and education
  • Staff training
  • Continuous Feedback 

Marketing and Education

Forrester Research found that to increase adoption, banks should use digital money management at every stage of their digital banking process, from awareness to usage.

Another way to increase adoption is to offer a custom brand for the digital money management solution. Farmers Bank & Trust has had a lot of success with their custom digital money management brand called Clarity. According to Rachael Schwartz, Electronic Marketing Specialist of Farmers Bank & Trust, “The marketing materials were crucial in making Clarity part of our brand... it significantly helped our adoption rate and increased word of mouth.”

In order to increase adoption and engagement of Clarity, Farmers Bank & Trust created an advertising campaign through various marketing channels including in the sidebar next to the customers transactions, which meant account holders couldn’t miss it. They also used instructional videos to explain the product’s benefits and made the enrollment process easy by fully integrating the product within online banking. Lastly, to encourage account holders to engage with Clarity, Farmers Bank & Trust ran iPad prize offers for customers who used the product. See the full case study here.

Staff Training

Staff training is essential to the success of any digital money management solution. While most people think they are logical and practical with their money, in reality, the relationship is emotional. That means it can be an especially big turnoff if employees can’t understand account holders’ financial questions, or worse, don’t know that digital money management is a service offered by the financial institution.

Erin Caldwell, Training Director at MX, believes that “the most effective training inspires employees to use the money management solution for themselves, making them first-hand experts who cannot only answer basic questions about the tool, but provide recommendations and advice based on their own experience managing their own finances. This personal interaction is especially powerful in motivating account holders to trust the financial institution and invest time in using a digital money management solution.”

Taking this a step further, digital money management can help financial institutions truly understand their account holders on a more intimate level through data and analytics available to the front-line staff. As discussed in a webinar on 2015 Banking Trends, John Schulte, CIO at Mercantile Bank, has begun rolling this out. While he couldn’t share any specific results, he said it is proving to be very successful. Having a tool to help front-line staff open up financial conversations is a no-brainer way to help financial institutions cross-sell and add share of wallet.

Effective staff training not only educates, but also engages. Your team is a prerequisite to providing relevant advice to your account holders when they come knocking (or calling) for help. Don’t invest in digital money management and leave the training component of implementation half-baked. Make sure you give your team the information, motivation and support they need to help your organization succeed. It will lead to greater cross-selling opportunities.

Continuous Feedback

Like any financial services product, there needs to be a continual feedback loop in order for it to be successful. According to Forrester Research, once you have launched digital money management, “your customers will provide feedback about their experiences through email, calls, chat, and social media posts.” Pay attention to the feedback and make changes when called for.

Once you have worked closely with your account holders, you should be able to work closely with your online banking provider and digital money management solutions provider to iterate on your existing solution and make these changes happen. You should have the chance to contribute future ideas to their roadmap, have training sessions available to maximize staff engagement and have a dedicated customer success manager ready to help you whenever you need it.


Throughout this white paper, we have discussed why digital money management should not be a stand-alone feature hidden away, but a fundamental re-programming of how financial institutions engage with their account holders in a digital world. If financial institutions want to be competitive, make up for lost revenues, and remain the primary financial institution for their account holders, they need to focus on creating valuable experiences. They need to be focused on the account holder.

More specifically, we covered:

  • The importance of empowering account holders’ financial lives
  • Why traditional PFM hasn’t been effective
  • How digital money management is different
  • Strategies to get the most from digital money management

We hope you enjoyed this white paper!

The MX Team

To get an estimate on the returns that are possible with digital money management and to see a product demo, contact us here.

P.S. Here are other resources you may find useful: