It’s always been the case that managing personal finances is one of the biggest headaches many people face in their everyday lives. Indeed, figures from PwC reveal that more than half of people in the US (53 percent) report that their finances are a major cause of stress – with nearly a third of people saying these issues distract them when at work.
Worries about the state of finances can lead to longer-term health issues, so it’s hugely important for financial providers to offer their users a helping hand with services that can give them more control over their finances.
However, personal financial management (PFM) tools have never exactly taken off, with many efforts failing to find a wide audience. This may seem strange seeing as everyone has times when they feel overwhelmed by their finances. So what does the industry need to do to change this?
Solutions exist – so what’s wrong?
The issue is not a lack of demand from consumers for these type of services, or a failure from the industry to offer solutions. But while PFM solutions have been around for many years, it’s always been a challenge getting them into the mainstream.
It’s not necessarily the case that such tools have struggled to attract users in the first place – rather it is retaining an active user base where the difficulties lie. In my experience, people are often willing to give the solutions a try – emphasizing the fact that the demand is there – but they do not stick with them, abandoning them after just a few uses.
So why is this? One of the most common reasons is that, until now, many of these tools have relied on a large amount of manual interaction from the user in order to provide the best results. Users have to input details of their activities, clean up incorrect data categorization and ensure they keep their financial information up-to-date. This can quickly become tiresome, so it’s no wonder that after an initial bout of enthusiasm, people lose interest in the solution.
People know that managing their finances is something that needs to be done, but – like many chores – actually doing it is another matter. Therefore, if financial institutions want to change this and help their users get more engaged with their money management, solutions need to take much of the time consuming and manual processes out of the equation.
Taking the management out of money management
With the level of data available today, and the advent of tools such as artificial intelligence and machine learning, the key for financial institutions will be to develop solutions that can give high-quality reports and advice without the need for manual intervention and management from users.
Tools must be available on the channels consumers wish to use, extending beyond just mobile and online banking to include emerging touchpoints such as chatbots and smart speakers, all while offering a clear, easy-to-understand experience that strips away the complexity of traditional personal financial management solutions.
In recent times, several startups have proven that it’s possible to achieve success. The likes of Digit, Acorn and iQuantifi have all enjoyed strong results. However, many of these new apps tend to only focus on one piece of the pie that is a comprehensive money management tool. It’s up to the financial services industry to look at what these services do well – and where they fall short – when developing their own solutions.
The task for financial institutions and technology providers today is to get people to think differently about how they manage their finances. If they have tried such tools in the past and found them too complex or time-consuming, it’s up to the industry to show how times have changed and provide them with services that are more convenient, multi-channel and allow them to set the financial goals they want.