Personal Finance Tools Bring New Value to Online Channel

With all the buzz around mobile banking, it's sometimes easy to forget about online banking. But banks are breathing new life into the channel with personal financial management (PFM) tools.

PFM tools have come a long way since the introduction of off-the-shelf software such as Intuit's Quicken. A new breed of PFM tools integrates almost seamlessly with online banking applications. These solutions, experts say, present an opportunity for financial institutions to take customer relationships to the next level.

"This is a ... value-added service to our customers," says Teddy de Rivera, EVP of the Internet services group with Wells Fargo ($622 billion in assets). The San Francisco-based bank has offered a PFM tool called My Spending Report since 2005 as part of its Web banking service. "Our customers told us they wanted help in managing their expenses, and this is a way for us to build more advice for them online," de Rivera explains.

Sasan Goodarzi, president of Digital Insight, an Intuit (Calabasas, Calif.) company, says PFM tools are customer-retention devices. "It helps [banks] shift from providing transaction value to a value-added relationship," he says. "There's also a stickiness issue for the bank."

According to Goodarzi, Intuit research of users of its Personal Finance Works product, a solution the company provides to banks using the Digital Insight online banking platform, reveals that 72 percent of users said they log on more to their banks' Web sites because of the PFM tool.

The Bank as Financial Adviser

Leslie Chaffer, senior product manager at S1 Enterprise, which offers a PFM tool through its Personal Banking product, notes that with online PFM tools, the bank -- not a software vendor -- provides customers with their financial data. Adds Mark Moore, VP of marketing for the Norcross, Ga.-based company, "These tools put the bank into the financial adviser role."

The PFM tools available to banks tend to take the fundamental features provided by the more traditional software solutions and present them in a more streamlined fashion. "The bank provides you with a single place to look at your household cash position and to categorize your spending over a period of time so you can adjust your spending habits," explains Moore.

Wells Fargo's de Rivera notes that the bank's online PFM offering, which was developed in-house, is not necessarily designed to replace traditional financial management vendor software, which offers richer content. "Those solutions have a lot of bells and whistles that some people do like," he acknowledges. "Ours gets at the core of what consumers and small businesses need."

My Spending Report is offered free to Wells Fargo customers. It automatically categorizes their spending and can pull information from any of their Wells Fargo products, such as credit and debit cards and checking accounts. "The information is presented as a table, and customers can tell the tool to show that information in graphical format, too," de Rivera relates.

A recent addition to My Spending Report is Budget Watch, which helps customers set goals. There is also a feature called What's Left that offers customers ideas of what to do with their money, such as paying down debt -- something that weighs heavily on people's minds in this economy.

Edward Woods, a senior analyst with Boston-based Celent, says online PFM tools are, in a sense, Web 2.0 applications, as they actively engage customers. "PFM-lite-type functionality will 100 percent be a part of our future," he says. "The only aspect remaining is ... how deep they will go."