What Engagement Banking Needs Is REAL Engagement

Jeanine Skowronski at American Banker penned an interesting article recently titled What Engagement Banking Needs Is Less Engagement. In it, she wrote:

“I can’t help thinking the money management moment has passed and that, moving forward, engagement banking – a future model for the industry that PFM is a big part of – would benefit from less engagement. This might reflect my lifelong aversion to charts and graphs. Or it could be related to a suspicion that many financial firms want to ‘engage’ with me simply to obtain information marketable to a third party. This could be one more instance where terminology is failing the industry, given that the word ‘engagement’ denotes a level of commitment not all consumers may be looking for in their banking relationships. Maybe something like ’empowerment banking’ or ‘choice banking’ would be a better descriptor.”

I totally understand where Jeanine is coming from and why she would feel that way. She even cites a study that found that 46% of consumers want technology to simplify their lives.

My take: The problem here — as Jeanine brings up — is in the terminology. We’re not using the term “engagement” appropriately,

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Customer engagement has been a pet topic of this blog for year. Back in January 2007 I tried to define the concept of customer engagement as:

“Repeated — and satisfying — interactions that strengthen the emotional connection a consumer has with a brand (or product, or company).”

The key phrase there is “emotional connection.” Simply interacting more often with a customer is not engagement. Only meaningful interactions create, or build on, the emotional connection.

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To make a sweeping generalization, it’s hard to believe that the banking industry has embraced this definition.

Making offers within the online banking platform or on a mobile device — regardless of how relevant the offers are, are just not meaningful interactions for many consumers. Jeanine talks about her “lifelong aversion to charts and graphs.” She’s not alone. Lots of people couldn’t care less about charting their current or future spending. Expense categorization? A chore.

So yes, people want technology to “simplify” their lives. What they’re really saying is “I want technology to do the things I don’t want to do” and “I want technology to alleviate and fix the problems I have with the companies I do business with.”

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But what banking is needs is not less engagement, but real engagement. More meaningful interactions with customers. Interactions that not only strengthen the emotional connection that the customer has with the bank, but that deepen their involvement in the management of their financial life.

Today’s PFM tools — despite the advancements in user interface, and ability to collaborate with ex-spouses — aren’t doing the job of engaging more consumers in their financial lives.

In a recent Aite Group report, I segmented consumers in one of three categories based on the frequency with which they performed 15 different financial activities. I found that 20% of consumer are Highly Engaged (or active) in the management of their financial life, 50% are Moderately Engaged, and 30% are Inactive (or not at all engaged).

The figure below shows the extent to which each segment wants their primary financial institution to help them manage their financial lives.

Among consumers who aren’t highly active, or highly engaged, in the management of their financial lives, the overwhelming majority don’t want their primary FI to help them manage their finances.

In other words, all the charting/graphing tools, merchant-funded offers, Facebook pages, blog posts, Twitter tweets, and YouTube videos that banks and credit unions throw out there — i.e., the things banks and credit unions call “engagement” — are mostly unwanted by 80% of the population.

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The solution isn’t less engagement. It’s more engagement — more meaningful engagement.

The challenge is that, among the 80% who aren’t highly engaged today, the diversity of reasons for why they’re not engaged — and what might get them engaged — is mind-boggingly wide.

Tactics like the one employed by SavedPlus (mentioned in Jeanine’s article) may be very effective with a percentage of the population, but it’s likely that that percentage is pretty small.

Banks and credit unions will need to experiment with a wide variety of techniques to get the 80% engaged. And if management is going to ask “What’s the ROI of doing that?” every step of the way, nothing is going to get done.

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Lastly, there is one point in Jeanine’s article I would take issue with. Specifically, where she writes:

“Banks should focus on developing products and services that make accountholders’ lives easier.”

I know the bank blogging gurus love to bash banks for not being innovative, and one startup in particular plays on the complexity of the banking industry by naming itself the opposite of complex.

But I think the industry has a pretty damn good track record of making account holders’ lives easier. ATMs, online banking, online bill pay, eBills, remote deposit capture, online account applications. What’s all this? Chopped liver?

They’re all innovations that have made bank customers’ lives “easier.”

What banks should be focusing on is improving the performance of account holders’ financial lives.

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Banks Need To Redefine Personal Financial Management (PFM)

As usual, NetBanker nails it with its post on Will mobile finally make PFM popular? In it, Jim writes:

“Mobile is, and will be, a huge driver for specialty PFM apps. App stores help consumers find the services, and mobile makes them less daunting to use. But it’s not just the mobile platform driving usage at these four challengers (see below), it’s the way they have positioned themselves with tangible consumer benefits (e.g., save money by spotting fraud charges) rather than the nebulous (e.g., “manage your spending for a better life”). Parsing this list a little closer, only Mint is positioned as a pure PFM. The challengers are all backing into PFM from various niches.”

He then goes on to talk about BillGuard, Lemon, Credit Karma, and Manilla.

My take: 1) NetBanker is spot on that mobile is — and will be — a huge driver for specialty PFM apps. Consumers are showing a strong willingness (if not desire) to download and use apps that have a very (or relatively) narrow set of functionality. It’s incredibly easy for someone to download an app, test it out, and see if it add values. And there’s data that shows that finance apps are doing well with consumers, compared to other types of apps. The following chart shows app “loyalty” as defined by Flurry:

20130802 FlurryThe chart shows that relative to a number of other category of apps, Financial apps are used an above average number of times per week (usage), and that consumers keep Financial apps on their mobile device an above average length of time (retention). Since Flurry gets its data from apps developers, I don’t think bank/credit union apps that provide account access is included in this data (I could be wrong about that).

2) NetBanker may be overstating the ability of app stores to “help consumers find the services.” A recent visit to the Apple apps store revealed six pages of apps that begin with the letter A. I couldn’t even begin to count how many pages of apps there were all together. An analyst with Canalys (a firm that tracks the apps market) recently said: “When we speak with app developers, many are concerned about monetization or platform fragmentation, but the number one problem they face is getting their apps noticed.”

3) The last two sentences in the quote above really intrigued me: “[O]nly Mint is positioned as a pure PFM. The challengers are all backing into PFM from various niches.” What’s a “pure” PFM? Why does NetBanker think the firms listed in the post are “challengers” to Mint? And why does NetBanker think those challengers are “backing into” PFM?

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The core of the issue here is simple: There is no clear definition about what PFM is (and isn’t). There is no common understanding — among bankers or consumers — about what PFM is. I don’t have research to back me up, but I’m willing to bet that if you showed a representative sample of consumers a list of companies that included Mint, BillGuard, Lemon, Credit Karma, and Manilla, and asked: “Which of these companies offers a “pure” PFM?” you would get blank stares from 98% of them.

Even among bankers, the term PFM is too loosely used. I (think I) know exactly what Jim means when he refers to Mint as a “pure” PFM — a PFM platform that offers budgeting, expense categorization, and charting/forecasting/analysis tools. Geezeo and Money Desktop, which choose to offer their technologies through FIs, rather than direct to consumers like Mint, are probably considered “pure” PFM tools,  as well. The term PFM has come to mean “budgeting, expense categorization, and charting/forecasting/analysis tools” in the banking community.

But the majority of consumers have shown little interest in these types of capabilities. Instead, they want to know their credit score, how it’s changing, and what to do about it (Credit Karma), or they want to track or prevent grey charges on their debit and credit cards (BillGuard).

These capabilities are “personal financial management” capabilities. They’re not “backing in” to PFM. They ARE PFM. And they’re not challenging Mint (or other “pure” PFM platforms) — they’re providing additional capabilities not found in Mint.

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I’m a big fan of what the “pure” PFM players are doing. But bankers need to redefine their concept of PFM, and expand the definition to include a wider range of “PFM” capabilities.

What they’ll realize is that their “pure” PFM deployments fall well short of providing the range of capabilities that consumers want and need. And they’ll realize that their”pure” PFM deployments need to become more of a platform that integrates the “challengers” into the platform.

It won’t be the Apps Stores that help consumers find the “specialty” financial apps out there. It will be the banks and credit unions. The FIs will vet the apps, recommend to their customers which ones are good, safe, and can be integrated. Consumers will pay for these apps, and FIs will get a cut of the revenue for helping the developers reach a wider base of users.

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To get back to the core question of the NetBanker post — “will mobile finally make PFM popular?” — the answer is: “It depends on how you define PFM.”

If you continue to have a narrow definition of PFM (i.e., budgeting, expense categorization), then the answer is NO.

On the other hand, if you define PFM more broadly, then the answer is YES.

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But a lot of bankers still won’t grasp the strategic importance of this.

It represents a shift in the underlying value of banking.

The old value was “money movement.” Banks were (still are) good at moving money. You parked your paycheck in the bank, then wrote checks (and more recently swiped your debit card) to the places and people you did business with, and the bank took care of all that.

The new value is “money management.” Despite the flagging economy and all the talk of the “1%”, the numbers don’t lie: Compared to even 20 years ago, our (Americans’) earning and spending power is as strong as ever.  But many of us don’t need help allocating and investing assets, and we don’t really need or want help to do budgets or categorize expenses.

There’s a whole bunch of stuff in the middle (where budgeting is at the bottom or left, and investing assets is at the right or top). Things like what BillGuard, Lemon, Credit Karma, and Manilla (and other “specialty” PFM providers) do.

Helping consumers not just make smart choices about how they spend their money, but what tools they use to track, spend, and manage their money could be — I think it WILL be — the way FIs compete in the future.

Do You Need A Minty Fresh PFM?

Intuit announced that it would offer banks and credit unions the opportunity to implement Mint as a PFM platform integrated with the FIs’ online banking platforms. As usual, NetBanker was all over this with it’s equally as typical excellent analysis. Jim Bruene’s list of pros and cons for FIs to consider regarding implementing Mint is spot on.

Well, mostly spot on.

There are a few points I’d quibble with. Jim writes:

“Many of Intuit’s 1,100 online banking clients (500 of which use Intuit’s FinanceWorks PFM) will jump at the chance to integrate Mint. Non-customers will be considerably more wary.”

Jump is not the right word.

For the 500 FinanceWorks users, switching to Mint will be a difficult decision. Mint.com may be the gold standard in PFM, but forcing users to change something they use (and may actually like) should not be taken lightly. I also find it difficult to believe that the other 600 clients have been holding off from deploying PFM because they’ve been waiting for Mint.

Jim also points out the potential for brand confusion:

“Adding another brand to your service is always a tough call. And if other banks offer the same Mint-branded PFM, have you lost the potential for competitive advantage? Furthermore, does driving your customer into Mint actually make you more vulnerable if Intuit or someone else releases a “conversion kit” to move all your account history to Mint.com or another bank’s Mint service?”

I don’t think of deploying Mint as adding “another” brand to the online banking service. What other brands are there? Geezeo and Money Desktop are industry, not consumer brands. Popmoney is not a strong consumer brand. There are no strong consumer brands in the world of remote deposit capture. Checkfree for bill pay? It’s not the Checkfree brand that draws consumers to use online bill pay.

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NetBanker’s list of pros and cons are excellent, but it my simplistic way of looking at the world, there’s one overarching question banks and credit unions need to answer here:

Economically-speaking, what are we going to get out of implementing Mint?

According to the nearly 500 credit union executives surveyed by Filene Research last fall, 6% of credit union members use PFM tools provided by their credit union. In other words, the 12 million users that Mint has (or so it claims) is more than double the number of PFM users the total credit union industry has (you can do the math).

1. Will integrating Mint into the online banking platform jump start PFM adoption in a way that other platforms have been unable to?

Geezeo and Money Desktop may have some stories to share about how their clients have seen better than 6% adoption of PFM.

2. If existing Mint users are happy using Mint at Mint.com, will they switch to using it at their bank’s or credit union’s site?

Yes, I too have consumer research showing that consumers would prefer to use PFM at their FI’s site — but those aren’t the existing Mint users.

The future Mint user experience confuses me. Intuit told me that they would not deploy the offers functionality of their dot-com platform in their FI platform. But couldn’t a consumer who uses Mint on their FI’s platform just go over to Mint.com to see these competing offers? If they’re already a Mint.com user, I have to believe the answer is yes. 

3. If we implement Mint, and our customers/members use it, what’s really the bottom-line impact to us (the FI)?

And that’s the question that few (if any) FIs can answer with any degree of certainty.

The research I’ve done shows that — according to consumers’ own perceptions — a minority of PFM users (~20%) deepen their relationship with their bank or credit union as a result of using PFM.

So if you’re a credit union with 6% PFM adoption, and deploying Mint would double that –no, hell, let’s make it triple that to 18%, and only one in five of those members will deepen their relationship from using the tools, the question is:

Is it worth deploying Mint to grow the relationship with 3.6% of our members?

There’s no simple way to answer that question. Who are those 3.6%? How will they grow the relationship? How much do we really need to invest in order to get that relationship growth? Could we be doing some differently with PFM to make the 20% impact rate expand to 40% of PFM users?

Bottom line: Deciding whether or not to implement Mint is not an easy decision. If your FI is willing to make a serious commitment — to PFM, not just Mint — as a tool and platform for nurturing and growing customer/member relationships, then you should do the hard work of figuring out if this is the right platform for your organization. If you’re not willing to make a serious commitment to PFM…

Telling The PFM Story

In a recent Financial Brand article titled Online Banking 2.0: Getting Visual, Brett King is quoted as saying:

“FIs still have a long way to go. Visualizations and basic budgeting tools are only one small step forward. It’s going to take more than a few fancy pie charts, a drag and drop goal function, and seeing account usage on a timeline to pimp out internet banking. While a pie chart is potentially an effective tool to show me some of that, and might even be central in some scenarios, there is a lot of other relevant information that might be prioritized.”

My take: Totally agree. FIs need to tell their customers a PFM story.

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Here’s the problem few bankers seem to want to realize: Many people hate numbers, aren’t comfortable with numbers, and/or don’t want to spend their time trying to make sense of numbers.

This is one of the major reasons that PFM usage is so low (another being the fact that many of us just aren’t interested in doing budgets, categorizing our expenses, or graphing our financial lives to death).

Want to increase the usage of PFM — and it’s value to customers? Tell a PFM story.

Tell each PFM user the “story” of their spending, savings, investment performance, etc. each month. In WORDS, not numbers.

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How are you going to do that?

A company called Narrative Science just might be able to help. The company claims to “transform data into stories and insight.” From what I’ve seen, it just might be able to do that with PFM data.

Here’s an example for what the company has created for one financial services firm:

The “narrative” was created solely from data provided to Narrative Science’s AI engine.

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For any particular customer, the depth and detail of the narrative will depend on the level of data provided. But if a bank customer gets a personalized “statement of performance” each month — and gets value from it — it might create an incentive to interact more frequently with the PFM platform.

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What I would like to see Narrative Science develop (and for PFM providers to do, as well) is tell “data stories” in the form of infographics. 

Let’s face it: With the exception of the highly-intelligent people who read this blog, most people out there are too damn lazy to read a lot of text. 

An infographic — a good one, that is — isn’t just a series of graphs and charts. It’s a story, a narrative, that makes heavy use of visual ways to display data. 

But the missing ingredient to PFM isn’t graphs and charts — it’s the story. 

Anybody For A PFM Summit?

Some people are really good at organizing things, events, and people. About the only thing I can organize are my thoughts.

So I’m really hoping I can convince somebody (or organization) to organize a PFM Summit.

Not a conference, not a Finovate-style demo format, and not a free-form BarCamp.

A summit. A meeting of the minds about where PFM is, the impact it’s having (and not having). And where it’s going.

I want the leading PFM providers to pay for it — Geezeo, Money Desktop, Yodlee, Strands (to name just a few — I don’t want any heat for leaving anybody off the list).

And I don’t expect to be the only analyst there. The sponsorship money has to cover getting Jegher, Cohen, and Schwanhauser there, too.

If we can’t get 100 well-qualified, relatively seniorish-level execs from FIs to show up, then there is no there there regarding PFM.

I’m not 100% clear on what the format would be, but I’d like to see it include:

1) An analyst debate. In a recent Google+ hangout about PFM organized by the National Consumer League, Schwanhauser and I expressed some clearly conflicting views about PFM. Would like to continue and expand that conversation, and include the other analysts.

2) Vendor interrogations. Don’t get me wrong — I love the Finovate format.  But it leaves no room for a critical questioning of the vendor. And just giving them more time on a stage is a waste of time (sorry guys). Somebody (and I would propose those somebodies would be me and my fellow industry analysts) needs to sit down with these vendors and ferret out what’s real, what’s vaporware, and most importantly, what’re really working well and not working well in the world of PFM.

So, how about it Bruene? You’re really good at organizing this kind of thing. How about adding a PFM Summit to your list of events?

Finance Dot Data Dot Gov

One of the following two statements is false:

1. Just one in four PFM (personal financial management) users believes that PFM tools have done a good job of helping them understand how other people manage their financial lives.

2. No data exists for FIs or PFM providers to help consumers understand how other people manage their financial lives.

I can assure you that statement #1 is true, because I have the research data to back it up. If you thought statement #2 is true, you are forgiven, but that statement is NOT true.

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The Treasury Department recently launched a new web site called the Finance Data Directory, which brings together (for the first time?), a number of data sources relating to consumers’ financial lives. Included are links to the CFPB’s credit card complaint database (which I’m not a big fan of), the CFPB Credit Card Agreement Database, the FDIC’s Call Reports, Survey of Un/Underbanked, and Summary of Deposits, and a database on Consumer Expenditures.

This last database mentioned above should be utilized by every PFM provider. It provides detailed spending data by category (e.g., food, housing, utilities, apparel, transportation, etc.) at an incredibly granular level. It’s exactly the kind of data that consumers need to understand how their spending compares to others in their age and/or income brackets.

Another dataset worth exploring is the Survey of Consumer Payment Choice Data which provides detailed data on consumers’ credit, debit, and prepaid card usage. Helping consumers make sense of this data, and how it could/should affect their payment decisions is what PFM providers should be doing.

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The Treasury’s efforts appear to be tied to two initiatives: The first is the Data.gov initiative, whose purpose, according to its website is to:

Increase public access to high value, machine readable datasets generated by the Executive Branch of the Federal Government.

The second initiative is the Treasury’s attempt to take a more activist role in helping consumers manage their financial lives.

I participated in a Google+ Hangout recently, coordinated by the National Consumer League, and sponsored by JPMorgan Chase. One of the panelists was Sophie Raseman, the Director of Smart Disclosure in the Treasury’s Office of Consumer Policy. On the Treasury’s web site, Sophie wrote:

“The Finance Data Directory is part of Treasury’s work to promote the development of the next generation of personal finance tools that promote financial capability.”

While the finance data directory has a ton of data that PFM providers should find useful, Sophie said something during the hangout which really resonated with me:

“PFM needs to focus on outcomes.”

I couldn’t agree more. This gets at the heart of what I was trying to communicate in my PFM Is Dead post. Oversight — the ability to know where your money is and where it goes — is useful, but just one of the potential benefits and impacts that PFM can have.

Account aggregation and budget creation/tracking is great, but unless it changes behavior — or in Sophie’s terms, alters outcomes — then the potential impact of PFM is unfulfilled.

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One aspect of the Treasury’s objectives that shouldn’t go unnoticed is its choice of words. Note that the Treasury is looking to promote financial capability. I might be reading more into this than what’s really there, but I believe it was a conscious choice to use the word capability instead of literacy (Sophie’s comment about outcomes supports my belief). 

Too many consumer advocates focus on financial literacy. Knowledge without action, or change in behavior, is useless. 

It will be interesting to see how the Treasury’s efforts in this area unfold.

PFM Is Dead, Long Live FPM

PFM (personal financial management) is dead. And if you want to know who killed it, look in the mirror. Because you killed it. You, the banks and credit unions that have been implementing PFM. And you, the PFM vendors who have been selling them this stuff.

I know what you’re thinking: What the hell are you smoking, Snarketing Boy?!@#? You’re thinking, “We integrated PFM into our online banking platform and saw a big spike in adoption in the first 90 days!”

That’s actually how you killed it. You buried it. Buried it alive. Stuck it in the discount rack of that dying record store you call your online banking site.

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It didn’t have to end this way. But you deceived yourselves into thinking PFM was something that it isn’t. The following quotes were pulled from CU Times:

“We wanted to bring a product to market that offered our members a real and complete solution to managing their personal finances.” — Credit union COO, referring to PFM

“The purpose of the new tool is to help build awareness of the credit union’s ability to help individuals plan for short- and long-term financial goals, as well as track income and expenses and promote financial literacy.” — Attributed to just the credit union

“Gaining an understanding of one’s financial picture will empower our members to make prudent financial decisions.” — Credit union CEO

I’m sure there are plenty of similar quotes from bankers, I’m just too lazy to go find them.

The problem with these statements, however, is that none of them are rooted in reality.

PFM — as implemented by most FIs today — is mostly budgeting, expense categorization, and cash flow analysis. Not only is that a far cry from being a “complete solution” for helping people manage their finances, but, drawing upon a recent survey of 1,115 consumers conducted by Aite Group, and published in a report titled Strategies For PFM Success, there are (at least) two issues that prevent the above statements from being true:

1. Few consumers are sufficiently engaged with the management of their financial lives. I identified 14 financial activities — including budgeting, expense categorization, forecasting cash flow, evaluating savings/investment performance — and asked consumers if they did these things, and if so, how frequently. I took the results and grouped respondents into one of three activity levels: Low, moderate, and high. About 30% of consumers (consistent across generations) are not at all engaged in their financial lives.

The percentage of consumers that are highly active, however, varies by generation: One-third of Gen Yers, a quarter of Gen Xers, about 15% of Boomers, and just a handful of Seniors active in the management of their financial lives. One thing, however, is consistent: The most active consumers are those most likely to use PFM tools. Bottom line: Unless consumers become more active in managing their financial lives, the PFM tools will go unused.

2. PFM tools fall short of delivering full value. One of the things I discovered analyzing the survey data was that PFM users could reap three types of benefits from the tools: Oversight — knowing where their money is and where it goes; Insight — knowing how their financial lives are performing; and Foresight — knowing what to do to improve the performance of their financial lives. Bottom line: Few PFM users have reached the pinnacle (or the middle level) of this pyramid.

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PFM is stillborn. Budgeting and expense categorization, with pretty charts and graphs (and now Bubbles!) simply doesn’t have that much of an impact on consumers’ financial lives. Consumers get Oversight out of PFM, but that it isn’t enough. They need more.

I’m not one to shy away from trying to name things, so I’ve got a name for what is needed. If you’re dyslexic, you already know the answer: We need FPM. Financial Performance Management.

Consumers need tools like the bill analysis tools that Truaxis provides, the card and mortgage analysis tools that Credit Sesame has developed, the saving incentives apps that Bobber Interactive has designed, and the spend management capabilities that Banno demoed at the recent Finovate conference.

But consumers need these things to work together with their existing accounts, and existing online and mobile banking platforms. Independent, one-off tools and sites will never gain enough traction to garner a significant mass of consumers.

If FIs really want to provide their customers and members with a “complete solution to managing their personal finances,” they’re going to have to go well beyond slapping up some PFM (i.e., budgeting and expense categorization) tools on their web sites. 

It’s going to require a concerted — and probably strategic — effort to bring these capabilities together into a coherent offering.

Adding PFM as a feature to checking accounts is a dead end. 

FPM needs to become the product. It’s what people will pay for. It’s what delivers the value.