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Personetics Guide

What Is PFM – Personal Financial Management

Personal Financial Management (PFM) is a type of digital banking solution that helps people monitor their personal finances, manage their money, and keep track of their financial health.

PFM software can help banks offer a variety of services to their customers, including:

  • Spending categorization: Shows the customer how much money they’ve spent on various specific categories of purchases.
  • Automatic budgets: Help the customer set a monthly budget for different types of purchases.
  • Reminders and notifications: Alert the customer to upcoming bill pay deadlines.
  • Low balance warning: Tells the customer when they are likely to encounter a low balance issue.
  • Offer lower-cost financial products and services: Some PFM solutions can show the banking customer when they might qualify for a different product that is a better fit for their goals, such as a lower-interest rate loan or a 0% balance transfer credit card offer.
  • Automatic savings and investment: Some PFM tools help people save money with every purchase, such as “round-up apps.” They can also help customers set savings and investment goals

Why is PFM Important for Banks?

Financial institutions offer PFM solutions for several reasons:

  • Increasing competition from neobanks and fintechs: Some of the most innovative apps and consumer-facing PFM solutions in recent years have come from fintech startups and challenger banks. Traditional banks have invested in PFM to keep up with this digital innovation.
  • Evolving customer demands: As more of customers’ everyday financial activity has shifted to mobile apps and digital channels, they have begun to expect a more sophisticated digital banking experience. Customers want to see: How are my personal finances performing? How much money do I have? Am I saving enough? Am I spending wisely? Am I investing for the future? What should I do differently to make the most of my money? With the right approach to PFM, traditional financial institutions can become even more relevant to their customers and remain at the center of their customers’ lives.
  • Enhanced customer experience: With customers, it’s not just “what” they’ll be able to do within their digital banking application. It’s also “how” they’ll be able to do it. PFM tools are designed to make it easier the process of managing finances and achieving financial goals more seamless for customers and less “work.”
  • Increasing customer engagement: PFM solutions have the potential to help banks drive higher engagement with their digital customers. The more frequently they log on to their mobile banking app, the more time they spend engaging with their banks, the more likely customers are to trust their bank and look to their bank for financial advice and money solutions. Customer engagement is a way to keep customers interested in their bank, with a continual dialogue. . This in turn creates new opportunities for service and digital sales.
  • Increased revenue: PFM tools offer the banks a straightforward way to offer those additional financial products and services to customers. For example, banks can offer personalized financial advice or suggest products such as loans or investment options based on a customer’s financial situation.
  • Cost reduction: By providing PFM tools, banks are looking to reduce their customer service and support costs. The more PFM can act as “self-service” for customers, enabling them to manage their own finances, the less likely they are to reach out to bank employees for assistance, the type of interactions that can be expensive for banks.
  • Data Insights: Every time customers interact with their PFM, they generate valuable data that banks can then use to: be more targeted in their sales and marketing outreach; improve the products and services they offer; and provide better customer service.

Overall, offering PFM tools can be a win-win situation for both banks and their customers. Banks can improve customer engagement and satisfaction, increase revenue, reduce costs, and gain valuable insights into customer behavior, while customers can improve their financial management skills and achieve their financial goals.

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