Banks individually might brag about how they put their customers first, but sometimes those customers disagree.
But for banks that want to look like heroes to a money-anxious clientele, one popular way to rev up customer loyalty is to offer personal financial management (PFM) programs. With online PFM, customers aggregate all their financial information – including investments and other accounts outside the bank – to more easily budget and keep track of spending and bills, and do it for free.
Analysts like Christine Barry say the idea has been gaining momentum among financial institutions. For retail customers, PFM adds “stickiness” to the bank relationship, making customers eager to stay with a bank that’s helping them personally. Meanwhile, a small business version can handle more complicated functions such as customer invoicing and payroll, to the same effect.
“There’s a lot of excitement for PFM and a lot of demand for it,” said Barry, a senior researcher with Boston-based Aite Group. In an Aite survey of 283 small businesses of less than $10 million in annual revenue, about 40 percent of respondents said they’d use banking sites to manage finances – if their banks offered such a thing.
Right now, only about 11 percent of respondents manage finances from their bank’s website, she said, with most others using non-bank PFM programs or simply trotting out Excel spreadsheets.
But banks are increasingly warming to the idea. Marco Bernasconi, vice president at Connecticut-based technology vendor COCC, said PFM is getting renewed attention as one of 2010’s most popular technology investments. Ron Shevlin, Aite senior researcher focusing on retail banking, said pent-up consumer demand for these programs is huge. Mint.com, a national program targeted directly to individuals, reportedly has 3 million users, he said.
Locally, Brockton’s HarborOne Credit Union just unveiled a business-oriented PFM program, while Holyoke-based PeoplesBank recently launched a retail PFM program. Newburyport Five Cent Savings Bank launched its program for retail customers in June 2009, and now has 502 users, or nearly 30 percent of its online customers. The program, which has gotten little marketing since its initial launch, will be getting a renewed publicity push this summer, according to Keri Sullivan, assistant vice president with information technology.
Newburyport’s customers have been thrilled with it, Sullivan said. Instead of getting calls for technical help or to complain, customers have grasped the program easily and actually called the bank to gush about how much it’s helped them.
Not For Everyone
The programs make banks and credit unions seem more like advocates than adversaries, said Bryan Clagett of Geezeo, a Connecticut-based vendor that sells PFM tools through a number of offices, including a Boston location.
“We know that, fundamentally, there’s a problem with [customer] trust,” he said. While vendors such as Mint sell directly to customers, as Geezeo itself once did, Clagett said customers feel safer if they’re using programs through banks’ websites.
As an added benefit, banks can also get a clearer view of their customers’ financial needs, and make their marketing more focused as a result.
But the idea isn’t perfect for every bank.
“A lot of people are thinking, ‘Hey, this is the next killer [application] that’s going to take us to the nirvana of customer retention,’” said Steve Shaw, director of strategic marketing with tech vendor Fiserv, which sells PFM programs.
While a new program like this might indeed be popular and successful, banks need to make sure they have a few other things down first. Fiserv’s research shows that, more than any new feature or flashy program, simple, comprehensive online banking and billpay will keep customers around for far longer. PFM is great for some customers, but customer satisfaction hinges on more basic offerings.
Aite’s Shevlin also said PFM won’t be the magic key to win customers for life, especially for those who believe the program will just draw in customers of its own accord. PFM works best for banks that can put in the time and resources to promote it and make it a cornerstone of their customer relationship, Shvlin said.
Banks might proceed with caution, he said, but he added that consumers are most definitely interested. Tech-savvy Gen Y likes it, and Gen X – the group with members currently in their 30s and 40s – are at a point where they have an enormous amount of financial concerns to keep track of. That’s on top of an economic mess that has many customers anxious about saving.
“It’s not hype,” Shevlin said. “There is a huge amount of interest.”
