The German banking industry has taken a somewhat reluctant approach to online banking in recent years. Now FinTech startups are bursting onto the market from every direction, presenting established players with serious competition. This applies in particular to personal finance management (PFM), a customer-friendly extension of online banking that has the stuff to become a key application for users.
PFM gives customers the option of syncing and managing all of their accounts through a central portal. This not only provides a precise overview of their current assets and a financial calendar for recurring payments, it also allows them to work with a single financial planning tool that shows them exactly where they’re spending their money each month and how much these outgoings amount to.
By automatically categorising income and outgoings and using this information to generate reports, PFM gives customers a better understanding of their own buying behaviour and financial status – the ideal basis for setting realistic budgets and saving targets. And by anonymously comparing their data to that of comparable users, it’s also possible to determine if a customer could potentially save on insurance payments.
When will PFM become mainstream?
PFM has been gaining ground for several years now, without actually breaking through to widespread use in the online services provided by banks. In Germany, the Postbank, Comdirect and the Volksbank are among the few pioneers in this area.
That said, the advantages to be gleaned by financial institutions by implementing PFM are readily apparent. At the end of the day, it’s an excellent way to reverse dwindling customer contact and regain customer loyalty – a critical success factor in these days of mobile and online banking.
In addition to furnishing banks with new ways to reach out to customers (and helping to improve customer relationship management), PFM gives banks a complete overview of their customers’ financial status – and this opens the door to up-selling which could allow banks to offer customers made-to-measure services.
FinTech startups are driving competition
PFM is also important for traditional banks and savings banks for another reason: global competition driven by innovative FinTech companies. In Germany, numbrs.com and finanzblick.de are the two most significant service providers. On an international level, Strands Finance from Spain and Meniga in Iceland are dominating the market with their white label solutions. With white label, banks buy in software solutions and integrate them into their existing systems. And this model has been successful: several large banks are currently running PFM pilot projects – not on their own, but in collaboration with the FinTech startups.
Banks face a momentous question: act now or be left behind?
PFM can offer banks an excellent opportunity to win customer loyalty, but this means the functionality must remain within the remit of the bank. With the transaction history and the PFM platform itself located on third-party servers, it’s easier for customers to switch banks without having to start from scratch and reconfigure their entire PFM. In short: independent providers who bring together the services of various financial providers offer clear advantages for the customer.
This means established institutions must act fast, as merely offering a bank account isn’t enough to differentiate themselves from other providers – and it certainly won’t be enough to strengthen customer loyalty. At the same time, these established players now have the chance to pull in early adopters, position themselves as drivers of innovation and provide customers with some compelling reasons to get on board in a hotly contested market.