The business case for Personal Financial Management (PFM) — and MoneyDesktop (MD) specifically — continues to get better and better each year. As proof, we’ve gathered data from dozens of compelling sources. This data collectively answers three key questions:
1. Why Change?
2. Why PFM?
3. Why MD?
The answers to these questions showcase why MD continues to bring a phenomenal return on investment (ROI) for financial institutions everywhere.
Let’s get started.
3. CONTENTS
Why Change?
Financial Industry Shift
Why PFM?
Why MoneyDesktop?
Smarter Data Analytics
Improved ROI
Insight & Target
Conclusion
1
3
5
7
10
10
11
11
4. The Business Case For PFM
Overview
The business case for Personal
Financial Management (PFM)
— and MoneyDesktop (MD)
specifically — continues to get
better and better each year. As
proof, we’ve gathered data from
dozens of compelling sources.
This data collectively answers
three key questions:
1. Why Change?
2. Why PFM?
3. Why MD?
Account holders are changing. There is an ongoing shift away from traditional brick &
mortar banking. Technology is providing better ways for account holders to interact with
The answers to these questions
showcase why MD continues to
bring a phenomenal return on
investment (ROI) for financial
institutions everywhere.
Let’s get started.
their money and with their financial institutions.
Why Change?
Anyone who follows business news knows that industries across the world are being
revolutionized. From Amazon to iTunes to Netflix to Twitter, new technologies are
rendering traditional business models irrelevant. Consumers now demand e-books
instead of hardcovers, digital music instead of CDs, video on demand instead of
video rentals and online media instead of newspapers. This isn’t news. Everyone
knows this.
What may be surprising is how quickly the change has occurred.
Look at the book industry, for example. In less than eight years, Amazon
went from being the industry underdog to becoming a force so powerful that
Borders couldn’t compete for market share:
$7.0B
6.0B
5.0B
4.0B
3.0B
2.0B
1.0B
'02 '03 '04 '05 '06 '07 '08 '09 '10
This might reflect your personal experience. Think of the last time you bought
a book. Chances are you didn’t drive to a retail store, dig through the shelves
and wait in line. You likely signed into Amazon and made the purchase —
perhaps by downloading the book directly to an e-reader.
$$$
01 Business Case for PFM
5. Today’s consumers have adapted. They’re not only accustomed
to the digital revolution — but they expect it, along with all the
conveniences it brings.
It’s the same story, over and over:
Music
2B
Physical
Digital
Ringtones
1.5B
Album
Download
1B
Single
Download
500M
Vinyl Cassettes CDs
0
$$$‘75 ‘80 ‘85 ‘90 ‘95 ‘00 ‘05 ‘10
Source: Tal Yellin / CNN Money
Movies Advertising
6B
60M
4B
40M
$2.2 B
$34M $10M
2B
20M
BANKRUPT
$0
0
‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10
‘05 ‘06 ‘07 ‘08
Blockbuster Revenue Netflix Revenue
Newsprint Ad Revenue Online Ad Revenue
Source: Online MBA Programs
Data: Newspaper Association of America Interactive
Advertising Bureau Trailing four quarters.
Put simply, companies like Borders and Blockbuster were slow to adapt to the digital revolution and were unable to
recover. On the other hand, industry pioneers such as Amazon and Netflix saw the shift as an opportunity. By adapting
and catering to new consumer expectations, these pioneers delivered exactly what users demanded.
Business Case for PFM 02
6. 10 Megabanks Now Have
More Assets Than All 13,630
Other US Lenders Combined
ASSETS
8,000B
0
‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11
10 Biggest Banks All Other Lenders
6,000B
4,000B
2,000B
TOP 10
ALL
OTHERS
Something similar is happening
in the financial industry.
There has been an enormous shift in asset concentration
and customer loyalty during the past two decades. For
instance, the 10 biggest banks in the US now have more
assets than all 13,630 other lenders combined.
One reason for this shift is that the biggest banks have
better met users' demands for robust online and mobile
banking solutions.
Take Bank of America (B of A), for instance.
B of A was the first financial institution to launch mobile
banking on the iPhone, and the results were impressive.
More than six million people downloaded the app, and a
quarter of a million joined B of A specifically to use mobile
banking.1
The app generated enormous returns for B of A. To illustrate,
from June 2011 to June 2012 more people switched to B of
A than any other financial institution in the US.
03 Business Case for PFM
Source: FDIC/CUNA
Bank of America
JPMorgan Chase
Wells Fargo
U.S. Bank
10%
Capital One/ING Direct
Other
21%
12%
5%
5%
4%
39%
TD & PNC - 2% Citibank
Bank of America, the villain of Bank Transfer Day, is now the single
biggest destination for customers switching to new banks.
Source: AlixPartners
All this growth came despite the fact that B of A was
deemed as the main villain during Bank Transfer Day in
November 2011 (a grassroots movement to switch from big
banks to credit unions). Additionally, during this time Bank
of America scored the lowest of any financial institution on
a customer satisfaction survey — nearly 16 percentage
points below the industry average. 2
7. Business Case for PFM 04
In retrospect, Bank of America’s user acquisition might not
be surprising. After all, consumers in the financial industry
favor convenience over customer service by a margin of 15
percentage points. 3 B of A simply gave users what they
wanted.
It follows that when financial institutions focus primarily on
customer service, at the expense of digital convenience,
they risk losing their user base. Users demand convenience,
and companies that don’t meet user demands don’t survive.
All of this illustrates the necessity of investing in online and
mobile banking solutions especially since the volume of
transactions handled at a physical branch has declined by
more than 45 percent across the industry since 1992, while
the cost per teller transaction has skyrocketed.4
This means that focusing primarily on a traditional growth
model (e.g., building branches and hiring new tellers) is
merely an expensive way to fail. It also means that the
revolution in the financial industry is not slowing down (as
evidenced by the sharp decline in transaction volumes
from 2007 to 2013). If anything, the change is speeding
up. Users are visiting physical branches less and less, and
they’re demanding digital channels more and more.
The average cost per teller transaction at community banks and
credit unions has more than doubled in the past two decades as
monthly volume has declined sharply.
$12k
$1.20
COST PER TELLER TRANSACTION
AVERAGE MONTHY VOLUME
(left scale)
(right scale)
It’s not a surprise, that a host of new digital players such
as PayPal, Simple, Moven, Walmart, and Google have
moved into the financial space. Together with innovative
megabanks, these disruptive companies and technologies
could be viewed as the Amazons and iTunes of the financial
industry — innovators that represent a tremendous threat
to smaller market players.
Eventually, these disruptive companies will give their users
the option to do everything digitally that could be done in a
branch. Given this option, why would users choose to drive
to a branch, wait in a line, sign a paper deposit slip and get
a receipt? If users increasingly avoid similar experiences
when purchasing books, music, movies and news, why
would they choose something different for banking?
The answer is simple. They wouldn’t.
In sum, it’s clear that when financial institutions don’t
innovate alongside their competitors, they risk stagnated
growth (like Barnes & Noble) or going bankrupt (like
Borders). Keep in mind that only one generation needs
to make the switch to digital banking en masse, and the
traditional model will become totally irrelevant.
And that’s why change is so crucial.
"Are there people who still prefer going into
a bookstore? Sure, but that didn’t save the
economics of book sales. The facts are brutal
when it comes to declining branch activity. The
American Bankers Association reported in 2008
that the Internet had surpassed the branch as the
channel of preference for day-to-day banking,
and the branch’s decline has sped up since then
in favor of mobile and Internet, with no signs of
slowing."
- Brett King
"We are seeing a lot of customers starting to use
mobile as their primary channel, and I think we'll
see that trend increasing for the first time, we're
able to improve the customer experience while
being able to potentially reduce the cost ...Mobile
customers are more engaged and tend to stay
longer."
- Ravi Acharya
Senior VP of Digital Services, JP Morgan
"Borders isn't just a victim of a challenging
economy. The company made some poor
decisions over the last decade and failed to adapt
to new ways consumers shop and read books. It
clung to an outdated strategy way too long and
reacted slowly as more nimble competitors took
its business away."
- Rick Newman
Market Analyst, US News
10k
8k
6k
4k
2k
0
1.00
0.80
0.60
0.40
0.20
0
‘92 ‘96 ‘02 ‘07 ‘13
Focusing primarily on the branch is an expensive way to fail.
Source: FMSI
8. Why PFM?
Luckily, there’s still time for traditional players to innovate and remain relevant. To do this, financial institutions need to adopt
a PFM solution that meets users' demands to see all their accounts, balances and transactions together in one place.
The demand for PFM is high. Specifically, 85 percent of
account holders say that having one place to manage
all their finances is one of the most important services a
financial institution can offer, 5 and 52 percent of account
holders say they would leave their financial institution for
one that offers better money-management capabilities.6
The truth is, no one wants to log into multiple institutions
to stitch together a complete picture of their finances.
Consumers will go where they can experience the least
friction, and the institution with a seamless solution will win
and retain users.
As online marketer Bryan Eisenberg claims, “Where there
is friction, there is opportunity.”
One key opportunity here is that users of PFM are far less
likely to leave your financial institution. To illustrate, PFM
users boast an attrition rate as low as two percent, while
non-PFM users have an attrition rate of more than six
percent.7 Since the average user in the industry is valued
at $250 per year, this four percent difference between PFM
and non-PFM users add up quickly — to $100,000 for every
10,000 users every year.
The long-term effects of increased user loyalty can’t be
overstated. Recently, many Americans have become deeply
loyal to mainstream financial experts like Dave Ramsay
and Suze Orman, experts who directly influence people’s
lives by helping them get in control of their finances. PFM
software plays a key role in this process, building the same
sense of loyalty that someone like Ramsay or Orman
have. For instance, 76 percent of PFM users say that the
software has helped them get in control of their finances
and 72 percent say, “I finally know where all my money is.” 8
PFM allows financial institutions to fulfill their core role as
a service provider — helping people manage their money.
Once banks and credit unions can achieve this and really
make a difference in people’s lives, loyalty will follow. In fact,
some banks have reduced the number of accounts closed by
up to 50 percent after introducing PFM. 9
It's no wonder, then, that the biggest banks are adopting PFM
solutions at such rapid rates.
50
42
40
34
29
PFM adoption at the biggest US banks is set to increase by 150
percent in a three-year span. Based on data like this, Celent
Research claims that “from a relationship perspective, PFM
will be the most important" innovation for financial institutions.
Celent also predicts that more than 52 percent of the total online
banking population will have signed up for PFM by early 2014. 10
Senior decision-makers at large financial institutions mirror this
enthusiasm. Joy Marshall, VP of Internet Services at Wells Fargo,
says that PFM "is absolutely central to our online strategy," and
Dottie Yates, VP of Online Design at Bank of America, says that
"the concept of PFM is driving everything we do."
05 Business Case for PFM
40
30
20
10
0
2011 2012 2013 2014
NUMBER OF BANKS
8
10
16
21
PFM Adoption by Top 50 US Banks
Source: Celent
9. Such enthusiasm will rise as more financial institutions
realize the staggering ROI that can be achieved with
PFM. For example, when PNC Bank first released Virtual
Wallet, an innovative PFM platform, they attracted around
26,000-40,000 new users each month (65 percent of
which were new to the bank). 11 Adoption rates for Virtual
Wallet have continued at nearly the same rate for the last
few years, and it now has more than one million users —
a data point that represents a terrific investment for PNC.
But PFM isn’t just about acquiring and retaining users. It
also brings a ROI in the form of increased online banking
traffic. For instance, users of PFM log in to online banking
twice as frequently as non-PFM users. Additionally,
Benefits Year 1 Year 2 Year 3 Year 4
You can see that the possible revenue from additional
cross-sales is enormous. That’s because PFM is a data
sponge. The data that it holds is the key, and the ability
to organize it and take action is the holy grail of effective
marketing.
We’ll dive into the details of Big Data in the next section,
which is about MD’s top-tier PFM solution. For now we want
to point out that the potential ROI of PFM is massive.
The phenomenal ROI is exactly why big banks are quickly
adopting technology and investing millions of dollars to
develop their own solutions.
When one particular financial institution
implemented PFM they saw that “users
increased the average time they spent in
the secure site from one to six minutes.”13
The implications of increased online
traffic are enormous. Forrester
Research calculated that for a mid-sized
financial institution the cost savings from
additional online banking use alone
equaled $118,969.14 This is because
each minute the user spends online
means that the user can find answers
to their questions online rather than
via phone. Each minute also equals
additional revenue from cross-selling
"Users of PFM tools are more profitable, have higher
balances, consume more products and services, and
are less likely to leave for another bank."
- Cisco
The Next Growth Opportunity for Banks, 2011
"Javelin data illustrates that financial institutions that
install compelling personal finance management
tools stand to reap the benefits of increased
customer loyalty, higher usage, lower costs and
added revenue."
- Javelin Strategy & Research
"There is an ROI for (PFM...) through increased customer
loyalty, higher usage, lower costs and added revenue."
- Online Banking Report
"[PFM] can be an even more powerful retention technique
than other online features, even bill payment. Why? The
average user with a dozen or so payees could move their
bill payment account to another bank with an hour or two
of work. But with current practices, it’s much more difficult, if
not impossible, to move transaction history to another bank."
- Javelin Strategy & Research
Business Case for PFM 06
since users spend more time interacting directly with the
financial institution rather than with a third-party app like
Mint.com.
Finally — and perhaps most importantly — PFM represents
an enormous win in the realm of Big Data.
Picture what happens when a user aggregates all their
accounts through your financial institution. You’ll have
insight into a wide range of data not previously available.
You’ll see every checking account, term deposit and loan
that the user has, and you’ll be able to use that data to
make informed cross-selling decisions.
Every financial institution wants to increase high-quality
loans and decrease single-service households, and Big
Data is the ticket to do just that.
Instead of relying on gut impulse or market fads, you’ll
be able to know exactly what your customers need. For
example, say that a user aggregates a car loan from one
of your competitors. You’ll then be able to give the user
a targeted ad that can undercut the competitor’s monthly
payments and win that user to you from your competitor.
Here’s the full ROI breakdown from Forrester Research:
$118,969 $241,781 $368,561 $499,437
$339,188 $586,389 $729,775 $882,848
$847,969 $1,465,972 $1,824,437 $2,207,120
$1,306,125 $2,294,141 $2,922,773 $3,589,405
Cost savings from additional
online banking usage
Revenue retained by increased
customer retention
Revenue from additional
cross-sales
Net Benefit
10. Why choose
"We want to be a bank that
adds value to our clients with
every interaction, and MD
allows us to fulfill that mission
anytime & anywhere."
- Rick Claypoole
?
07 Business Case for PFM
11. Fortunately, you don’t have to invest millions of dollars to develop
your own PFM solution. MD offers the strongest PFM on the
market, and we’ve done all the development for you.
Take one look at the market and you’ll see that not all PFMs
are created equal. Most of them lack an engaging experience
and look like they were made in 1998, back when AOL was
in vogue. In other words, the interface is functional but the
design and experience is hardly impressive when held up
against the standards that users — particularly millennials
— have come to expect in the era of Web 2.0.
This is where MD can help. The MD experience is consis-tent
— and consistently beautiful — across desktop and
mobile platforms. Our design exceeds the standard of any
other PFM (including big-name solutions like Mint.com),
and we’re continually creating new ways to visualize and
interact with finances.
Best of all, each financial institution that uses MD gets
all the credit for the design when they integrate our PFM
seamlessly into their online banking platform.
But MD isn’t just about beautiful and functional design.
We’re innovating across the board, which has led us to
win four consecutive Best of Show awards at Finovate (the
largest Fintech conference in the world), sign more than
Online Banking 1998 or 2014?
400 financial institutions in the three years since we were
founded, and see a 445 percent increase in recurring
monthly revenue from 2011 to 2012.
Business Case for PFM 08
12. For Example:
Here's data for one financial institution that
reflects the industry average:
7-8
28-30
1-2
We also fully integrate every element of Web 2.0 — including
interactive HTML5 widgets and the latest iOS and Android technology.
This is crucial because mobile banking is set to balloon by more than
300 percent in the next four years,15 and mobile traffic is already
almost 30 times higher on average than branch traffic.
Simply put, mobile banking is the way of the future, and any PFM
that doesn’t lead with an engaging mobile platform won’t garner
consideration or adoption in the 21st century.
09 Business Case for PFM
Web Site Visits
Per Month
Mobile App Visits
Per Month
Branch Visits
Per Month
13. Smarter Data Analytics
MD is also at the forefront of revolutionizing Big Data for financial institutions. To this end, we’re releasing Insight
and Target — two data analytics platforms that can supercharge your ability to provide users with what they want.
After all, who isn’t pleasantly surprised to learn they can save hundreds of dollars by simply switching loan providers? Smart
ads will soon become the standard in advertising, and the institutions at the forefront of adopting this technology will reap
the rewards.
Improved ROI
MD has a track record of giving financial institutions a
terrific ROI.
To illustrate, let’s look at one of our own clients — an
institution with assets in the ballpark of $2-$5 billion.
This client is currently on track to reach 25 percent PFM
adoption rates within three years (i.e., 45,914 PFM users
out of 183,654 total online users). Since the attrition rate
for PFM users plunges to 1.5 percent from 7 percent for the
typical online user, the client’s estimated cost savings for
PFM user retention alone equals $631,311 per year.
In addition, this client will see $180,784 in net interest
income and $137,741 in new cross-sell opportunities.
All of this brings the total potential ROI for this client to
$949,836 annually.
And that number doesn’t even include the huge potential
for ROI through implementing Insight and Target, which are
set for release in early 2014.
When a user aggregates their external accounts from
various institutions via our PFM, we make that data viewable
and searchable for you. With MD’s FinSmart technology,
financial institutions can create intelligent ads that make
people want to take action. You can even measure ROI and
quickly see how many views, clicks and conversions each
offer generated.
This ad is so smart that the user can immediately see how
much money they’d be saving by switching auto loans.
FinSmart ads are not only different for each user, but they
are built from that user’s unique financial data. The result is
an offer that actually matters to the user, and catches their
attention. This means that ads become useful instead of a
nuisance and user conversions skyrocket.
In short: you’ll be the financial institution that wins and
retains users.
Business Case for PFM 10
7% ATTRITION RATES 1.5%
PFM USERS
NON-PFM USERS
14. WITH INSIGHT AND TARGET,
THE TRUE VALUE OF PFM
REVEALS ITSELF.
For instance, one of our clients is on track to gain 2,297 new loans, with a
total loan volume of $26,435,000 all because they’ll use Insight and Target
to advertise to users with more precision than ever before. They’ll see a
potential ROI of $464,390 in vehicle loans, $919,737 in credit card revenue,
and $685,050 in mortgage/home equity. This will bring a total potential ROI
for Target and Insight to $2,069,176.
Add this to the total potential ROI for PFM in general and this client is looking
at a grand total of $3,019,012 annually.
Year after year, this will make for tremendous cost savings for the client,
especially because they’ll be pulling users from competitors and taking more
and more wallet share as a result. First adopters of PFM (like this client) will
see the biggest returns, and they will be the financial institutions that stay
most relevant as we move further into the 21st century.
Best of all, you can plug your own data into our ROI calculator to see how
your financial institution will stack up. Ask us how it works, and we’ll gladly
set you up.
CONCLUSION
The financial industry is following in the footsteps of the news, music and
entertainment industries. More and more, account holders are demanding
a convenient and engaging banking experience that is on par with other
online and mobile apps they use everyday.
Account holders expect cutting-edge technology and design with a
genuinely engaging user interface (UI) and user experience (UX), and
their expectations will be met one way or another. The answer to whether
these account holders stay with their financial institutions or switch
to third-party pioneer competitors, comes down to the ability of FIs to
harness the power of PFM in order to enhance their online and mobile
offerings.
At its heart, PFM is a financial service. It fits perfectly with the long-standing
goal of the industry: to help people find more ways to make
their money work for them. By implementing the right PFM, your financial
institution can attract their business and become their primary financial
institution (PFI).
At this point, you have to make a choice. Will you continue to focus
primarily on building and supporting offline channels, even in the face of
declining branch traffic? Or, will you change your focus to meeting user
demands for digital banking technologies and driving the PFI relationship
through online and mobile channels?
PFM is and will continue to play a central role in building the future banking
experience, both online and mobile. Financial institutions everywhere are
realizing the way to become an account holder’s PFI in the 21st century
is to offer a primary financial application with PFM at its core.
"While many of the PFM providers
were trying to copy the success of
standalone solution Mint.com, we saw
more opportunity in creating a cohesive
bundle of benefits for consumers,
financial institutions, and online banking
partners."
- Ryan Caldwell
CEO, MoneyDesktop
"MoneyDesktop is doing more than
just putting lipstick on a pig. Its patent-pending
Bubble Budgets combines
colors, variable sizes and movements to
give users an undeniably clear picture
of their budget status on a yearly,
quarterly, monthly, weekly, or even daily
basis."
- Jim Marous
Author, Bank Marketing Strategies
"Visually, its PFM tools are stunning, and
watching them demonstrated onstage
made me want to look — and interact
— with my finances. Trust me, that never
happens."
- Mary Wisniewski
American Banker
"If I know anything about [MD], they’ll be
ready to show us (and inspire us) to drive
a singular engaging user experience.
Now if only the rest of Fintech would
follow suit."
- Bradley Leimer
Mechanics Bank
11 Business Case for PFM
15. Business Case for PFM 12
Appendix
Please note that sources for all charts appear with the accompanying graphic.
[1] Brett King, "Bank 2.0: Modality Shift" (TED Talk) 2011
[2] American Customer Satisfaction Index, "Benchmarks By Industry" 2012
[3] Yodlee Study, "Mobile Banking Plays Key Role in #1 Factor for Customer Loyalty" 2013
[4] Financial Management Solutions Inc. (FMSI), "Branch Transaction Volumes Decline" 2013
[5] Decipher Research, "PFM-Retention Case Study" 2010
[6] Intuit, "Financial Services Poll: Uptick in PFM" 2011
[7] Swimming Upstream, "The Bottom-line Impact of Offering Online Financial Management" 2010
[8] Aite Group, "PFM Public Survey" 2012
[9] Online Banking Review, "PFM Adoption Rates" (via Meniga) 2010
[10] Celent, "Devil Is In the Details" 2011
[11] Bloomberg Businessweek, "PNC Lures Gen Y With Its 'Virtual Wallet' Account" 2008
[12] Pittsburgh Business Times, "PNC's Virtual Wallet tops 1 million" 2012
[13] Forrester Research,"The Business Case For Personal Financial Management" 2012
[14] Ibid.
[15] American Banker, "Mobile Banking Will Grow 300% Over the Next Four Years: Aite" 2012
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