Home / Technology / Banks don’t need Big Data … just PFM

Banks don’t need Big Data … just PFM

I had a revelation when being shown a presentation from one of the Personal Financial Management  (PFM) solutions firms yesterday.

It was when we were talking about how consumers use PFM for peer comparison purposes.  If you’re unfamiliar with such stuff, it’s the ability to see how you stack up against similar people to yourself, in terms of how you spend, save and live with money.

You might ask: what do people of my age typically spend their money on? and find that most of them are drinking vodka or something like that.

But you can do more complex analysis through PFM solutions, such as asking: someone earning my income, living in my area of London, with two kids and a dog, what sort of retirement planning profile do they have on average, and how does my investment in pensions compare?

Now you get the idea.


You can get into some really complex stuff.

And it’s all simply at a point and click.

This sort of user profiling sounds useful for the customer, but the revelation for me is that it even more powerful for the bank.

This is because your customers are sorting out all their transactions, signing up for budgeting and alerts and building their own demographic parameters but, as they do this, the bank can build really powerful marketing campaigns using the same date.

Send a campaign to all people earning this level of income in this area of London who have asked about pensions, a pension’s promotion offer next time they log on.

If you have any 25-34 year olds who have clicked on short term loans, give them an ad for a five-year term loan at 1% below usual rates next time they are online.

Identify all people with two kids in this income bracket and offer them a child protection bond …

You get the idea.

In fact, what’s really classy about this is that the bank doesn’t even have to drill big data to get this sort of campaign to work – the customer does all the work.

All the bank needs to do is to be intelligent enough to leverage the customer’s efforts.

Just a thought …


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Jason

    Not sure I understand your diffrentiation – what you’ve described is big data, with specific a BI filter (PFM) applied.
    Big Data is simply the recognition that banks potentially have a wealth of customer information to gain insight – storage is relatively cheap so store it and do things of interest/use for both yourself and your consumers.
    Storing the data client-side is a possiblility, but by the time you scale to banking levels, the opportunity cost incurred transferring the data and pivoting specific info outway the storage cost – easier to retain in one place.

  • PFM is different, in that when properly executed, consumers will provide info on all of their financial relationships, not just those with this bank. That distinction separates it from the Big Data available within the banks systems. PFM systems encourage consumers to better segment their own data which improves its usefulness. But most important, they can also help consumers be more conscious of their finances. Few banks score high on customer advocacy (a measure of consumers’ perception that an institution will place consumers’ needs ahead of their profit motive), but PFM opens the door to improve this important rating. Banks may even be able to take PFM a step further to offer advice through this channel, further increasing its value to those consumers (and increasing loyalty to the bank).

  • Chris Skinner

    Agree with Eric that PFM is where customer is self-selecting and analysing their data, rather than the bank = far more permissions based and means zero effort or intrusion by the bank in creating a ‘opt-in’ approach to marketing by default,

  • I have been following PFM for a few years now.Can anyone tell me if the customer can be bothered to input data from several different sources. I think the friction levels will be high.As for cultural and security problems have a look at recent PFM launches in South Africa to fully understand the issues (http://www.finextra.com/news/fullstory.aspx?newsitemid=23360).
    Hooking up an attractive UI to your bank account sounds like a good idea- if only your bank had its data all in one safe place ! An aspiration for most banks who are still looking for a 360 customer view.

  • The problem with PFM is that most customers simple do NOT want it. PFM has been around for more than 12 years… in fact, I remember playing with the first Yodlee consumer centric offering in 1999 or 2000. PFM continues to struggle to gain acceptance, although admittedly, there are many more vendors selling the offering and many more Bankers who are desperate to deploy technology that will magically generate customer “loyalty”.
    The reality is that consumers who might benefit from PFM are not going to bother with it; those who try it are likely to be technology junkies.
    A recent ComScore study revealed that more than half of banking customers of top 10 banks are aware of PFM functionality, but just 19% are interested and less than half – just 8% used the service (read: http://bankblog.optirate.com/comscore-2011-online-mobile-banking-red-flags). I suspect that statistics for consistent use over a long period (say 6mo or longer) is likely to be a fraction of the 8% usage reported by ComScore.
    The business for PFM is uncertain – both in terms of the benefits for Consumers, and certainly, in terms of the benefits to the Bank.

  • Chris Skinner

    @Serge (and slightly answering Robin)
    I hear what you say, but the question is what don’t they want? A great online user experience or a complex, chunky and potentially threatening and insecure aggregation service.
    The latter is what we played with in 1999; the former is what’s on offer today.
    Looking at the latest PFM services – many of which wrap around Yodlee – we see the facebooks and twitters of banking.
    These Web 2.0 service-based offers are what many, even the non-geeks, will seek. Meantime, I appreciate your commentary but think it’s a little like those who thought no-one needed twitter or facebook.
    Once people realise how PFM transforms their online financial experience they’ll move.
    p.s. if PFM is so flaky, how come Mint succeeded?