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W.UP: PFM tools failed those who needed them the most. Here’s how to fix them


Once touted as a disruptive force in retail banking, the first generation of personal financial management tools were no more than clumsy apps with little to offer. Can PFM 2.0 turn the tide? In preparation for our upcoming webinar, we’ve asked Bruno Macedo, head of delivery implementations at five°degrees, what he thinks is next for money management apps – and how to transform them into a win-win for banks and customers.

Do you think traditional personal financial management tools have failed?

Yes and no. Next-gen tools such as robo-advisors that provided people with data analysis and forecast worked quite well for those with a decent level of financial literacy. I’m talking about consumers who’d used some sort of financial management tool before, like Microsoft Money or an Excel sheet to budget, to track their spending and set savings goals. I wouldn’t say they were a huge success but did well enough.

PFM tools have failed those who needed them the most. Consumers with low to no financial literacy, who struggle with balancing their budget and lack funds for savings, emergencies, retirement or their children’s education. These are the consumers who end up overspending and getting into bad debt, often because they don’t plan and don’t do their research. They’re also the most vulnerable when a financial crisis hits.

What do you think consumers expect from personal financial management tools?

Customers want to feel empowered. They expect banks to keep them in the loop about what’s going on in their bank accounts, like receiving notifications when their balance drops below a certain level, their salary comes in or they get charged for something unexpected.

At the same time, they also want to have a 10,000-foot view of their finances to see if and how their spending habits change. This is where financial analysis, including spending summaries and forecasts, comes into the picture. For instance, showing users how much money they’re expected to save yearly at their current rate of spending and income and spotting if they go off track.

Proactivity is also key. This goes both for alerting customers if a transaction looks suspicious and for letting them set alerts up according to their preferences. For example, if they’re looking to buy a new car or put some money away for retirement, banks can message them about new products or service offers that might be relevant to them.

Read the full article here. Find out more about W.UP here.

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