Third-Party Versus Bank PFMs

27 August 2010

NEWS ITEM

Americans prefer to access PFM tools though bank sites – survey

Americans prefer to access personal finance management (PFM) tools through banking Web sites, with security concerns trumping the advantages, such as account aggregation, offered by third party providers, according to a survey.

OUR COMMENT

BofA and Wells Fargo are a couple of banks that provide fairly comprehensive P2FM/PFM capabilities on their own websites. However, the insight consumers can gain from them is restricted to their account(s) in the respective bank. This is obviously not too useful given that a person’s total financial position and his or her ability to control it is clearly a function of all their accounts – checking, savings, credit card, etc. – across multiple financial institutions. Besides, single bank PFMs are likely to push only their own products, thus making them a biased source of budgeting recommendations.
Cross-account aggregation and unbiased offers are two benefits provided by neutral, non-bank PFMs, and it’s difficult to image how banks can match up with them here.
Even if a single bank PFM seeks to provide cross-account aggregation, like HDFC in India does with its “OneView” service, consumers have to disclose Internet Banking credentials of the accounts they hold with other banks to the PFM-providing bank. But, this seems only slightly less skittish than doing so with neutral PFMs.
Surely, we don’t expect one bank to promote another bank’s product, so the benefit of unbiased offers is virtually impossible to get from a single bank PFM solution.
In PFM, we see an interesting tradeoff between trust and functionality. This might get resolved only by being more pragmatic about the expectations from a PFM (e.g. visibility versus budgeting) or by the entry of a bank-like trusted entity (e.g. retailer? telco?) into the role of a PFM provider.

BofA and Wells Fargo are a couple of banks that provide fairly comprehensive P2FM/PFM capabilities on their own websites. However, the insight consumers can gain from them is restricted to their account(s) in the respective bank. This is obviously not too useful given that a person’s total financial position and his or her ability to control it is clearly a function of all their accounts – checking, savings, credit card, etc. – across multiple financial institutions. Besides, single bank PFMs are likely to push only their own products, thus making them a biased source of budgeting recommendations.

Cross-account aggregation and unbiased offers are two benefits provided by neutral, non-bank PFMs, and it’s difficult to image how banks can match up with them here.

Even if a single bank PFM seeks to provide cross-account aggregation, like HDFC in India does with its “OneView” service, consumers have to disclose Internet Banking credentials of the accounts they hold with other banks to the PFM-providing bank. But, this seems only slightly less skittish than doing so with neutral PFMs.

Surely, we don’t expect one bank to promote another bank’s product, so the benefit of unbiased offers is virtually impossible to get from a single bank PFM solution.

In PFM, we see an interesting trade off between trust and functionality. This might get resolved only by being more pragmatic about the expectations from a PFM (e.g. visibility versus budgeting) or by the entry of a bank-like trusted entity (e.g. retailer? telco?) into the role of a PFM provider.

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