Understanding the Importance of Personal Finance Management

Learn why Personal Finance Management (PFM) tools are crucial for banks and consumers alike.
FTB News DeskMarch 14, 202411 min


  1. Why is PFM Important for Banks and Consumers? 
  2. How PFM Drives Engagement and Loyalty 
  3. How PFM Empowers Consumers 

Final Thoughts


A PFM, or Personal Finance Management tool, is like a digital helper for your money. It looks at how you spend and save to give you a clearer picture of your finances. It’s not just for individuals; businesses, like small ones, can benefit too.

But, relying only on a PFM for engagement isn’t enough. Engagement happens when you really understand your customers’ financial habits and use that info to give them helpful insights.

1. Why is PFM Important for Banks and Consumers?

Day by day it’s getting more confusing to manage finances. This challenge becomes only more daunting as people today manage their money over multiple services in such a way that it suits them.

Managing finances is getting more complicated these days. Consumers don’t just have one bank account anymore. On average, they have around 5 to 7 accounts, and some even have more than 20! These include checking and savings accounts, credit cards, loans, and retirement savings spread out across different banks and financial apps.

This makes Embedded PFM Tools become the new “must-have” features for banks, credit unions and other financial providers who want to drive customer engagement, loyalty and retention. With a single click, there are several accounts available to consumers, thus they are ready to move if they don’t see analytic tools that it needs from any particular financial provider.

2. How PFM Drives Engagement and Loyalty

Consumers want banks and financial apps to help them manage their money better and make smarter financial choices. Many consumers think it’s the job of these financial providers to teach them how to be good with finance. A majority also want their bank or financial app to actively assist them in managing their finances. Financial companies that meet these expectations will gain benefits like stronger customer loyalty and more money deposited in their accounts.

Research shows that people who regularly use mobile and online banking services tend to stick with their bank more and keep more money in their accounts compared to those who don’t use these services often. 

Specifically, we looked at data from over 10 million consumers over a year and found that those who regularly used features of Personal Financial Management tools within their mobile banking app had the highest account balances and even increased their savings, while those who used these features less saw their balances decrease.

3. How PFM Empowers Consumers 

Let’s be honest, managing money can be messy, and most consumers don’t enjoy budgeting. Only a small group of consumers actually like being hands-on with their finances. Some even choose to ignore their debts, which psychologists call “financial avoidance,” leading to increasing credit card debt among Millennials and Gen Z.

Embedded Personal Financial Management (PFM) tools make it easier for people to take control of their finances and become financially stronger, without the hassle of spreadsheets or stress. It’s important that these tools are integrated into digital or mobile banking apps, rather than being separate entities. Here are some key tips for creating the right PFM experience:

  1. Simplify transaction data: Clear and understandable descriptions of transactions prevent frustration, confusion, and mistaken reports of fraud, reducing the need for customer support.
  2. Connect all accounts: Providing the option to view all financial accounts in one place can be a game changer for users with accounts at different institutions.
  3. Streamline the process: Make important information and common actions easily accessible within the digital user experience to drive higher engagement.
  4. Foster new habits: Deliver insights consistently and in a way that’s valuable and actionable, helping users develop healthier financial habits over time.

Final Thoughts

In the rapidly changing world of digital banking, standing out requires offering exceptional customer experiences. Personal Financial Management (PFM) and Banking Insights solutions have become essential in this regard, providing users with comprehensive tools to manage their finances effectively. This not only enhances user experience but also allows banks to focus on education and personalization strategies, ultimately leading to higher engagement and stronger customer relationships.

Additionally, implementing a personalized advice and data-driven insights strategy can enhance user understanding and utilization of your platform, offering conversational banking experiences and further strengthening your relationship with customers.

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FTB News Desk


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