The Customer Effect

Competition in PFM market heats up as HSBC gears up to launch ‘Beta’

  • HSBC took a major step into the PFM space by announcing a beta app that offers a dashboard of all accounts along with personal finance insights and advice.
  • HSBC's foray into PFM ups the game for startups in the space, adding pressure on them to differentiate themselves from banks offering similar services.
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Competition in PFM market heats up as HSBC gears up to launch ‘Beta’

While PFM apps like Mint, Digit and Clarity Money have touted the benefits of giving customers a 360-degree financial picture, banks are inching closer to that space.

Starting late this month, 10,000 HSBC customers in the U.K. will be able to see all bank accounts, loans, mortgages and savings balances within the a HSBC Beta app — even if they’re not with HSBC. They’ll also be able to access dashboards of their spending patterns, set savings rules, and make use of a digital money management coach. It’s a move that’s going to make the market for personal finance tools more competitive.

“It’s a game changer, and other banks will launch their own products in that space; it represents a change from banks as brick-and-mortar institutions to becoming digital vaults,” said Ryan Gilbert, a partner at Propel Venture Partners, a Bay Area-based venture capital firm.

Customers participating in the test will be able to add accounts from 21 major banks operating in the U.K., including Lloyds and Barclays, ahead of a hard launch for all customers next year. Gilbert said the move is in response to two European Union-wide regulations next year: Payment Services Directive 2, which makes it easier for third-party merchants to access bank account data with the customer’s permission; and the General Data Protection Legislation, which strengthen data protection rights for individuals.

“HSBC is getting out there early; it’s as much as a defensive as an offensive play,” he said.

For HSBC, which conducted what it considered a successful PFM app trial in partnership with U.K. fintech firm Pariti last year, a foray into PFM apps is a natural fit, given demands from its millions-strong customer base.

“Lots of people ask us if a big bank like HSBC is relevant in today’s competitive fintech landscape,” said Raman Bhatia, HSBC’s head of digital for the U.K. and Europe, in a statement. “What sets us apart is that we have millions of customers, which provides a unique insight into how we can continue to improve our digital banking offering.”

And it’s the banks’ large customer base that presents the biggest challenge to nonbank PFM competitors.

“I would be cautious about investing in PFM tools in these markets,” said Gilbert. “I would rather go for ‘PFM plus,’ with additional insights and guidance to help the customer.”

For U.S.-based PFM startup Clarity Money, banks’ moves into PFM aren’t a surprise. Colin Kennedy, Clarity’s chief revenue officer, acknowledged that banks getting into PFM tightens up the competition for third-party PFM apps. But he said those that will win will succeed at offering unbiased financial advice.

“It is absolutely not a threat to those in the space — banks are needing to promote their own proprietary products [to customers] to make the returns they’re looking to generate for investors.”

But banks’ interest in PFM is also an opportunity for startups to partner with them to offer their tools to more customers. A recent example would be TD Bank’s partnership with Moven on the bank’s MySpend app. Clarity is also in talks with banks on possible partnerships, Kennedy said.

Others question whether PFM offerings from banks will stick with the young people they want to reach.

“Ten years ago, banks were touting the benefits of account aggregation and PFM tools to analyze spending,” said Ron Shevlin, director of research at Cornerstone Advisors. “People don’t care. The consumers most likely to use digital tools — millennials- – don’t have loans, mortgages, and savings. They don’t need to see ‘all their accounts’ at one place because they don’t have that many.”

Photo credit: Flickr / Håkan Dahlström

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