The Customer Effect
PFM apps are folding as banks work them into their own apps
- Consolidation is underway in the crowded PFM market
- The parent companies of Level Money, Prosper Daily and Zenbanx have all folded the fintech startups this summer alone
Consolidation is underway in the crowded personal finance management, known as PFM, market. Last week, Level Money, the money management app owned by Capital One Financial, said it will shut down on Sept. 1. Also last week, Prosper Marketplace said it would discontinue the Prosper Daily app and urged customers to bring their PFM needs to Clarity Money. Earlier last month, SoFi said it would nix the services by Zenbanx, just six months after it acquired the online banking company, and would use its technology and personnel for its own online bank. “When we started Level Money back in 2013, there weren’t many tools to help people manage their money,” the company wrote on its homepage Thursday. “While we’ve had successes over the years, we are encouraged by how much the financial industry has changed — there are now a plethora of tools available to help you manage your money.” The post also said that as part of Capital One, it would continue creating “ways for people to save and manage their money,” without further detail. Capital One did not respond to requests for comment by deadline. PFM has never been a prominent feature of consumer bank accounts. For most of banks’ existence people had to balance their own checkbooks based on debits and credits. That’s changing now as banks realize the importance of personal financial management for continued customer engagement. And they're starting to implement PFM features into their offerings to provide more complete banking experiences. As it is today, PFM is usually a separate entity found in entirely different apps like Clarity Money, Moven or Mint. “Industry wide, there’s a reluctance to discuss [personal financial management],” said Stephen Greer, author of the Celent report Personal Financial Experiences, which asserts that while banks and startups got stuck trying to make PFM work, the customer need for PFM tools has evolved into the need for “personal financial experiences.” “For a lot of banks that tried it, it was poorly executed; there would be modules within online banking that users rarely even knew existed or required a lot of manual intervention. The term really hasn't evolved that much … companies were just putting a name out there to stick a flag in the ground, trying to describe and outline PFM. Now it’s really evolving to what digital banking in general is.” For example, one of the biggest nuisances of PFM historically has been the lack of good financial data. Customers using an app would have to hand over their online banking credentials so the third party financial app could access their banking data to be able to provide users with their financial snapshot. The data that appeared on the home screen of their online banking wasn't always in sync with what they would see in their PFM app. Those standalone apps have done a lot for legacy financial firms; they’ve shown them how to provide “creative and innovative ways to help customers be more financially successful,” Wells Fargo’s Ben Soccorsy, head of digital payments product management, told Tearsheet last month in a discussion about its forthcoming Control Tower product. The Control Tower, a tool within the Wells Fargo mobile banking app that gives customers a single view of their digital financial footprint and lets them turn on or off the sharing of their bank account information, is the perfect example of a bank establishing itself as a trusted advisor to the consumer, Greer said. It uses payment transaction data to push features that make it easier for customers to control their own finances instead of pushing them a new credit card they have a good chance of being qualified for, for example. There’s an element of trust that most people seek in a financial advisor, human or digital, whether they're positive or cynical about legacy financial institutions. As banks start to offer these features of financial advice that startups have been offering for much longer, that aspect is becoming more prominent. “Incumbent banks have various little advantages” — trust, a large customer base and brand recognition and stability — “and they're extremely underestimated,” Greer said. Meanwhile, a lot of standalone apps have trouble launching and gaining any traction. “What they have done very well is shown the market what is possible and what good looks like,” he added. “Larger banks have really taken notice and used that as inspiration for their digital strategies.” That first became clear with earlier deals like BBVA’s acquisition of digital bank Simple or TD Bank’s partnership with Moven, which allows the Canadian bank to use Moven's software in its own mobile banking app to give customers a single app in which to manage their financial activity.