Industry disruption and digital transformation in financial services have created both challenges and benefits.
For consumers, digital transformation has led to financial fragmentation. The average American consumer now uses 15 to 20 different financial service providers and 14 financial apps. Gen Y and Gen Z couples use upward of 30 to 40 financial service providers. As a result, it’s increasingly difficult for individuals to see and understand their full financial picture and make informed financial decisions.
For banks and credit unions, financial fragmentation has resulted in splintered relationships, lower share of wallet, and less visibility into accountholders’ financial lives. This has led to fewer opportunities to provide personalized advice and next-best-product recommendations, making it even harder to grow financial relationships and help accountholders reach their financial goals.
A Challenging Situation
With only 30% of Americans considered financially healthy, there’s a dire need for your financial institution to provide tools and resources to help your accountholders attain financial resilience.
It’s a recognized need, evidenced by the abundance of personal finance tools on the market from third-party vendors attempting to capture this audience. Often including gamification, financial advice, and slick user interfaces within their tools, these non-bank fintechs also offer their users lending, credit, deposit, and/or payment solutions that compete directly with your product offerings under the auspices of improving end-users’ financial health.
And yet, there’s an often-overlooked solution readily available for you: personal financial management (PFM) tools embedded into the digital banking experience. Given that over 75% of respondents in a recent survey would prefer to use PFM tools from their primary financial services provider – not a third-party fintech – now is a great time to take another look.
Overcoming Its Past
Suggesting the implementation of PFM is enough to raise eyebrows in many a boardroom across the country, and for good reason.
The early days of PFM services were rough, from an accountholder’s perspective. They were rarely integrated well with banking providers, requiring manual rekeying of data or using unreliable screen-scraping technology to attempt the automated transfer of financial data. As a result, consumer adoption was low, and banks and credit unions rarely saw a positive return on their investment.
Fortunately, things have changed. The same digital transformation that escalated financial fragmentation has also benefited personal financial management.
Not Your Parents’ PFM
There’s no denying that digital transformation has improved personal financial management. Today’s PFM tools and technology have been bolstered by open banking, improvements in financial data exchange, and the proliferation of open APIs. Here are four changes to PFM tools and technology that can change the game for your accountholders – and your financial institution:
1. API-Enabled Financial Data Exchange. The security and user experience challenges of screen scraping have dogged financial institutions for years. In addition to being a slow and unreliable means of data exchange for accountholders, screen scraping makes it difficult for your financial institution to distinguish legitimate login attempts from fraudulent ones, leaving systems vulnerable to credential-stuffing attacks and other cyber threats.
That’s why Jack Henry™ has replaced inbound screen scraping on the Banno Digital Platform™ with API connections to all five major data exchange platforms – Finicity, Akoya, Yodlee, Plaid, and Intuit. This gives accountholders more control of their financial data and how it’s shared with third-party providers, including the ability to grant or revoke data permissions within the digital banking experience.
Providing security, reliability, and visibility for both accountholders and your financial institution, direct API connections remove blind spots for all parties and open the door to deeper relationships.
2. External Account Aggregation. Aggregating external accounts isn’t new, but API-enabled data exchange, deeper data and reporting capabilities, and refreshed pricing models have changed the game.
A deeper relationship with Finicity brings external account aggregation directly into the Banno Digital Platform, making it easier than ever for your accountholders to aggregate their financial lives in one location – yours.
Here’s why that’s so important: With so many different financial relationships to keep up with, accountholders spend an average of only three seconds on each financial app they use. They’re there to do a quick balance check, then move on to the next one. That’s why attaining first-app status – becoming the place your accountholders go first to view their full financial picture – is more important than ever.
Aggregating external accounts into your digital banking app also gives you a window into your accountholders’ financial lives that you didn’t have before. You can choose to use that information to more effectively cross-sell or share personalized advice for accountholders, to empower AI or machine learning models to make faster lending decisions or expand your underwriting model beyond the usual FICO data, or just gain a deeper understanding of how and where your accountholders are managing their finances. It’s a data boon for the analytically minded.
Beyond the technology, Jack Henry’s updated “all-in” pricing model means you aren’t paying separately for each account that’s aggregated. It’s just a single price per user, so you aren’t charged more for helping accountholders combat financial fragmentation and improve their financial position. It’s a game-changer that can help you better serve your base of accountholders and encourage healthy financial activities and habits.
3. Enhanced Transaction Descriptions. One of the greatest benefits of personal financial management systems is their ability to clarify where and how money is spent. But today, a separate system isn’t required to provide that clarity. Instead, enhanced transaction descriptions within the digital banking platform can remove confusion right from the start.
Rather than long alphanumeric strings that hint at business names, locations, store numbers, or payment processing solutions while confounding the people trying to understand a particular transaction, enhanced descriptions deliver immediate clarity for accountholders and your support teams and make it easier to automatically categorize spending.
4. Embedded PFM Experience. History has shown us that when PFM functions are separated from the main digital banking experience, they won’t achieve widespread adoption. It’s why Jack Henry is taking PFM functionality that was separate and integrating it directly into the digital platform.
While it may feel like a small change, it provides great benefits for accountholders and your financial institution. Seventy-one percent of Gen Z believes that brands should help them achieve their personal goals and aspirations, yet only 14% of accountholders believe their bank or credit union is helping them meet their goals.
Embedding PFM functionality demonstrates to your accountholders that you are a financial advocate and are willing to provide the tools they need to understand their spending habits and behaviors. It connects them to their finances, and empowers them to make meaningful changes, while simultaneously proving that you’re committed to their financial wellness.
Help Accountholders … and Your Bottom Line
With so much to gain, it’s a great time to reconsider how today’s personal financial management tools can help support your mission of financial advocacy. You’ll empower your accountholders, engage with them through the ever-growing digital channel, gain data that helps you identify opportunities and understand your account base, and offer unparalleled ease and convenience.
Don’t let memories of yesterday’s PFM hold you back from the digital transformation that your accountholders and your financial institution need today.
Discover how Jack Henry can help you integrate personal financial management into the digital banking experience. Contact our digital experience team today.
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