Synopsis: Personal finance is simple for people who have a savings account and a checking account, and that’s all. It is, however, complicated for people who may have several financial obligations such as student loans, a mortgage, car loans, credit cards, retirement savings, and other investment accounts, in addition to checking and savings accounts. In this article, we discuss how Personal Money Management banking tools can assist one in accessing all financial data at once.
The monumental rise in Personal Finance Management (PFM) Apps:
The traditional method of banking and finance management is currently witnessing a revolution. A major contributory factor is that now customers want more than just basic features. They prefer customised services and analysis when it comes to their financial data. Moreover, most of us have a complex financial situation that consists of different types of loans, mortgages, investments, retirement savings, etc. in addition to the usual savings and checking accounts.
This has given rise to PFM tools.
PFM tools are built on Application Programming Interface (API) technology and allow the users to get a deep understanding of their finances. The concept covers assets, debts, income, and expenses. It lets customers examine how much they spend, where they spend it, and so on. To put it simply, PFM tools help users understand where they currently stand financially. Through PFM apps, one can access all their financial data in one place and make critical decisions accordingly through insights and advice provided by the tool.
Also Read: Opinion: 3 Banks that are a Step Ahead with Open Banking APIs
The need for Open Banking powered PFM Apps today:
Open Banking has drastically changed the way financial institutions function over the last few years. Through open banking and PFM tools, Financial Institutions (FIs) and banks can go beyond their conventional methods of banking.
For banks and FIs, such a switch helps them get a detailed understanding of their customers and how they can leverage this information to create personalized services and provide value to their users. This ultimately leads to an increase in retention, higher revenue, and greater brand recognition.
On the other hand, open banking and PFM apps give customers definite control over their expenses and provide them with an overall picture of their financial health. Such apps also aid customers in better management of their finances by giving them actionable insights and tailored solutions.
Utility of PFM Apps:
PFM apps provide customers with everything they need at each step; right from checking their balance to analysing statistics for customised advice. Here are some advantages of having an Open Banking enabled PFM App:
1. Notifications: PFM apps help users avoid drawing in excess and spending more than their planned expense by alerting the customer whenever the balance reaches a certain amount. This aids the user in having a clear overall view of their finances and what needs to be done next.
2. Analysis: Such apps can analyse the user’s spending habits and point out when the expenses are more than the average. All this helps the customer be mindful of their spending and get back on track with their monetary goals. Once they get a proper view of their spending, they can take control of their expenses and manage accordingly in the future.
3. Alerts: PFM apps can alert the user whenever unusual activity occurs, for example, purchases made in unfamiliar locations. This aids the user in taking prevention action in case of fraud.
4. Sharing news: Another great thing about these apps is that they continually share relevant market and financial news with the customer and how they might affect the user’s financial situation. Now the customer can stay up to date with news of interest.
5. Customised advice: PFM apps provide the user with individualized advice, such as guidance, analysis and insights. Today, customers want actionable advice that can help them reach their monetary goals. Budget tracking, price comparison features, and real-time updates assist the user in making smarter decisions.
Also Read: 2 Ways the Pandemic Affected Banking Innovation
The takeaway:
Customers are getting sophisticated by the minute and are expecting more from their banks and FIs. There is a need to get personal with customers to provide valuable insights that aid them in decision-making. As a consequence, banks get higher engagement and users get premium services.
PFM apps bridge the gap between the customer and the bank. Banks and FIs need to get personal with their customers and provide valuable insights that guide them in making decisions. This will lead to higher engagement for the banks and better services for the users. To put it simply, such apps are a win-win for both the customer and the bank in the long run.
Views expressed in this article are the personal opinion of Satyajit Kanekar, Co-founder & CEO, Mobileware Technologies.
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