Transforming financial institutions with automated, end-to-end digital decisioning, Corridor Platforms bridges AI innovation and compliance for real-time success.

Introduction 

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

Final Thoughts

Introduction

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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From the perspective of a banker, what exactly is AI and how is it actually being used today?

Slaven: Thinking of AI as just generative AI, like ChatGPT, is a little misleading. I like to think of AI as a collection of tools that can be applied to help bankers solve specific problems, and that’s how we’re really seeing it applied in a meaningful way today. If bankers just focus on the newness of the technology and its speed of change and advancement, that will likely just mislead them and eventually they’ll end up coming back to trying to solve the original problem. The simplest, most direct way to have success with AI is by applying the right tool to the right problem to begin with. The best strategy is to start small and then iterate from there.

Where are you seeing the most potential opportunities for applying AI tools within financial institutions?

S: For ChatGPT, which gets a lot of attention, it doesn’t actually get used that much, maybe on the internal side for content generation and ideation and helping creative processes that are used in marketing or similar initiatives. In production, there is a lot more success in the use of AI for fraud detection, analyzing large amounts of data, loan decisioning and assessing risk. Increasingly, we see AI used in an externally visible form to enhance customer service by answering easy and routine questions for customers, which helps banks realize cost savings and focus their human resources on higher value-add types of questions which require more empathy and thoughtful answers to get to the right resolution for the customer.

Tell us about BAC Community Bank…

Jackie: BAC is a community bank based in Stockton, Calif. with about $850 million in assets that focuses mainly on serving one market area through our eight branches. We’re unique in that we are primarily a commercial bank and the majority of our customers are commercial customers, the majority of our lending is commercial loans, so our biggest selling point is the quality of the relationships with our customers, and we are really focused on being a relationship bank.

Within a high touch, community bank relationship orientation, what were some specific goals that banks like yours are looking to achieve?

J: For us, we were thinking about ways to leverage AI technology to have a better level of communication, a better tool, a better process for working with our existing customers. Specifically, we wanted to make it easier for our relationship managers to communicate effectively with their specific customers and it was important to be able to customize the solution to support our bank’s unique needs and the needs of our commercial customers.

How does that community bank relationship orientation inform the way that technology teams think about leveraging AI for community financial institutions?

S: Our focus is on how we can help bankers take the management of their customer relationships that might have been previously happening in-branch or through multiple channels and put them into a digital space that all resides in one place. AI makes that more efficient and scalable, but that relationship management, maintenance, development is the core value-add and is ultimately why we are able to be successful for our clients. AI is not a static entity, so we are always communicating with our clients and receiving feedback about customer experience, agent or banker experience, and then incorporating that into our platform. All the while, we are making sure we are tooling the available AI and suitably modifying it to address the specific problems that we are talking about. So, it’s not about just taking the available AI from Google or other providers and using it as is, but rather, modifying the AI so that it fits the scale and context of the problem we’re trying to solve. This helps bank employees focus more of their attention on building and growing customer relationships – letting their human strengths shine – and have AI do more of the mundane tasks that would be hard or complex otherwise.

What are some important considerations for bankers who are considering utilization of AI?

J: Speed of implementation is very important for bankers, so working with an AI provider who is able to listen to our requests and clearly understand what we want to achieve and then collaborate to deliver that quickly is key. Most community banks don’t have control over all of their technology, so they are often restricted by what their vendor is able to do, so working with highly responsive technology partners makes it much easier for a bank to dip its toe into something like AI.

Another consideration is to leverage AI to not replace – but enhance – human connections and relationships. What is important is that all of our customers have the option to select their own personal banker. We’ve made it easier for our customers and bankers by having our chat tool, which we call Smart ALAC, take over the easy questions and for more complex questions, provide customers the option to connect with someone at the bank to talk it through in more detail.

Finally, flexibility. This means taking calls out of our call center by allowing customers to answer their own questions a lot of the time or point them to a specific place on our website where we can provide them with pre-prepared documentation about accounts or products or rates, right there on the spot. Because of our predominantly commercial customer base, it was important to provide all of these capabilities both via the mobile channel and the website since we’re often interacting with an office manager or business owner who are at their desk working on their PC and that’s how they prefer to interact with us.

S: First, bankers should clearly articulate what they want to achieve, whether that’s improving relationships with customers or trying to differentiate their service in the marketplace. Then, they should start small. See what works for their bank or for a particular customer set and their specific needs, and then iterate from there. AI platforms are quite complex and have lots of capabilities that are highly configurable, but it’s hard to know what configurations will work best for your bank up front. Part of the success equation is really figuring it out in gradual steps which match the bank’s desired experience and risk profile and that ultimately enhance the experience for customers and bank employees.

People like to have relationships and they are more comfortable working with someone that they know, so the goal of any relationship-focused institution should always be to help establish that relationship and drive a better experience. AI makes this more efficient and scalable but should not be there to try and replace a human. It should provide the bank with the ability to adjust the dial to deliver what is appropriate and suitable for the bank.

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The importance of unifying customer data and intelligence throughout a financial institution cannot be understated – a recent report from McKinsey indicated organizations that harness the full power of their data are 23 times more likely to acquire customers and six times more likely to retain customers. These data-driven organizations are also 19 times more likely to be profitable.

Breaking Down Data Siloes

Consolidating account holder information into one source can appear to create a challenge. However, this can be achieved through a few navigable steps. The first is identifying how data is currently collected and where it can be found, followed by team outreach to determine the existing data management system in use that is most effective. The chosen data platform should be established as a centralized system that will act as a single source of truth for customer information.

The ideal data platform should be able to unify all existing data, offer actionable insights and enable information to be easily updated. Banks that make this shift are better poised to use data to understand customer needs, develop long-term growth strategies and receive accurate reports for critical business functions. The final step to breaking down siloes is encouraging the institution’s teams to leverage the data for cross-functional communication and collaboration.

Delivering the Hyper-Personalized Experiences Customers Expect

Personalized experiences are a must-have facet of the user journey for FIs to retain and gain account holders. Research from McKinsey indicates that 71 percent of consumers expect personalized interactions from companies and those that excel at delivering this form of customer intimacy tend to generate faster rates of revenue growth. Fintechs looking to garner customers from FIs have progressed to hyper-personalization tactics such as AI to gauge banking customer needs and suggest products and services.

FIs that ensure their team has access to a single source for customer information can deliver more tailored service for each account holder Bank staff that interacts with account holders will be able to leverage the database to quickly recognize who the customer is, the past interactions they’ve had with the bank, as well as the products and/or services they currently use. This creates opportunities for more curated interactions, improves customer satisfaction and bolsters stronger loyalty.

Elevating Operational Efficiency and Risk Mitigation

Access to comprehensive financial views, including customer dashboards, books of business and operational information, can help the bank better identify and manage potential risks, as well as the ability to visualize every activity happening across the organization. Consolidated data views empower banks to mitigate credit risks by making more informed decisions about lending and other financial services. This can help reduce the risk of loan defaults and ultimately improve the institution’s overall profitability. FIs that simplify their approach to data across the enterprise can also eliminate redundant systems that lead to inefficiencies, confusion, and unnecessary costs.

This data structure also benefits customer accessibility. Banks that can establish a central location where account holders can see all their financial details within the bank and take action to contact a personal or business banker are better positioned to provide a strong customer experience. Surveys show that an exceptional user experience makes all the difference – 69 percent of customers list poor services as the primary reason for leaving their bank. Banks that create more streamlined systems with greater self-service options can offer account holders the financial autonomy they crave, create frictionless experiences and build greater trust.

Unlocking Growth Opportunities

Unified data throughout the institution empowers advisors to initiate more meaningful financial conversations around each account holder, which in turn fuels customer relationships and the organization’s long-term success. Capturing all customer data in one place positions banking teams to be proactive about cross-selling to increase wallet share. Centralized data across the enterprise equips the institution to provide customized guidance and move account holders toward other products and services that can benefit their financial journey. Banks that can increase business with the accounts already housed within the institution can achieve five times more growth.

Looking Forward

FIs that prioritize unifying data across the enterprise gain invaluable potential to maintain a competitive advantage and drive stronger business strategies. Data-driven insights enable banks to create friction-free, intuitive user experiences via hyper-personalized experiences to drive stronger customer connections. Cohesive data also empowers FI leaders to proactively identify opportunities and risks across entire customer and prospect lists to improve long-term growth. Banks that successfully employ the power of unified data will be one step closer to transforming the future of financial management.