I agree that there's not much of a value-add in term of online adoption if banks just plan to replicate already existing tools like Quicken. If you have Quicken you'll use it, and if you're not already banking online you're a pretty serious laggard and it's unlikely that whatever incentives a bank throws you way will convince you to change your habits (short of them paying you to do it, and even then I can't imagine someone like my Dad taking up that offer).

Just making an already existing service "web-based" is hardly innovative and as you pointed out, banks have to play catch-up with Wesabe and company.

I wonder if other services, like a media-rich process for major financial decisions or transactions would provide significantly more value than PFM tools. The idea is that these tools can focus on solving major pain points (i.e. saving for college, buying a home, saving for retirement, etc.). By offering a process rather than a way to aggregate personal financial data, banks could provide guidance in areas where consumers are the most challenged.

The beauty of Internet is that these solutions can be highly personalized and scalable so that the maximum number of customers benefit. They can also tap the wisdom of the masses by allowing customers to share tips, goals, inspire each other to do better and track progress over time (though it's not likely that a risk averse culture like banking would promote such behavior).

I agree that cross selling can be tricky, but if banks can use technology to actually solve problems (having enough for retirement, affording college, paying for parent's health care, etc.), then a more natural conversation can occur re: how they can meet these goals.

I think the lesson may be that banks need to deliver more than a Quicken-like tool, they need to promote easy-to-use solutions that address real problems.

You have made an excellent point and one that holds true. We are looking to promote Wesabe to our members. Why? If it helps them manage their spending habits the long term will be people who are financialy responsible. Is that not a good thing in this day and age? But when I asked my peers to consider it the response was "If it takes them off our internet banking pages we don't want it". So the response I gave was "Do you always work with only one window open on your computer?" Silence. So promoting a benefit will only be done if there is something in it for us. I can see a ton of money and time spent developing PFM with the holy grail it will add to our bottom line. Then there will be the rush of people moving away once they see the cross sell scenarios. This is just one aspect of PFM that some just can't see.

I agree with you 100%. PFM is not going to drive adoption of online banking, and these days, with Wesabe et al, PFM is not enough anyway.

On a related note, I have often wondered why banks were not the first to offer Wesabe-like features as a way to differentiate their online banking product from others. Of course now we have Wesabe, and as you note, banks missed the boat on that one as well.

That being said, the banks could still leverage their client base and create a social network of their customers which could be value add. How about people who need a 2nd mortgage - a product the bank itself is loathe to offer? Within such a network, the bank could match borrower and lender, evaluate the credit risk for the lender and facilitate the payments. That's good for everyone.

My opinions:
With all due respect, I think you’re missing a few key points. In my opinion I think this is just what online banking needs. While I agree that a simple implementation of a Quicken-like PFM probably wouldn’t raise many eyebrows, I think negating the whole category by assuming nobody is interested, is short sided.

You mention that the older crowd doesn’t perceive the benefit of online banking and that only a quarter of current users express an interest in PFM. I’ve heard this too, but I can see why they respond this way. Online banking has not progressed much beyond version 1.0, in over ten years. The mention of PFM conjures up thoughts of Quicken, and the huge amount of time and money we all wasted setting it up only to give up 6 months later.

I think this is a technology issue. Web 2.0 and the creative developers out there are working on some very compelling technologies in this space. Look at any of the top websites today. Ten years ago, we’d probably all say, “that is a silly idea.” Not to mention, none of these guys had their markets all to themselves. Competition is huge online. The winners succeed because of good technology and a great customer experience. They change the way people live in a positive manner. The prize is many new loyal customers.

I think this “PFM” technology can have a big impact on the banks. I am fortunate to have seen some of the new up and coming solutions and I can say with certainty that I would eagerly switch institutions to get these capabilities. Some of these features would do wonders for me, requiring no effort from me. What I have seen is not just PFM but a real boost for current online banking. It is what online banking should be. Packed with features giving you creative ways to view and better understand your finances in a simple to use, point-and-click environment.

Unlike Wesabe, Quicken and the others, the technology I’m intrigued with is driven by the banks. Giving them control of the environment. Yes, cross selling is a sticky subject and needs to be handled tastefully, but this is a marketing issue that banks have dealt with for decades.

Regarding cost justification, there are many compelling benefits for the banks. The technology Im most intrigued with isn’t that expensive and doesn’t add any additional support overhead to the institution. The benefits it provides to the marketing department, alone, make this a strong value proposition. But the features it gives the account holders could establish some new users and loyalty. When an institution is spending millions on new branches, why not spend a tiny fraction of that updating the online branch?

I think the greatest risk the banks face is ignoring this technology and allowing the third party sites like Wesabe and Mint to come in and snatch away customers. Once the customers go to these sites, it is going to be very difficult for the banks to draw them back. talk about a challenge to build relationships.

Say a consumer comes home from work one night and decides to log onto Wesabe after hearing about it from a coworker. There she reads some forums about car purchasing and starts to wonder if she should consider replacing her aging vehicle. She reads some posts and makes some of her own posts inquiring about financing. Several people respond with advice, sharing their experiences, where they went, and why (for a loan). Who do you think she is going to contact the next day? She is consulting a community on Wesabe. Does her bank even know she’s interested?

But again, it really depends on the quality of the technology. Raw PFM doesn’t appeal to me. But what I have seen would eliminate any desire I have to logon to Wesabe, Mint or any of the others.

I hear you on this - but wonder if the core of the recent research goes back to what you and many of the other posters have been saying - it is about making things easier online for your users. So maybe the whole PFM definition in this context needs to be re-defined into something that doesn't bring to mind visions of Quicken (with all its mind-numbing levels of details it lets you add to manage your finances - and being a heavy Quicken user believe me I know 'em) - but instead brings something to mind that my spouse or less-tech family can use. Simple pre-assigned category spending reports, searchable transaction registers, with the ability to annotate, and balance your account. Personal opinion - if we want to impact the mass market holdouts and get them online - we have to do it with mass market tackets - simple, intuitive, and without too many widgets thrown on. For the sake of all the people who still call their kids when their PC lockups - simple is a good thing even in PFM - and that type of PFM-ish services will help get folks online.

Ted --

I think the question at hand is "is implementing online PFM really worth it?"

The notion of "worth" in that question implies that there is a cost and a benefit. And my take is that the cost outweighs the benefit.

Some of the analyst firms seem to believe that online PFM will bring some customers into the online banking fold. Not only do I disagree, but even if it did, the cost of developing online PFM just for this "benefit" would be high, considering the number of people it might bring online.

As for the potential benefits regarding deepening relationships with existing online banking customers... yes, online PFM might provide added convenience which customers would perceive as a benefit, and make them less likely to defect, and perhaps more likely to buy more products from the bank.

But at what cost? The question is: Is this the right place the spend the next dollar on service enhancement? My belief is that for many, many banks, the answer to that is NO.

Ron,
You're absolutely right that banks should perform a cost/benefit analysis.

I'll also support you on the fact that "developing" these technologies may skew that analysis towards the "cost" side. But the mass majority of banks do not do their own development. They buy products and services.

There are products like Jwaala's Moneytracker (noted on this site a couple months ago) that turns a bank's generic online banking application into a powerful yet incredibly user friendly PFM. This product is not that expensive and it seems to have had a rapid adoption at Amplify FCU.

I think these tools can completely change the current view of online banking, opening the doors to many more people that don't currently use it. Additionally, some of the core processors are working on solutions for this space. This is very possibly the point behind Intuit buying Digital Insite. Although, I'll admit that is a scary occurance.

While performing your cost/benefit analysis it would be wise to also consider what your bank will look like in 3-5 years if you dont have these modern technologies. The online channel desperately needs some attention. This is a huge step in the right direction and I think it is wise to be a leader in improving this channel vs. a late bloomer. Again, I will strongly consider switching institutions for these features if my bank doesnt have it. And Im guessing Im not the only one out there with that thought.

Good discussion here. I agree with Tom and Ted that online banking PFM is not just Quicken online, nor should it be dismissed out of hand. At this point in time, online banking PFM (and any of it's Wesabe-like counterparts) are truly intended for and will be used by a group of people that are active financial managers, people who don't mind investing the time in set up and maintenance to get a big picture look at their financial lives. Now just because it may have traction with a specific group right now, does not mean banks shouldn't look toward implementation. As Tom noted, in a few years, better servicing and enhanced online capabilities moving the online channel beyond a mere ATM-like balance and transaction list will be the expectation, especially among younger consumers, as recent research we've conducted has borne out. I think you're right, Ron, in that coming out with a full-blown capability at this time may require more time, money and technology than is available, but I think banks do need to be moving incrementally toward offering some type of online banking PFM that provides value, such as providing pre-categorizing expenses or budgeting tools.

Great discussion, although I am late to the table. I agree with the overall sentiment, that passage of time is what will drive up online banking over that last hurdle.

Meantime, it begs the question as to what ought to be done to better engage with the Gen M/X/Y as they graduate into the older categories. They will expect and demand greater convenience, and better service in the sense of "know me" and "remember me" "wherever I am" and "whatever I am doing", and "as my personal circumstances evolve".

I also think it will be less important to get everything from one institution for that group, and the notion of fractured/ multiple bank services will be appealing, with different ways available for them to aggregate those services, that provides them better control.

So yes, simply adding more functions to online banking is not enough.

I’m glad Ron has sparked such a provocative discussion about “Personal Financial Management (PFM).” Intuit thinks the industry needs to have exactly this discussion because we do indeed see PFM as the natural evolution of today’s Online Banking experience. And as the General Manager humbly working for the company who invented this space, I think we should share some of our learnings over the past quarter century about how consumers and small businesses manage their finances. So let me share a few thoughts to further our conversation.

Frankly, I think Ron is framing the PFM opportunity too narrowly. Perhaps the question isn’t whether PFM can draw new online banking users – I think it will for the reasons outlined below – but whether the industry should use PFM to aim higher, ie, driving a more significant set of benefits for financial institutions and their customers. If PFM simply drives incremental online banking users, it’s dead-on-arrival.

So I’ll ask: Did anyone stomp up and down demanding an iPod before 90 million of us snapped them up? Or Walkmans before the iPod? Fax machines, the PC, cell phones…the list goes on yet the answer is the same in each case. As smart product developers, we know we can’t “ask” our way to innovation. We need to build innovation out of carefully studying people’s behaviors and then applying our expertise and creativity to solve the problem at hand.

And what a set of problems we’re seeing! Personal debt at record levels, skyrocketing college tuition costs, longer lives yet minimal savings for retirement, and crushing mortgages, to name a few of our favorite financial demons. Perhaps one cause of these woes is because one hundred million U.S. households (nine tenths of all households) are using post-it notes, pencil, paper, and spreadsheets to manage how they achieve their life’s aspirations and (poorly) solve these problems.

Can we imagine that PFM is a better way to solve these problems for them? Absolutely!

What ails Online Banking today is an understanding of what’s important to Financial Institutions and their customers. This manifests itself as a lack of vision by vendors and an online banking experience that in the words of one consumer we interviewed, “is nothing more than a glorified ATM.” Online banking helps this consumer in just a few transaction-oriented tasks such as checking to see if a check or deposit has cleared, for a mere few moments each week.

However, Intuit envisions a world far different from today’s minimalist experience. Imagine one where consumers and small businesses look to their primary financial institution’s website to help them with their most important day-day financial management tasks – saving more money to meet their goals, spending less time paying their bills, reducing their taxable burden, paying off their debt, securing their fiscal identity – and if they’re a small business – managing their cash flow, paying their employees, and getting paid from their customers. Very few if any of these “jobs” are currently available and solved by today’s Online Banking experience. If your bank was able to do this for you, how would you view them differently than today? What shift in attitudes & behavior would positively affect the bank’s P&L?

To solve these problems well, I don’t see the industry simply replicating Quicken and grafting it onto online banking sites. The new PFM crop of tools should thoughtfully solve a very limited number of jobs with ‘drop dead simplicity.” The very best ones will take the critical next step to merge the old online banking functionality with this new functionality into one seamless experience. While it may be true that people often don’t follow-through with their aspirations, these new tools have an opportunity to capture a huge, untapped audience because it’s available where people already go – their bank’s online banking site.

So who would this new experience be right for? Well, perhaps we should instead ask who wouldn’t this be right for? Certainly, Gen Yers who as you note, want a tool to both handle day-day finances and make smarter decisions (uh, making smarter decisions will require a foundational understanding of your finances, ala PFM.) But to suggest that only Gen Yers are the target audience is to hitch your ride to that most fashionable of target audiences. Let’s not forget it’s the people with money who actually enjoy managing it – and that matter most to financial institutions. Gen Xers and Baby Boomers have the most income and financial needs. And as they pass through numerous “life triggers,” such as having a baby, buying a house, or losing a job, they typically re-evaluate how they manage their finances and turn to new tools to help them.

If vendors can build this transformational mousetrap for consumers, the debate becomes less around whether PFM will bring in new online bankers but rather how will PFM drive much more important financial institution metrics such as new customer acquisition, deposit growth, fee income, and average products per customer. In this view, PFM is less a “bolt-on tool” than a wholesale re-invention of the end-to-end online banking experience that places the financial institution’s website at the center of the consumer’s financial universe.

Executed with “drop dead simplicity” this new site should radically delight a financial institution’s customers who are compelled to tell their friends via word of mouth. New customers and their deposits flock to the branches. The financial institution knows many times as much about their customers as before and is able to offer new services at the “point of need” instead of sending wasteful direct marketing or pinning up posters in the branch. Retention increases due to customers who have consolidated their finances at this bank. Small and mid-sized financial institutions now have both the service and the technology offerings to beat anyone.

Pollyanna view? Maybe a bit. But also rooted in twenty five years’ understanding of the biggest financial problems users have and how to delight them and their financial institutions by solving them. I’m even up for a friendly wager with Ron to bet on it. How ‘bout dinner’s on me if Intuit’s PFM product, FinanceWorks, doesn’t provide a compelling value proposition to financial institutions and their customers by this time next year?

Paul --

Thanks for your comments. I'd like to make one thing clear: It was some of the analyst firms who were touting online PFM as a way to jumpstart online banking adoption.

My take was that: 1) implementing online PFM wouldn't jumpstart OL banking, and 2) there's no compelling reason to jumpstart OL banking in the first place.

Your comment, however, raises different,and probably better, questions: What is PFM in the first place? and Can FIs use PFM in a strategic way?

To the first question, most of what I've seen in the way of bank-provided OL PFM is tracking and aggregation. I'm sure that's incredibly helpful to some, if not many, consumers.

But if banks (and other FIs) want to use PFM in a more strategic manner, than what's included in PFM must go beyond simply tracking -- and I think you would agree based on your comments.

As for the target, I would be the first to agree that Gen Xers, Boomers, and even Seniors have a NEED for the kind of functionality you envision. But I am pessimistic that many Boomer and Seniors, in particular, will change their well-ingrained behavior to become users of this new and improved OL PFM.

Some will adopt, for sure -- but many or most? I bet no.