A number of industry analyst firms have recently opined that developing online personal financial management (PFM) capabilities can help banks grow online banking adoption and strengthen their customer relationships.

My take: I disagree. In my opinion:
  1) growth in online banking adoption is a demographics game
  2) PFM will not drive further online banking growth
  3) most banks are wasting their money developing online PFM tools

First off, let's consider who isn't banking online. For the most part, it's older consumers. According to Forrester's numbers, 78% of Gen Yers and 72% of Gen Xers bank online. With already high adoption, and representing just 45% of the total online population, there's not a lot of room for growth there. With 57% of Boomers and 42% of Seniors banking online, any significant growth in online banking adoption will come from these segments.

But PFM isn't going to be the catalyst to make that happen. The primary hurdles keeping these "offline" bankers away from the online channel are security concerns and habit (they don't perceive there to be added convenience to banking online). On top of that, there are a number of people who enroll for online access and then find it to be cumbersome and difficult to continue.

PFM isn't going to help overcome those hurdles. Javelin Research recently found that just one quarter of online bankers were interested in online PFM. So why would the holdouts be more interested? Computer-based PFM tools (not just online ones) have been around for a long time. You probably even own a copy of Quicken or Microsoft Money. The number of people who own copies of these programs is in the multi-millions. The number of people who regularly use their copy of the program is....well, much less.

Now you can cite all the market research you want about how consumers want more help managing their finances and tools to help them manage their budget and finances. But intentions don't always translate into actions. If today's 40, 50, and 60-year olds haven't started using PFM tools yet -- and aren't online banking either -- offering PFM tools online isn't going to lure them online.

The market for online PFM isn't online holdout Boomers and Seniors, but Gen Yers (and the next generation of consumers) who are already online -- and a whole lot more involved in managing their financial lives than Boomers or Seniors were at that age. But Gen Y is already banking online, so PFM tools aren't needed to lure them online.

And unfortunately, what banks are offering (or considering offering) may not help deepen the relationship, either. These young consumers want help making smarter financial decisions -- not just tools to track and manage their finances. And most of the online PFM tools that banks are developing don't do nearly as good a job of doing this as offerings from sites like Wesabe do.

The fact of the matter is that banks have, for the most part, missed the boat on this opportunity. It might not be too late for banks to develop a Wesabe-like capability. But it's not time, money, or technology capabilities that keep banks from doing it. It's culture, mindset, and the practices banks use to justify their investments. 

Banks who invest in online PFM capabilities will look to justify their investments through incremental cross-sell. But consumers who do adopt these tools will run away faster than you can say BOO if their bank starts aggressively cross-selling through their PFM implementations.

It really comes down to strategy and business model considerations. Banks looking for answers to how to attract new customers and deepen relationships with customers aren't going to find them by trying to grow online banking rates with PFM tools. Banks need to figure out how to make a profit by helping consumers manage their money -- and not just by pushing more checking account and savings accounts at customers and prospects.

Ron Shevlin is Vice President of Client Solutions at Epsilon. Prior to that, Ron was an analyst at Forrester Research. He opines (translation: rants) about financial services marketing at Marketing ROI: Whims From Ron Shevlin. The opinions expressed here are Ron's, not those of NetBanker, his employer, or any firm trying to help banks build online PFM tools (obviously).

Two weeks ago we introduced you to our first guest blogger, William Azaroff, who has since then posted a couple gems here.

This week we welcome a second guest to the fold, Ron Shevlin, Epsilon vice president and ex-Forrester financial-services research director. Ron blogs about important marketing topics such as ROI, segmentation, and targeting at his blog, Marketing ROI. I named Ron's blog to my "Fave 5" last month (here) and called it "(the) best antidote to all the b.s. circulating online."

There are a number of great marketing bloggers, but what sets Ron apart is his hard-hitting style, strategic thinking, and the frequent use of financial services examples. And as you can tell from the mini-bio appended to his posts (below), he has a keen sense of humor.  

Ron Shevlin is vice president of client solutions at Epsilon. Prior to that, Ron was an analyst at Forrester Research. He opines (translation: rants) about financial services marketing at Marketing ROI: Whims From Ron Shevlin. The opinions expressed here are Ron's, not those of NetBanker, his employer, or any other sane person or party for that matter. 

His first post, Why Banks Aren't Capitalizing on Web 2.0, is here. In the future, you can read all his NetBanker posts by choosing "Shevlin" from our Topic list in the top navigation bar or by searching for "Shevlin" using the site search in the upper left.

Any other industry insiders interested in guest blogging at Netbanker? Drop me an email.

A recent article in Bank Systems & Technology looked at the question of whether or not banks were reaping Web 2.0's potential. The subtitle of the article—"some institutions aren't realizing all that Web 2.0 has to offer"—is generous beyond belief.

The article takes the form of a panel discussion, with participants from Wells Fargo, Adobe Systems, Tower Group, and Hurwitz & Associates addressing questions about which banks are implementing Web 2.0 technologies, and why banks aren't embracing them more than they have.

The Tower analyst had some interesting things to say, while the rep from Wells Fargo understandably focused on internal initiatives, although (probably reflecting the part of the organization he works in) he made no mention of WF's blogging efforts.

What had me shaking my head in disbelief was the comments from the Adobe person. Her reply as to why banks aren't embracing Web 2.0 technologies more: "The main obstacle seems to be that institutions are hesitant to improve one section of their website too drastically for fear of making the other sites look even more out of date."

Robin Bloor of Hurwitz better captured reality with his response to the same question:

"It may simply be a matter of where to invest. A Web 2.0 project is very difficult to define in terms of specific business objectives. There are no obvious corporate successes to imitate, and no easy way to calculate payback."

My take: There are three major forces holding banks back from capitalizing on Web 2.0:

1) ROI. Despite all the talk about building customer relationships, most banks invest in sales, not in relationship building. If there's no clear link between the investment and a sale, most banks are reticent to make the investment. An example: Personal financial management. NetBanker now tracks more than 20 online personal financial management sites. Why is it that most banks (with the exception of a select few like Wells Fargo) aren't making an investment in a PFM or Wesabe-like capability? Because they can't see how it ties to making a product sale.

2) History. Besides "no obvious successes to imitate," there are past failures to avoid. Plenty of bankers still remember the online community efforts that banks dabbled in seven, eight, nine years ago. They jumped into those initiatives feet first back then and found that they were jumping into empty pits. This time around, they're more cautious and asking, "What's different this time?" Well, there are plenty of things different this time, but they still need to be educated about, and convinced of, these differences.

3) Banker say what? Ask 100 banks if they could launch a successful social media campaign, and 95 will say, "Huh?" (4 will say no, and 1 very deluded individual will say yes, unless she's from Wells Fargo). Even if some banks were willing to take a longer term view of the ROI on these investments, it's still not clear to many exactly what Web 2.0 is—and isn't. I, for one, wouldn't suggest tossing around words like "wiki" or "facebook" with senior execs at most financial firms.

So is Web 2.0 dead when it comes to banks? No. But the needle isn't going to move until one or both of the following happens:

PFM sites influence consumers' choice of institutions. Wesabe's Jason Knight has said that his firm doesn't compete with banks. And he's right, of course. But if (or when) Wesabe starts becoming an influence on its members' choice of firms in any significant manner, the banks will sit up and take notice. And then start, however belatedly, to get on the Web 2.0 bandwagon.

P2P lending makes a bigger dent in the big banks' business. Firms like Prosper can crow about the dollar volume of the loans being made on their sites, but, for now, many banks assume (rightly or wrongly) that these transactions are not cannibalizing their business. If this view changes, however, banks will start whistling a new tune regarding Web 2.0.

Ron Shevlin is vice president of client solutions at Epsilon. Prior to that, Ron was an analyst at Forrester Research. He opines (translation: rants) about financial services marketing at Marketing ROI: Whims From Ron Shevlin. The opinions expressed here are Ron's, not those of NetBanker, his employer, or any other sane person or party for that matter.