Synopsis: Personal finances are simple for people with a savings account and a checking account, and that’s it. It is, however, complicated for people who may have multiple financial obligations such as student loans, mortgages, auto loans, credit cards, retirement savings, and other investment accounts, in addition to chequing and savings. In this article, we explain how personal money management banking tools can help you access all of your financial data at once.
The monumental increase in personal finance management (PFM) applications:
The traditional mode of banking and financial management is currently undergoing a revolution. A major contributing factor is that customers now want more than basic functionality. They prefer personalized services and analysis when it comes to their financial data. In addition, most of us have a complex financial situation which consists of different types of loans, mortgages, investments, retirement savings, etc. in addition to the usual savings and checking accounts.
This gave birth to PFM tools.
PFM tools are based on application programming interface (API) technology and allow users to have a deep understanding of their finances. The concept covers assets, debts, income and expenses. It allows customers to see how much they are spending, where they are spending it, etc. Put simply, PFM tools help users understand their current financial situation. With PFM applications, one can access all their financial data in one place and make critical decisions accordingly with the information and guidance provided by the tool.
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The need for PFM applications powered by Open Banking today:
Open Banking has radically changed the way financial institutions work in recent years. Through open banking and PFM tools, financial institutions (FIs) and banks can go beyond their conventional banking methods.
For banks and FIs, such a change allows them to have a detailed understanding of their customers and how they can leverage this information to create personalized services and deliver value to their users. This ultimately leads to increased retention, higher income, and greater brand recognition.
On the other hand, open banking and PFM applications give customers precise control over their spending and provide them with a holistic picture of their financial health. These applications also help clients better manage their finances by giving them actionable insights and tailored solutions.
Usefulness of PFM applications:
PFM applications provide customers with everything they need at every step; from checking their balance to analyzing statistics for personalized advice. Here are some advantages of having a PFM application compatible with Open Banking:
1. Notifications: PFM apps help users avoid over-dipping and spending more than their planned spending by alerting the customer whenever the balance reaches a certain amount. This helps the user to have a clear overall picture of their finances and what needs to be done next.
2. Analysis: Such applications can analyze the user’s spending habits and indicate when the spending is above average. All of this helps the client to be aware of their spending and get back on track with their monetary goals. Once they have a good overview of their spending, they can take control of their spending and manage it accordingly in the future.
3. Alerts: PFM apps can alert the user whenever unusual activity occurs, for example, purchases made in unfamiliar locations. This helps the user to take preventive measures in the event of fraud.
4. Share news: Another advantage of these apps is that they continually share relevant market and financial information with the customer and how they might affect the user’s financial situation. Now the customer can keep up to date with news that interests them.
5. Personalized advice: PFM applications provide the user with personalized advice, such as advice, analysis and information. Today’s clients want actionable advice that can help them reach their financial goals. Budget tracking, price comparison functions and real-time updates help the user to make smarter decisions.
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Customers are becoming more sophisticated and expect more from their banks and FIs. It is necessary to become familiar with customers to provide them with valuable information that helps them make decisions. As a result, banks get higher engagement and users get premium services.
PFM applications bridge the gap between customer and bank. Banks and FIs need to get closer to their customers and provide them with valuable information that guides them in decision-making. This will lead to greater engagement for banks and better services for users. Put simply, such applications are winners for the customer and the bank in the long run.
The views expressed in this article are the personal opinion of Satyajit Kanekar, Co-Founder and CEO of Mobileware Technologies.