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Money talks. A two-part* conversation about online innovation in the Financial Services sector. (Part one.)

 LPA HEALTH WARNING: Long post ahead – so if you prefer reading Tweets instead of blogs, here’s the abridged version (as a Tweet):


Innovation patchy. PFM growing. Social ubiquity unavoidable. Austerity is sexy. Watch niche players (esp. mobile). Everyone wants your data. FaceBank, anyone?

“Money, if it does not bring you happiness, will at least help you be miserable in comfort.”

So wrote American author and publisher, Helen Gurley Brown, who was editor-in-chief of Cosmopolitan magazine for 32 years.

It’s true that money is a subject that affects us all – yet, how we choose to engage with it varies wildly depending on a range of variables including our circumstances, personality, interests, competence, lifestyle, relationships and so on.

It was with this in mind that I started talking to people in New Zealand’s Financial Services industry about online innovation in their sector, which frequently meandered into how the Web has (or hasn’t) changed our relationship to money.

As I was working though this topic, and as I met with more people at the coalface of the industry, I realised that the scale and size of the sector is so vast (even in a post-Finance Company era) that trying to cover everything could easily degenerate into a de facto laundry list of product and service advertorial.

So, here, in no particular order, are just some of the themes or trends that are emerging through the online provision of Financial Services. If there are any glaring omissions please let me know


#1: INSIGHTS or OVERSIGHTS? The world of Personal Financial Management (PFM)…

One of the big trends in recent years has been the creation of various Personal Financial Management or PFM tools – usually manifested as a website and/or mobile application. PFM is what your Mum or Dad would probably refer to as budgeting.

There are a number of players in the New Zealand market – some are banking services or aligned with banks, some are stand-alone products and some are fully publicly-funded services. 

The market includes players such as:


Above: Dunedin’s PocketSmith is one of several major Personal Financial Management providers in New Zealand.

Image source: http://www.pocketsmith.com/ 


Overseas, in addition to Mint.com, one of the new players worth watching (although they offer more than just PFM) is BankSimple, co-founded by one of Twitter’s first employees and lead engineers, Alex Payne. They’re starting from the ground up, and have some pretty big dreams, so it’s an interesting story.

But back to PFM. Essentially, these Personal Financial Management tools allow us (as users) to do a number of things that we wouldn’t have been able to do via our regular old paper-based bank statements from years past, for example:

  • Retrospectively monitor our spending by category type, e.g. groceries, holidays, health, transport etc
  • Set savings goals and track our progress towards these goals
  • Import transactions from other accounts
  • View trends over time via charts and graphs
  • Set/send ourselves reminders and alerts, and have these delivered to our mobile, email etc

And there are a bunch of other features and functions that PFM tools provide as well, but this will give you an idea of what PFM delivers if you’re not currently using any of these tools (i.e. most New Zealanders).

Most of these tools are, as one provider candidly stated, ‘glorified calculators’. That may sound a little dismissive – it’s not intended to. Ostensibly, the PFM products take data about a customer’s financial situation before slicing, dicing and presenting it in a far more elegant, interactive, predictive and usable fashion. I was told that quite a few players ‘have come and gone’ in this space in the past few years (both here and offshore) – something I didn’t know, but not unusual in the Web space.

Overseas, PFM is pretty big business as well – the leading US player, Mint.com (who would pitch themselves as far more than just a PFM provider) sold to Intuit just over a year ago for USD $170 million. (Intuit is the provider of financial management software, Quicken, if you want to know more.)

Mint.com offers a typical range of PFM services and ancillary offerings including all the usual suspects such as: credit cards, cheque accounts, savings products, term deposits, investment products and insurance. There will be no great surprises that this is how they make money – through the sale of lead-generation data and by connecting customers to various third-party offerings. 

Speaking to some of the players in the PFM space in New Zealand, they told me that the sector is really still in its infancy. From the providers’ point of view, one respondent provided this analogy which captures the maturity of the market:


Generation 1:    Data capture

Generation 2:    Customer knowledge

Generation 3:    Personal insight

Generation 4:    Forward thinking / aspiration

Generation 5:    Socialisation, community and sharing

Generation 6:    Action and behavioural change


At the moment, the PFM space is essentially in Generation 2 or 3. It’s moved on from the days of the ‘statement’ to a point where customers can, with relatively little effort, gain more knowledge or insight about their financial situation. For many, however, the picture still remains incomplete for a number of reasons: most commonly because the PFM software simply doesn’t cope with the level of complexity of an individual’s unique financial circumstances.

One of the really interesting themes to emerge from those working in the sector is the question of how to move the user experience from something that’s great at providing knowledge and insights; to one that actually motivates change.

There was a feeling that the sector has done a pretty good job of arming customers with tools, but feelings were more muted when it came to whether it had actually affected behaviour. In short, there is world of difference between analytics and action.

For example, with their shiny new PFM software, a user can now sit at home and merrily deduce that they spend (for example) 16% of their disposal income on food and entertainment; 13% on health related expenses; 10% on travel/transport etc, but it’s not necessarily going to make them stop picking up a coffee every morning, or make them get up 15 minutes earlier to make their lunch. It might do. It might not.

Anecdotally, PFM people said some in-house research suggested that even at a subconscious level, the increased awareness of customers’ financial positions was and is, starting to have an impact. But cultural change can take years or generations to kick-in, so only time will tell.

This quote, from Marc Hedlund, CEO of the now defunct PFM site, Wesabe (which received USD $4.7 USD million in VC funding), is particularly apt (when blogging about why his PFM business ‘lost’ in the battle for market share with their major competitor, Mint.com):

“No one, in my view, solved the financial problems of consumers. No one even got close. Yes, both products helped some people -- ours mostly through a supportive community and theirs mostly through giving people a rough picture of where their money has gone. But when we analyzed the benefits we saw for our users, and when Mint boasted about the benefits they saw for their users, the debt reduction and savings increase numbers directly matched the national averages. Because our products existed during a deep financial crisis, consumers everywhere cut back, saved more, and tried to reduce their debt. Neither product had any significant impact beyond what the overall economy led people to do anyways.”

So there you have it. Nobody actually solved any problems. They provided some really clever software, but that’s it.



I wanted to find out what was happening here in New Zealand. Especially because I’m discussing website ‘features and functions’ on a daily basis (particularly from a user’s perspective), I am sometimes in the position of actually trying to convince clients to do fewer things – better. This can be tricky. Part of our job is to ‘evangelise the Web’, showcase the future and promote thinking that will differentiate a client in their respective sector. But this always has to be tempered with reality, resources, timelines – and focus. When apps or websites get stuffed with features and functions too fast, too soon, they can often collapse under their own weight or simply turn users off.

In talking to Sorted, as a non-commercial entity tasked with social marketing to increase the financial literacy and ultimately, the financial action of New Zealanders, I wanted to find out whether New Zealanders actually needed more information. There doesn’t seem to be a lack of freely available, good information, but what impact is it actually having? There is plenty of evidence to suggest that (pre-recession) Kiwis were generally abysmal with saving and protecting their money – yet over the same period the number of tools, services, products and providers offering financial management advice also escalated rapidly – so is there actually a disconnect?

According to Sorted, and the ANZ-Retirement Commission 2009 Financial Knowledge Survey, attitudes are changing (for the better) and there are many reasons for this. Some of the primary reasons are the Global Financial Crisis, the introduction of KiwiSaver, more media coverage of personal finance, and, because information and advice is more widely available. This quote is encouraging:

“There has been a significant improvement in New Zealanders’ overall financial knowledge. An increase of 10 percentage points in the size of the High knowledge group means that 43% of New Zealanders are now scoring highly in respect to financial knowledge. Of particular interest, the Advanced knowledge group, that in 2006 was measured at 15% (1:7 New Zealanders), has increased significantly to 20% (1:5 New Zealanders).”

So, it would appear that the online proliferation of money management tools may in fact be helping us to better manage our money. Even Bill English reckons we’re doing better. What do you think?


#2: UBIQUITY vs ANONYMITY: The rise and rise of the Financial (Connected) Personalities…

This may seem an odd theme here – and only tenuously related to online innovation. But as our digital footprints grow daily with profiles on YouLinkMyTwitFace and so on, the ‘visibility’ of digital personas (real or engineered) as broadcasting or narrowcasting entities becomes increasingly important – and unavoidable. 

The Financial Services industry is no different to any other sector in this regard – whether you are an individual customer, a financial advisor, a cooperative, a mutual society or a mainstream retail bank – your digital profile is a key part of your platform. ASB has just launched a major presence on Facebook, for example.

A quick scan of the other big banks suggests that this is far more comprehensive than what the other players are doing (so far). Of course, the application requires access to your Facebook profile data, which may discourage some users, but they already have 8,200 followers (having launched in late September) and I imagine they’re pretty happy with the response thus far. This is an interesting strategy. As another senior banking executive I spoke to said, “Consumers just want banks to be professional; not your best friend.”

It looks like ASB have committed serious resources (and real people) to sustain and grow this offering. So good on them for getting amongst it and doing things properly.

ASB on Facebook

ASB’s Virtual Branch on Facebook.

Image source: http://www.facebook.com/ASBBank

The key point here is that visibility and integrity are fundamental to success. If you’re going to put yourself out there, you really need to put yourself out there – with a genuine commitment to monitor, modify and support this channel. In the mortgage market, Mike Pero was one of the early pioneers in amongst a growing group of people to appear in a category that may be loosely termed as (apologies in advance): ‘Financial Celebrities’ – people with a visible public profile who comment on various aspects of the economic and financial jigsaw. Others include: Lisa Dudson, Martin Hawes, Gareth Morgan, Bernard Hickey and Mary Holm.

You can follow them on Twitter, watch Money.tv (Lisa Dudson), discuss your portfolio strategy, argue about property market trends and generally interact with them in a far more intimate and immediate manner than ever before. Many of them appear to be online 24/7 – the point is that they can be, they are and they don’t seem to stop for breath.

Despite the avalanche of ‘game changing’ hysteria around the use of these social tools, it’s clear that you simply can’t avoid or ignore them if you are in the Financial Services sector. And if there are any sceptics left – I still meet a few – who are still wondering what the business benefits are from ‘jumping in’ here are 10 for starters. You can:

  • Have a more direct relationship with your customers
  • Learn more about your customers (and understand them better)
  • Build credibility
  • Build traffic
  • Increase your website rankings
  • Get started easily
  • Quickly test your products and ideas
  • Save time
  • Save money
  • Generate leads / enquiries (and be more targeted)

And while measuring Social Media ROI, and the burgeoning world of sentiment analysis can be a little trickier (depending on the complexity of your offering, metrics or campaign), the alternative is anonymity and silence. Not a desirable trait in any competitive space.

*Read part two of this blog.



Posted by: Giles Brown, Web Strategist | 21 October 2010

Tags: innovation, financial services, Personal Finance Management

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