Life is unpredictable, how we spend can be impulsive and emotional, and everyone has their own system. This makes it difficult to create the perfect personal financial management (PFM) service, writes 11:FS’s Ryan Garner
With the rise of digital-only challenger banks such as Monzo, Starling and Revolut, intelligent money-management features have been integrated into their everyday banking services.
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With the advent of Open Banking, dedicated digital money managers (DMMs) have emerged. These are online or app-based services – such as Yolt or Money Dashboard – that intelligently help customers to manage their money without offering banking products of their own. So, job done then? Well, not quite.
11:FS recently conducted research that revealed the market is still in its early phases, and there is a lot of room for growth and development. While 89% of the UK population manage personal finance using a variety of tools, only 14% have tried a DMM.
Non-DMM users are still trying to actively manage their personal finances, stitching together spreadsheets, notebooks and their bank’s mobile apps in an attempt to handle basic tasks such as managing recurring bills and budgeting. Looking at usage levels across the UK population, the current wave of offerings has been impactful by focusing on a thin slice of what customers want.
To identify what consumers want, and how firms should prioritise them, we apply Jobs to be Done thinking to the research and design process. The result is an ability to design propositions that customers love, and spot disruptive moves in the market.
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By GlobalDataWhen we look at the non-users of DMM services, we can analyse where the opportunities exist to help customers make progress towards living better with money. The current battlefield – where the customer is currently underserved – provides huge opportunity for growth for DMMs:
- Staying on track with budgets and adapting if necessary;
- Managing your recurring bills and living costs, and
- Creating a realistic personal budget and knowing how much can be spent.
Many DMMs offer services that help customers with these Jobs to be Done. When we look at users of DMMs, we see that their priorities change.
The extra control and awareness gained from using these services means they become more conscious of their financial positions.
This means that the customer jobs that were once in the key battleground become ‘hygiene factors’ or, in other words, expected by customers:
• Managing your recurring bills and living costs, and
• Creating a realistic personal budget and knowing how much you can spend.
However, what these customers struggle with are future events that are obscure or undefined. These events seem too far away, and the targets too big to take action against.
Growth opportunities
The biggest opportunity that our research uncovered is to create ‘onward journeys’ for customers. These are still, by and large, untapped gaps in the market that DMMs could tackle and unlock new customer value.
Getting this right, however, means helping the customer avoid dipping into this money when unexpected costs arise. And this means creating more complex end-to-end customer journeys.
Our research revealed two specific journeys with the highest customer opportunity score, meaning they were ranked as the most important, but also the most difficult to deliver.
• Building long-term savings for specific events: Everyone has important life moments they want to fund, but saving for specific long-term events can be daunting, and something often pushed aside for another day.
The biggest constraint for customers making progress on this is trying to save on a tight budget (27%). Helping customers understand what they need to save, and coaching them to optimise their spending and saving would be a big step forward for these customers. A lot of the time, customers are saving for a specific life event like buying a house.
Designing an experience that connects their savings to an emotional purpose in life will help them think twice about spending this money on other things, the second-biggest constraint for customers (21%).
• Building and maintaining a financial ‘safety net’: We all want to be independent and self-sufficient, but struggle to build up a buffer to fall back on for emergency cover.
For most, disposable income is low – the biggest barrier to having a safety net, according to 29% of PFM users – and financial lives are messy and unpredictable. As a result, any accrued savings tend to cover non-emergency purchases.
Adding ‘positive friction’ and behavioural design techniques into the user experience can help boost self-control and avoid dipping into these savings; this was the second-top constraint for customers (22%). What is apparent from talking to consumers is they do not want rigid products, because they do not think in terms of traditional industry categories. Providers should not, therefore, be bound by them when designing services.
The discussion has to move from ‘what digital money management tools can we offer?’ to ‘what do our customers want to ultimately achieve?’ That means moving to truly digital services built around end-to-end customer journeys.
This will likely mean stitching together various APIs to deliver on that end-to-end experience. The more firms can focus on delivering services around these customers’ jobs, the more they can help redefine the category.
