PLEASANTON, Calif. — The writing is not on the wall — it's on your phone.

To remain competitive credit unions must embrace mobile personal financial management (PFM) tools. This effort isn't simply to attract the millennial demographic, it's an all-encompassing offensive; however, the tools have not yet completely caught up with the trend.

"Both PCs and physical wallets will be museum pieces by the end of the decade. Our phones, in whatever form they morph into, will replace both," said Safe America Credit Union's Vice President of Technology, John Gracyalny. "All of our payment systems, ID systems, digital social systems, will be encapsulated in a hand-held if not wearable device."

To date there have been issues related to technological capabilities and whether mobile phones have the ability to execute PFM functions in a manner that is equivalent to home banking or tablet use.

Recently, a few financial services companies, such as Bancompany in Missouri and FIS, have introduced mobile phone-based software allowing consumers to tag transactions or set aside funds for a goal.

FIS, for example, recently introduced a mobile-centric prepaid product called GenNow, which financial institutions can label as their own product. The first bank partnership is slated for August. The new app comes with standard banking features such as mobile check deposit. There are other less-typical features, such as MoneyDrawer, which is designed to serve as the lock on the "piggybank" to give an impulsive shopper pause.

Essentially, these third parties are basically connecting a mobile app to a bank account or prepaid card while at the same time empowering the end user.

"It can't be marginalized how important it is to have consumers looking at all of their external accounts on a single institution's app. This creates the single greatest cross-sell opportunity that a credit union has within the digital channel," said Wade Arnold, managing director of Banno, at ProfitStars. "It also presents the opportunity to increase feature adoption of services offered by the institution. For example our bill discovery drives bill pay and rush payments."

Banno, formerly T8 Webware, was acquired by Jack Henry & Associates in March and is now a part of the company's ProfitStars division. Banno has developed custom-branded mobile applications, websites and personalized payment card services. Through its financial decision support tool, Grip, the company will offer iPay Solutions integrated bill pay and Remote Deposit Anywhere mobile RDC solutions.

"I believe we are on the verge of the second-generation of PFM tools that actually create a return for both consumers and the financial institution," said Arnold. "The focus will be on machine learning technologies advising the member about his or her finances rather than the member telling the PFM system about what he or she wants."

Proliferation Of PFM
Gracyalny explained that the $310 million credit union, supporting 25,000 members via eight branches, is currently searching for a new digital banking platform to include Internet banking, bill pay and mobile banking for implementation with its new core system early in 2015.

"One capability we are requiring of our potential new digital banking providers is a PFM tool app. Ideally it should be available across both the browser and app channels," he said. "The four providers who are doing demos next week all say they have PFM available. It will be interesting to compare and contrast their offerings."

Gracyalny's approach comes as no surprise to Steve Shaw, vice president of Strategic Marketing for Digital Channels and Electronic Payments for Fiserv. "We have done research on how portable is PFM functionality to a smartphone device compared to a tablet or the online channel. What we have found is that the consumer's preferences and needs for PFM functionality differ by device."

At the end of 2013 Fiserv released a white paper entitled "Digital Banking Personas and Insights: Fashioning a Tailored Experience." Respondents were polled over the prior nine-month period via phone interviews and home visits to better analyze how they paid their bills and managed funds. Those polled earned between $30,000 and $100,000 per year.

"We wanted to know what their relationship was with their credit union and followed them down the line. We had them keep mobile diaries," said Shaw. "This was a qualitative survey — we really wanted to know the behaviors, attitudes and desires of consumers."

Shaw likened today's banking experience to a snack, lunch and brunch. The mobile channel, he said, is like snacking on food with quick 30- to 60-second transactions. The online channel is more so a lunch where a member is sitting down and digesting.

"With lunch, you have a menu there and you can do more creation," he continued. "Brunch is a more relaxed environment where the tablet comes in to play. This is where PFM really manifests itself because consumers can analyze their information."

Serving the bedroom communities of Silicon Valley, Safe America Credit Union's members, across all age groups, are by and large tech savvy. To date, however, they are still in the process of selecting the right PFM tools for mobile.

"We believe that this will be of interest to Boomers as well as Millenials," said Gracyalny. "Some sort of retirement planning function would certainly increase its attraction to the older members."

Gracyalny explained he has reflected on his own experiences with personal budgeting tools while vetting third party vendors. He noted that the biggest limitation is tailoring PFM functions specific to his needs, while allocating expenses whose category cannot be automatically assigned.

"Current budgeting tools seem to require enough manual intervention and adjusting that after a few months the user decides that the benefits are not worth the time spent," said Gracyalny. "I'm looking forward to seeing how the latest generation of apps deal with this issue."

Second Generation PFM
As a software developer, Arnold understands current issues related to the adoption of first generation PFM products. An initial concern is that the member has to do the configuring rather than utilizing the market baseline and machine learning that creates the system for them.

The second missing piece to the puzzle is adding consumer reward and consequences to the product. "For example, utilizing a time deposit account behind the scenes of a PFM goal would incentivize the consumer to place more money into goals. If the consumer needed access to the funds then they would lose interest and maybe even incur a fee in order to move the funds back into the checking account."

In order for the second generation of PFM solutions to be actionable, Arnold explained that the app must be tightly coupled with online and mobile banking, or possibly become a replacement. This way the member can move money, extend a line of credit or pay a bill based on insights gleaned from the intelligent PFM system.

"The broader technology marketplace is a leading indicator for where this needs to go. I look at products like the iOS Notification Center and Google Now as great examples that are using the context of data intelligence in order to provide relevant information to the consumer," said Arnold. "Both of these products glean insights from data of other applications and present actionable suggestions for the consumer."

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