- The personal finance industry is becomeing indundated with advanced technology and digital startups.
- We’ve outlined some of the recent trends and projections of this rapidly changing market.
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Creating a long-term budgeting plan and managing investments has never been easier. With digital-only banks and financial startups increasingly offering the latest personal finance management (PFM) features on their mobile apps and services, consumers can monitor their financial health with the push of a button.
And as the PFM industry becomes more and more saturated with these digital competitors, legacy players are being forced to improve their own suite of personal finance tools.
What is personal finance management (PFM) software?
PFM software, often apps, allow users to better manage their finances. Today’s PFM services can give users more control of their finances through artificial intelligence (AI), smart analytics, automation, and open banking. The overall goal of PFM software is to help consumers improve their financial health.
Insider Intelligence does not include features such as money transfers or bill payments in its definition for PFM software, as those actions don’t contribute directly to bettering one’s financial literacy.
Top contributors to the PFM software space include:
Neobanks: Chime, N26, and Revolut are some of the top neobanks offering personal finance tools built directly into their mobile applications and websites. And with 40% of respondents to an RFi survey indicating that they find PFM solutions offered by nonbanks to be more useful than those offered from their bank, these digital providers stand to gain major traction in the PFM industry.
- Digital wealth managers: Otherwise referred to as robo-advisors, digital wealth managers use technology such as AI algorithms and machine learning to help consumers better understand their financial health and manage investment decisions. Digital wealth managers may use a hybrid model, meaning they integrate human advice with robo-advisor responses to enhance the customer relationship. Some of the top competitors in the digital wealth management space include: Personal Capital, Nutmeg, and Lending Club.
- White-label software providers: White-label banking allows financial companies, usually incumbent banks, to integrate PFM software from a third-party directly into their platforms, so that customers can refine how they manage their finances. Two white-label PFM software providers that Insider Intelligence discusses in its Personal Finance Management Distributors report are Meniga and Strands.
What’s the market size of the PFM industry?
The U.S. personal finance software market size is projected to reach $343 million by 2026, registering a compound annual growth rate (CAGR) of 5% from 2019 to 2026, per Markets Insider.
According to Insider Intelligence, just 17% of consumers are now using Excel sheets to manage their money, compared with 53% using the mobile app offered by their bank.
And PFM solutions are particularly attractive to younger consumers who might not have a firm grasp on personal finance basics. Seventy percent of millennials have no personal relationship with a banker, and 78% never go to a branch if they can help it. Further, as many as 53% of US millennials spend no time managing their finances – leaving the door open for PFM providers to unlock a huge opportunity if they can incentivize “unengaged” consumers.
Latest trends in PFM industry
According to the Personal Finance Management Distributors report, bank customers who make use of personal finance management tools on average are 18% wealthier than those who don’t. And this competitive industry has led to an incredibly diverse market.
With startups and digital providers offering personalized customer experiences, consumers are demanding more of these advanced PFM features – forcing banks to add them to their services. As a result people looking to better manage their finances have the choice of a variety of options, from traditional bank apps, to neobanks, to standalone PFM apps.
One of the most attractive aspects of many PFM features is their 24/7 accessibility. Therefore, incumbents looking to stay competitive must invest in technology – whether it’s the replacement of legacy IT systems or the adoption of a third-party solution – to ensure continuity of service.
A large opportunity for PFM services lies with younger, digitally native cohorts. Over seventy percent of Gen Zers believe brands should “help them achieve personal goals and aspirations.” And improvements to user experience (UX), data-sharing capabilities, and tools designed to refine one’s financial health, have helped PFM solutions capture the attention of these younger consumers.
The personal finance market is constantly evolving due to advancements in digital tools and technology, like AI and machine learning. Business Insider Intelligence’s Personal Finance Management Disruptors report outlines some best practices for banks looking to upgrade their PFM offerings and breaks down reasons why banks should reinvest in PFM.
Insider Intelligence is launching Financial Services, which will include a wealth of research reports, charts, forecasts, and analysis that combines eMarketer’s industry renowned methodology with Business Insider Intelligence’s agility and expertise in financial services.