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Industry insights

Bending data: Essential building blocks for a perfect PFM platform

Michal Maliarov
min read

With banking going digital and more personal than ever before, Personal Financial Management tools (PFM for short) have become indispensable for individuals seeking to take control of their finances. To build the perfect one, financial institutions must prioritize certain key points that ensure optimal user experience. High-quality data most of all.  

What is PFM?

At its core, PFM is a set of digital tools and applications that enable individuals to manage their finances proactively. Unlike traditional banking, which focuses solely on transactional activities, PFM platforms offer a much more detailed and practical view of an individual's financial life, encompassing everything from budgeting and goal setting to investment tracking and debt management.

Did you know?

Over 83% of consumers believe it's important for banks to offer PFM tools while 59% want their financial provider to help them manage their finances proactively.

As you can imagine, high-quality data is the backbone of any successful PFM since no tool can be useful without a proper context. Without enriched data handed to the PFM by providers like TapiX, users are left with incomplete, inaccurate, and ultimately unhelpful financial insights. Just like you can’t out-train a bad diet, no amount of features and services provided by PFM can substitute bad data. The goal becomes clear: high-quality data first - features second.

1. Benefits of a good PFM

A properly set PFM can bring any bank valuable knowledge and loyalty of its customer base. What are users looking for the most?

1.1 Visibility and transparency

PFM tools provide users with a clear and transparent view of their financial standing, empowering them to make informed decisions about their money. Most important data point here is proper categorisation, which makes your purchases and transactions clear and ready for a proper analysis and future planning. No more groceries ending up in the “other” section.  

1.2 Financial planning and goal achievement

By setting goals, creating budgets, and tracking progress, users can plan for the future and work towards achieving their financial goals and aspirations. Thanks to an accurate categorisation in the first step, PFM can now properly track purchases made through all the categories and adjust the financial advice tailored specifically to each user.  

1.3 Cost reduction and savings maximization

PFM tools help users identify areas of overspending and implement cost-saving strategies, leading to increased savings and financial security. Here, context is crucial and users go through their lives in need of different approaches with every cycle. Enriched data are an important part of that since accuracy creates the right context which serves as a base for further financial advice.  

1.4 Financial education

Users are eager to learn about financial concepts, best practices, and strategies, empowering them to make smarter financial decisions and build long-term wealth. One of the best ways to achive that is education through gamification, which also hinges on smart data to fuel the PFM with accurate and personal information.  

2. Essential building blocks

2.1 Visualization

The additional layer of categorisation tags not only brings more clarity but also opens up more possibilities for PFM.

Visual representation plays a crucial role in making financial information accessible and actionable. A clean logo, informative graphics, and intuitive design are essential components of effective PFM. According to a study by Mastercard, best practices for visual data showcase include incorporating budgeting visuals, financial summaries, and accurate transaction tags.

Besides the basics like a beautiful logo, merchant address or category, enriched data adds more visual information including Google Places ID, unique payment labelling or more accurate categorisation with several levels of differentiation, making the PFM stand out from the crowd.

2.2 Data Quality

Accurate and high-quality data should be at the core of any PFM. Enriched data ensure that transactions are correctly categorized and provide meaningful insights, personally connected to each and every user. While many banks focus on analytics and constantly adding more features, neglecting data quality can result in transactions being inaccurately labelled or lumped into generic categories like “others”.  

This can hinder every other service and feature present, because the PFM will not properly understand the data it is workign with. It’s like building a house on a quicksand. Take care of the data first, and then every other feature (or a building block if you will) can fall into place.  

For personalized tips or targeted offers, proper categorisation and data quality and accuracy are key.

2.3 Differentiation

To stand out in a crowded market, PFM tools must offer more than just basic financial management capabilities. Features such as gamification, AI assistants, and hyper-personalization are driving trends in modern banking apps and will help any PFM stand out.

  • Gamification transforms financial tasks into interactive experiences, which helps with motivation and incentivises users to achieve their financial goals through challenges, rewards, and progress tracking.  
  • AI assistants enhance the platform's functionality by providing personalized financial advice, insights, and proactive alerts, making sure users make informed decisions connected to their unique financial circumstances. This is also where contextual banking comes into place.  
  • Hyper-personalization is probably the most notable trend of 2024. It further enhances the user experience by delivering customized recommendations, content, and features based on individual preferences, behavior, and financial objectives, ensuring that each user receives relevant and actionable insights to optimize their financial health and achieve their goals effectively. 
Without high quality data, the chatbot or AI will never work as you intended and users will only be discouraged from using the banking app.

3. How to do it right

Several European banks lead with a good example of carefully crafted PFM platforms:

This platform stands out with its real-time budgeting insights, savings goals features, personalized recommendations, seamless integration with third-party services, robust security measures, and community engagement. Users can track their spending, set savings goals, receive tailored insights, and connect with other users for support and advice.

With Revolut, users can access detailed spending breakdowns, set budgeting limits, categorize transactions, and receive real-time alerts for better financial control. The platform's innovative Vaults feature enables users to round up their purchases and save spare change automatically, while the Analytics section provides insights into spending patterns and trends.

This digital platform provides detailed insights into spending habits and trends, allowing users to make informed financial decisions. Unique features include customizable budgeting tools, interactive visualizations, and personalized recommendations based on individual financial profiles. Additionally, Raiffeisenbank's PFM platform integrates seamlessly with other banking services, providing a very well rounded approach to financial management.  

Did you know?
The expected size of the global PFM market is estimated to grow to $10.6 billion by 2025.  

4. Conclusion

In conclusion, the success of a PFM tool hinges on its ability to leverage high-quality data, intuitive visualization, and innovative differentiation to deliver personalized, actionable insights to users. By prioritizing these essential building blocks, banks can unlock the full potential of PFM and enhance the financial well-being of their customers.

About author

Michal Maliarov

Senior insider

A creative enthusiast who has spent half of his life in the technology industry. Passionate about fintech, AI, and the mobile tech market. Navigating the thin line between the worlds of media and advertising for over 10 years, where he feels most at home.

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