When BBVA Compass first offered personal financial management features in its online banking several years ago, the response was underwhelming.
"It never caught on that well," acknowledged Alex Carriles, head of online and mobile banking at the bank. "It had a very limited adoption for years; it remained almost static at a very low number of users. But we knew the potential this could have.”
But after a recent makeover of those features, and the help of the data aggregator MX, use of mobile PFM tools has shot up while interest in online banking has increased significantly, according to Carriles.
What the bank is doing differently and why this second incarnation of personal financial management is working could be instructive to the many institutions that have tried offering this type of digital financial help and have been disappointed when customers failed to use it.
A refresh
When the contract with the previous vendor was up for renewal, Carriles’ team decided to expand their options and look at everything else that was available. MX looked like an interesting alternative.
“When we implemented it first in online, the first thing we were pleasantly surprised at was how quickly customers started adopting this functionality,” Carriles said. “We would see reports every month on how the number of users kept growing. It’s been growing every month since we launched.”
Encouraged, the bank decided to launch the feature in its mobile banking app, in a slightly stripped-down version appropriate for a smaller screen.
What’s different this time
Categorization is critical to any PFM offering: If you’re trying to show people where they’re spending their money, you have to actually know where they’re spending their money. But that’s harder than it may seem. Forcing people to categorize their own expenses is too big an ask. Automatically categorizing expenses and getting it wrong renders the PFM useless.
“If your categorization is no good, your budget is going to be unmanageable,” Carriles said. “If I want to spend only $200 a month in groceries, but my visit to Kroger is categorized as automobile expense, it’s going to be unmanageable. It’s very important to have good categorization, and MX does a really good job at that.”
BBVA Compass’s previous PFM tool automatically categorized transactions, but not as well as MX does, he said. MX assigns a category to each transaction; the customer can tailor it.
The other important thing BBVA Compass’ new PFM offering has is the ability to bring in information about non-BBVA accounts, again with MX’s help. This is the only way to let customers see all their spending, including on cards they do not have with the bank.
“The best thing is being able to have aggregation. You can add any of your accounts from any other financial institution and be able to see everything at a glance,” Carriles said. It’s especially helpful when family members have store cards.
“Trying to keep track of which ones you need to pay at the end of the month is a nightmare,” he said. “This gives you the ability to be in control of your finances by showing you your budget and your expenses, not only from what you spend from your accounts at BBVA Compass, but all your accounts, everywhere.”
The summary of expenses in the new PFM tool is also front and center when customers log into online banking.
“That’s going to catch your attention: 'Oh, wow, am I spending that much on this?' ” Carriles said. “You can click on that and see your money going into the future. You can even ask questions like, 'How do I get out of debt?' You might need to start by paying off card A, then move to card B and to card C. You can go into the future and see what happens to your debts, how they’re going up or down. You can check your balances, you can check your budgets, which are displayed in a friendly way with bubbles. The color of the bubble tells you if you are on track, which will be green. If you’re about to blow your budget, it will go yellow and then red. That means that you are in trouble; you need to start watching your budget.”
The tool provides a picture of the customer's current expenses and habits, but lets them play with adjustments. For instance, it might show a person she spends $100 a month on Starbucks. The customer might decide to try to trim that down to $50, and the software will track that. Whatever the user does in online banking will be reflected in the mobile app and vice versa.
BBVA Compass would not share specific numbers, but said that since launching in March 2017, adoption of the new PFM tools in online banking has been significant, with a lift that has far exceeded the user base of previous financial tools.
New generation of PFM
It’s tempting to think that data aggregators are giving banks’ PFM efforts a boost, because of the heavy lifting they do on classification and bringing in account information from other banks and card providers.
But Emmett Higdon, director of digital banking at Javelin Strategy & Research, argues that this is not the case.
“The renaissance has less to do with data quality and more to do with better integration within the bank’s overall mobile banking functionality,” he said. “Traditional PFM offerings were disconnected from customers’ daily views of their accounts and transactions. Little actionable insight was provided to the customer. By integrating this data alongside customers’ regular account views, banks can provide valuable and actionable context for consumers’ budgeting and bill-pay activities. Consumers don’t necessarily need more data. They need help in making sense of the data they already have access to.”
Nate Gardner, chief customer officer at MX, agreed that providing the view of a customer's finances is paramount.
“It’s our ability to ingest unstructured transactional data and return it with good clarity in terms of merchant cleansing, categorization, the way we classify and enhance that data, the way we provide value back to the financial institution to use that data for good, advocate-driven purposes” that is key, he said. “We all know from history that the more work you require someone to do to gain that clarity, the less likely they are going to actually use it.”
This also takes a load off banks’ call centers, because customers make fewer calls about unrecognizable charges on their cards, wondering if they’re fraud, he said.
MX has built logic and algorithms that analyze unstructured transaction data — “It is a mess when you think about the billions of transaction types," Gardner said, and comes up with a clean, accurate merchant name and transaction category. The company has 25 million users, so the algorithms have lots of transactions from which to learn, he said.
Gardner also gives BBVA props for trying to use data to act as an advocate for its customers. Though the bank does not act upon the ideal MX promotes of using customer data to recommend to each customer the best product for them, even if it’s from a competitor, BBVA does try to use data to direct customers to the appropriate product for them within the bank, rather than trying to sell as many products as possible.
“The tone within the organization and sentiment within BBVA is very much this notion of, how do we start to match the right product to the right customer in the way that is most meaningful and beneficial to the customer?” Gardner said.
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