New Management Tools Shaping Financial Personalization

Financial services and products are in a transitional stage due to technology. In today's financial world, personalization and efficiency are key to attracting and retaining customers. Technology has changed the way we interact with our financial services and personal financial management is the essential tool for understanding this process.

A PFM, or Personal Finance Management, tool not only makes it easier to manage our finances, but it is also paving the way for the future of personalized financial products and other innovative uses of financial data.

What is a PFM?

Personal financial management (PFM) is a category of tools and applications designed to help people manage their finances more effectively. It arose from the desire to consolidate mechanisms to organize our lives, with the simple purpose of making our finances easier. Now, these tools provide users with a complete view of their accounts, expenses, budgets and investments, allowing them to make informed financial decisions and set achievable goals.

With the development of more and better technology, as well as the availability of real-time financial data, PFM applications have evolved significantly, as they can connect with various financial institutions and automatically collect data from bank accounts, credit cards, investments and other assets, providing a more complete picture of each individual's financial situation.

The Rise of Customized Financial Products Through PFMs

Where did the implementation of PFM lead us? Definitely to a universe of diverse, complete and customized products and services. One of the most exciting trends in the financial industry is product development. Financial institutions are using data collected through PFM to create offerings tailored to specific customer needs and preferences. A gold mine for everyone involved.

One example of this is that banks use PFM data to offer loans with customized interest rates based on the customer's credit history and ability to pay. Credit cards can also adapt to users' spending habits, offering rewards and benefits that match their preferences. All this with much simpler, faster and more convenient procedures.

For users, PFM applications can use financial data and spending patterns to provide personalized savings and investment recommendations. These can include appropriate investment choices based on risk profile or savings suggestions to meet specific, realistic goals.

Improving Financial Decision-Making

The best way to help someone is through good advice. And that's just what PFM apps do: they offer detailed analysis and data visualizations that enable users to better understand their spending patterns, identify areas for improvement in their budget, and plan their finances for the short and long term. In short: good advice before any decision.

A user can see graphically and in detail how much they have spent in different categories during the month, such as food, transportation or entertainment. With all this information at their disposal, they can adjust their budget and make informed decisions. This  can save you from a lot of trouble.

PFM tools can also help users set financial goals and track their progress; whether it's saving for an emergency fund, planning a vacation, or paying off debt. A study conducted by Javelin Strategy & Research in 2020 found that users of PFM applications save 27% more compared to those who do not use these tools.  This tracks with Finerio’s own experience, where we saw users save, on average over 21% more, than what they were spending prior. 

Promoting Financial Inclusion and Education

What few imagined is that as these tools become more accessible and easier to use, an increasing number of people can have access to financial services and management tools. This is how personal financial management is becoming an area with great repercussions for society. 

In many parts of the world, financial inclusion is a major challenge. According to the Latin America Financial Inclusion Index (IIF) 2022 results report, conducted by Credicorp Group, the IIF reflects a low average level for the region, with a score of 44.2 out of 100, an increase of 6 points with respect to 2021.

This is why we must be aware of the multiple and complex needs that, from their particularities, demand to be addressed. The financial world has enormous challenges to overcome, and today, PFM tools play a crucial role.

Innovative Uses of Financial Data

Financial data collected through PFM is also being put to other innovative uses. For example, financial institutions can use PFM data to identify potential cross-selling opportunities, offering additional products and services that match customer needs and preferences.

They can also be used to improve fraud detection and risk analysis. By having access to a complete view of customer transactions and financial behavior, financial institutions can identify unusual or suspicious patterns and take preventive measures to protect their customers.

In short, the development of financial products through PFM is exciting. The personalization and efficiency offered by these tools are changing every aspect of our existence. As technology continues to advance, we can expect PFM applications to continue to evolve to offer an even more personalized and enriching financial experience for users.