How Banks & Fintechs Are Using PFM - Hydrogen
How Banks & Fintechs Are Using PFM

How Banks & Fintechs Are Using PFM

The average person has multiple financial accounts to juggle, from credit cards, to mortgages, and checking accounts. These days, an individual’s personal finances are often a complex web. Keeping track of the various strands of the web is essential for reaching financial goals and achieving financial stability.

Personal financial management (PFM) solutions help people organize their various accounts and keep track of what they are earning and spending. People can use PFM software to set and track financial goals, or to help themselves stay on budget. Many banks and financial services companies have begun offering PFM apps or incorporating PFM into their mobile banking platforms. In this guide, we’ll discuss the benefits of PFM and how your organization can use it to best serve your clients.

What Is PFM?

Personal financial management software programs are intended to help people organize and manage their money. One of the earliest examples of PFM is Quicken, which launched in 1983. The software allowed users to create a budget and categorize and track expenses. The earliest versions of Quicken ran on MS-DOS, while later versions were designed to run on Windows or Mac operating systems.

In the 21st century, PFM has become much more robust and functional compared to earlier versions. Today, many PFM apps are capable of directly connecting to an individual’s bank, credit card, or other financial accounts and pulling the information automatically. PFMs will sort transactions into categories based on the information included in the accounts. For example, if a person pays their electric bill through direct debit, the PFM will be able to read that transaction and sort it into the utility category of a person’s budget.

In addition to sorting transactions and streamlining the budgeting process, PFM software often has features that allow a user to set specific financial goals. For example, a person might decide to save $10,000 in an emergency fund within a year’s time. A PFM app can do the math to help the user determine how much to save each month and can track the goal’s progress based on the deposits the person makes into the account they designated as their emergency fund.  

Why Does PFM Matter?

It might be an understatement to say that people’s financial lives are complicated. The average American has four credit cards. Federal student loan debt totals $1.5 trillion, with an additional $119 billion worth of student loan debt coming from private lenders. Among those who have mortgages, the average amount owed is $202,284.

As financial commitments increase, many people are also finding that it is challenging to make ends meet. One-third of families in the U.S. say they have nothing in savings, and 39% of Americans would struggle to come up with $400 in cash to cover an unexpected expense. 

PFM apps can empower individuals by providing them with easily accessible tools to track their spending, monitor their savings, and reach their debt pay-off goals. PFM software has evolved over the years and is now largely mobile-based, meaning a person can access their financial information no matter where they are.

While early PFM programs, such as Quicken, were created and sold by software companies, today, many PFM programs are offered by banks and financial services institutions. PFM allows a financial institution to better meet the needs of its customers and also allows it to stay competitive in a crowded market.

If your financial institution has not already implemented PFM into the online or mobile banking platforms you offer customers, some of the reasons it’s worth considering include:

  • Establish a connection with customers: Consumer confidence in banks has fallen notably in recent years, from just under 50% of people saying they had “a great deal of confidence” in banks in 2006 to just under 30% of people saying the same in 2018. By offering PFM, your bank sends a message to its customers that it cares about their financial success and well-being. PFM provides you with an opportunity to win over customers who might be hesitant to interact with a bank.
  • Increase customer engagement: Thanks to PFM, your institution’s app or online platform can become a one-stop-shop for all of your customers’ financial needs. People are likely to spend more time using your app or website when there are tools built into it to help them better manage their money.
  • Stay ahead of the competition: As more and more banks incorporate PFM into their apps and services, it will become something that customers expect when deciding where to open accounts. The more functional, easy-to-use, and feature-rich your institution’s PFM app is, the more likely people will be drawn to using your services.

How Banks Are Using PFM 

Several commercial banks have already found ways to incorporate PFM into their mobile banking platforms. In some cases, fintech companies were created with PFM as their backbone. 

Use Cases

One notable example of a bank that uses PFM is Simple. Simple is a neobank, meaning it has no physical branch locations. All of its services are online. The company offers personal savings and checking accounts as well as personal loans. The saving and checking accounts from Simple are integrated into its PFM software. When a person deposits money into their account, the app helps them divide it up into expense categories. When transactions occur, the money in the account is taken out of specific categories, helping a person avoid overspending or overdrawing from their account. 

Simple offers a “Safe to Spend” feature that takes into account upcoming transactions when showing a person how much they have available in their account. Instead of looking at the balance of their checking account before their mortgage or rent payment is paid, or before they’ve paid the electric bill, a user sees how much they have to spend after all of their expenses are accounted for. The feature takes the hassle out of calculating how much “disposable” income a person has, allowing them to make better financial decisions.

Another example of PFM from a bank is Control Tower from Wells Fargo. With Control Tower, a user can turn cards on and off and can limit locations where debit cards can be used. The program also tracks recurring payments over a 12 month period, allowing a user to keep track easily. If their card should end up lost or stolen, having a list of recurring payments that is readily available will make it easy to update payment information with each company.

Bank of America’s mobile app is another example of a major commercial bank incorporating PFM into the services it offers. Customers can access their account information through the app, track their spending, and check their credit score. The app also provides card control tools, such as the ability to verify that a person has their debit card on their person, to avoid having transactions declined.


Among the notable benefits of banks using PFM is that offering the programs to banking customers helps users get better control of their financial situation. A notable benefit for the banks themselves is that providing PFM puts them in the position of being there for a customer when that customer is ready to take the next step in their financial life. For example, offering a goal-setting feature to a person who has a checking account with a bank can encourage them to open an additional savings account. Providing a customer with access to their credit score and providing tips on what they can do to increase their score might make a person more likely to consider that financial institution the next time they need a loan or credit card.  

Recent Developments in PFM

One of the challenges banks and fintech companies have faced is getting people interested in PFM and encouraging high levels of use of PFM programs. Several features inherent in older software programs and platforms made PFM programs less-than-appealing to users. For example, traditionally, PFM software required a person to input all of the data by hand, a time-consuming and tedious task. Thanks to open banking, third-party PFM providers were able to pull financial details directly from someone’s accounts, but the user still had to go in and provide account information. 

Using PFM should be friction-less, and newer platforms that are incorporated into a person’s existing bank accounts help to eliminate friction. The software pulls data from a person’s accounts automatically. The trend is for PFM to be push-based, meaning it takes a pro-active approach to interacting with users. Instead of requiring someone to input data themselves or update account information, the PFM app should do it automatically immediately after someone logs in. The program can then give a user an automatic update, letting them know how they are doing on their goals or alerting them to an overdraft or low account balance.

Other trends in PFM include:

  • Offering personalized tips: Many customers aren’t sure what to do with their money or what the next steps to take might be. They are likely to wonder if they should focus on debt repayment or if they should focus on saving for a rainy day, a house, or a future event. PFM solutions that provide custom, personalized tips to users based on that user’s history are more likely to get used by customers. Apps that provide actionable advice are also more likely to help improve an individual’s financial situation, which can have benefits for both the customer and the financial institution.
  • Accurate transaction identification and categorization: One of the benefits of PFM is that it should automatically sort a user’s transactions into categories, such as clothing, groceries, utility payments, and restaurants. Traditionally, PFM wasn’t the best at sorting categories, leaving users to correct the mistakes themselves. In many cases, people would simply abandon using the software, as it required too much effort on their parts. Now, a trend in PFM is to improve transaction identification and categorization. A customer’s purchase a Whole Foods will be correctly identified as being from Whole Foods and will be sorted into the grocery category, rather identified as an unrelated expense.
  • Automatic savings features: Although the savings rate is very low in the U.S, many people are looking for ways to increase the amount they save, whether for a specific financial goal or to provide them with a cushion in case of an emergency, such as a loss of income, health issues, or an unexpected, essential repair. Automatic savings features, such as a program that rounds purchases to the nearest dollar and deposits the difference into a savings account or apps that automatically set aside a designated amount each week, can be very valuable for people. Incorporating an automatic savings feature into your financial institution’s PFM will help to encourage use and will bolster people’s deposit amounts with your bank.  
  • Easy goal-setting and tracking: PFM should help users set and reach financial goals. The trend now is for PFM to break down goals into actionable steps, clearly outlining to a user what they need to do to reach a goal they’ve set. For example, if someone wants to save $1,000 over a 12-month period, the goal-setting feature will let them know how much they need to save each month and will let them track their progress. An even more advanced goal-setting feature can show a person what they can do to find the money to set aside to reach their goal.
  • Analysis of transactions: Older PFM programs simply gave users a bunch of data and left them to their own devices when it came to interpreting it. Now, the trend is for PFM apps to analyze those transactions and provide users with actionable insights. Additionally, PFM programs can take note of a person’s spending over a set period and alert them to any potential increases or decreases in certain categories in the upcoming months. For example, if a person’s electric bill climbs in the summer because of air conditioning use, a PFM app can send the user an alert and help them decide how to adjust their budget to account for the increased electric expense.
  • Improved design: Graphs and charts were major features in older PFM programs. Although graphs and charts can look colorful and attractive, they don’t do much in terms of increasing engagement. They can also be challenging to parse. As more and more people use mobile devices, there is likely to be a move away from graphs and charts and over to designs that fit on a smaller screen and provide a user with more relevant advice and information.

Hydrogen Is a Top Fintech Player in PFM

You want to create a PFM program that integrates with your financial institution’s mobile banking software, but you aren’t sure where to start. You definitely do not want to spend months or years designing and rolling out a user-friendly, functional app, with data integrations and custom business logic. This is where Hydrogen comes in.

Hydrogen’s white-label, no-code fintech solutions are built on top of our APIs and designed to allow your company to introduce custom PFM software quickly and easily. All it takes is a few minutes to get set up in the Hydrogen Lab. 

Sign up today and begin taking advantage of all the benefits of offering PFM to your customers.


Embedded Finance Made Simple
By using this website, you agree to our use of cookies, and you acknowledge that you have read and understand our Privacy Policy and Terms of Use   Continue
Close Menu