Must-have personal finance management features for US market success

What does the US digital PFM market look like overall?

Right off the bat, it's clear that incumbent banks — these make up 17 of the 33 firms in our sample, with the remaining 16 being neobanks and fintechs — have the edge, both when it comes to breadth of functionality and UX. 

Only three out of the 17 incumbents in our sample haven't dipped their toe into digital PFM, compared to six out of 16 neobanks. 

Incumbents with PFM capabilities also have more functionalities than the challengers that offer these capabilities: an average of 15 compared to an average of 12 among neobanks. 

While UX scores are more closely-matched, incumbents have a slight edge here, too. 

The firm with the highest-scoring PFM UX — 903 — is Marcus, a neobank. But, overall, incumbents have a higher average UX score: 798 compared to 781 for neobanks. 

Which PFM features are must-haves?

So which PFM features are most widely available on the US market? And does this tip the balance when it comes to which category is doing it better, incumbents or challengers?

To answer these questions, we had a look at how many firms in our data-set offer the 14 functionalities which, in our view, are the most important for a well-rounded PFM product. We've grouped these 14 functionalities into five categories:

• Financial overview

  This includes the following features:

• • Choose which accounts to include in PFM

  • View transactions of a PFM category

  • View net worth information. This could include performance, changes in net worth, and a statement outlining overall net worth, that is the value of the user's assets minus outstanding loans and other liabilities

  • View overdraft risk days

• Income and expense analysis

  This category includes:

• • View expense analysis
  • View estimated expenses over a given period of time, for example monthly
  • View debt payoff projection
  • Manually add bills and recurring payments to cash flow analysis

• Transaction categorization

  This category includes the following functionalities:

• • Change the transaction category. For example, changing a transaction that has been categorized as "groceries" to "lifestyle" or "health"
  • Create a new expense category
  • Set categorization rule, so that transactions with certain attributes, such as those made with a particular merchant, for instance, are automatically assigned a specific category

• Budgeting

  This includes the functionality: Set a budget for a PFM category or subcategory

• Savings Goals

  This category includes the functionalities:

• • Set savings goal
  • View savings goal progress

According to our data, out of these 14 functionalities, the five most common are:

1. View expense analysis

This feature enables users to see a breakdown of their spending. 52.9% of incumbents and 37.5% of challengers in our sample offer it. 

2. Set a savings goal

This is where a user picks an amount they want to save, and for what reason. 52.9% of incumbents implement it. At 56.2%, it's the most implemented PFM feature among challengers.

3. View your savings goal's progress

Here, the user can view how much they've saved, and how close they are to reaching their goal. It's offered by 52.9% of incumbents and 50% of neobanks. 

4. Set a different transaction category

This enables the user to amend the transaction category so it's in line with their preferences, or if they feel the transaction has been miscategorized. 41.2% of incumbents and 37.5% of challengers offer it. 

5. Add an account in PFM

This enables the user to choose which of their accounts will be included in PFM. 41.2% of incumbents offer it, but only 6.3% of challengers do.

Looking ahead: What do US firms do well, and where can they improve?

Seeing as neobanks have built their reputations on their ability to be extremely agile and responsive to consumer demands, it's quite surprising that incumbents are edging them out. 

One possible reason could be that, as the US digital banking market becomes ever more saturated and competitive, incumbents are looking to PFM, which has been shown to strengthen personal connections, as a way to shore up their customer base. But the data from our historical functionality change feature, which shows the features firms have added and removed over time, seems to contradict this: only two of the firms in our sample — Bank of America and SoFi — significantly increased the number of PFM functionalities over the past 12 months. And only one of those firms is a legacy bank.

Another possible reason could be the power of incumbency. 

Challengers' market share is growing. But Boston Consulting observes that legacy banks still hold the bulk of primary banking relationships — relationships where the bank controls 60% to 80% of the customer's money flows. This means the latter have much larger datasets they can use to build out their PFM offerings. 

Of course, this isn't to say that incumbents are getting everything right. The majority are missing three useful features: view estimated expenses, add bills and recurring payments to cash flow analysis, and view debt payoff projection. The ability to view overdraft risk days is also rare, offered only by two incumbents and one challenger out of 33. 

Could we be seeing these features become more common over the next 12 months?

The rising cost of living and continued economic uncertainty are driving demand, with 42% of respondents to a Personetics survey saying they'd like personalized advice and money-management support within their mobile banking app. 

So, while nobody can say for sure whether legacy banks and challengers will be investing more in PFM over the next 12 months, those that do stand to make potentially significant inroads into the US market.