The growth opportunity for fintechs offering PFM services

People don't want a bank. A Jobs to be Done analysis identifies the growth opportunity for fintechs designing digital PFM services.

In the UK, fintech is booming. There are a plethora of challenger banks, non-banks and digital services helping customers manage their money. They aim to differentiate from incumbent banks by offering intelligent digital services that help people make progress on their financial Jobs to be Done. Whilst incumbent banks are fast following, the large majority of their products are functional rigid bank accounts that offer little more than the ability to store money and make payments. This creates a huge opportunity to help customers with their Personal Financial Management (PFM) Jobs to be Done by designing Digital Money Managers (DMMs). This article provides an overview of a report my team and I published on this subject (download here).

What is PFM and DMM

Let's start by unpacking some of the keywords and acronyms. PFM is a loosely defined term for talking about how people generally stay on top of their finances. The large majority of people in the UK (89%) try to actively manage their personal finances, but use a variety of tools to do so. This includes notebooks, spreadsheets, and now with the advent of fintech, Digital Money Managers (DMM). A DMM is an online or mobile app-based service that intelligently helps customers manage their money. Examples of DMMs in the UK are Money Dashboard or more recently services like Plum or Cleo.

Money is messy

Managing personal finances is a messy and complex process. Some people have unpredictable and variable income. Some have shared financial responsibilities. And some people are hard up and need to budget daily to ensure they stay in the black.

Life is unpredictable and how we spend our money can be impulsive and emotional. This makes it difficult to create the perfect system for a mass market audience, which might suggest why only 14% of the UK have used a DMM. Interestingly, those that use DMMs are also more likely to use spreadsheets and notepads to stitch together their perfect system. We spoke to one women who used the 6 jar system for money management because that helped her allocate money to different parts of her life more effectively. She said:

"I went out and bought a bunch of mason jars, and I did start off with the actual jars. I would take the money out of my bank and put it in the jars. It's a little bit weird because I'd need to leave enough money in the bank for direct debits, but I would note that down on a piece of paper [and put in the relevant jars]."

Early days for DMMs

Whilst DMMs have got off to a great start, designing digital services for these very manual behaviours, they are still early in their development. How do they evolve? Jobs to be Done is a great way to analyse and understand the market dynamics at play from a customer perspective.

Jobs to be Done helps us understand customer motivations in relation to the products and services they use. Through identifying the jobs customers are trying to make progress on we can identify the market opportunity ahead. And when new services, like DMMs, enter the market the customer’s priorities change and the market dynamics shift (which we'll demonstrate later in this post).

What's clear is customers don’t want a bank, they want to live better with money. DMMs are an important part of digital banking but as we say at 11:FS: digital banking is only 1% finished. This statement emphasises the huge opportunity to rethink the banking sector for the digital world – which DMMs have begun to do.

It’s [DMM] still in its infancy. It’s still not as intuitive as I would like. I’m thinking Apple style, like move that there and that move there, easy. All done.

34 year old, single mum, freelancer

The Jobs to be Done of PFM

A big part of the solution is making the shift away from commodity products towards truly digital services. The focus here being on designing intelligent digital services. To identify what these are and how we should prioritise them we apply Jobs to be Done thinking to the research and design process. The result is an ability to design propositions customers love and spot disruptive moves in the market.

We identified 12 Jobs to be Done important to the customer in the domain of PFM.

These Jobs to be Done represent desired future states customers are trying to make progress towards. To grow, DMMs need to ask 2 key questions:

1. Which of these jobs are most underserved by the market?
2. Which jobs do customers most want to make progress on?

Non-users of DMMs

Non-users of DMMs are looking to get the basics right. Most non-DMM users are still trying to actively manage their personal finances. They are creating systems of their own stitching together spreadsheets, notebooks and using their bank’s mobile apps. We spoke to some people using jars and pinboards to help organise and visualise their money.

The most important and underserved jobs for this group are getting a better grip on their recurring monthly bills and building up a “safety net” of savings to fall back on in emergencies. These are jobs DMMs can help customers achieve, so how do these priorities change once customers start using DMMs?

Current users of DMMs

When customers “hire” a DMM, the progress they want to make changes. The extra control and awareness customers have from using these services means that they want to do more with their money.

This is a huge opportunity for DMMs to extend their product experience to help customers build up goal orientated long term savings and find more ways to make money from their savings and assets. Tapping into these new jobs will enable DMMs to build out new end-to-end customer journeys that unlock new customer value.

Two new jobs enter the opportunity space for DMM users.

1. Building up long term savings for specific events (e.g. getting married, buying a house)
2. Finding ways to make more money from savings and assets (12).

Jobs to be Done helps us identify the key opportunities on the demand side of the market but we also need to factor in the supply side and understand what competitors are doing. Bringing together a demand and supply-side analysis helps us pinpoint the market opportunity.

The market opportunity

Among the DMMs we included in this research there are none that specifically focus on three of the Jobs to be Done we identified in our PFM research. They are:

1. Building up or maintaining a financial ‘safety net’ to fall back on when you need to.
2. Funding experiences and activities e.g. holidays.
3. Building up long term savings for specific events e.g. getting married, buying a house.

Some of the DMMs offer features that help people save, like Plum for example, but none of them specifically allocate those savings to a financial safety net, funding experiences or for life moments like getting married or buying a house. Using Jobs to be Done in product design helps the team think about how to design end-to-end journeys. An example would be a DMM in Hong Kong called Planto. They provide features like account aggregation, optimising spending and saving and showing properties for sale based on the users saving projections. These features together create an end to end journey that help customers with the Job to be Done: "Building up long term savings for specific events e.g. getting married, buying a house".

Thinking about the UK market again, we can map the competitors with the Jobs to be Done to create an opportunity matrix.

There are four categories each Job to be Done could fall into:

1) Hygiene Factors. The market is providing services for these jobs and customers feel well served. DMMs have to deliver on these jobs to stay competitive.

2) The Current DMM Battlefield. This is where the current DMMs are servicing the underserved customer jobs that exist in the market today.

3) Growth Opportunity. These jobs are important to customers but difficult for them to make progress on. The market is not servicing these jobs so they represent high growth opportunities for DMMs to evolve their propositions.

4) De-prioritise. These jobs are not being serviced by the current providers in the market and they are not a priority for customers. As the market changes these may move into one of the other quadrants in the future.

DMMs are competing to help customers who do not use DMMs with the three underserved Jobs to be Done:

1. Staying on track with your budget and adapting it if necessary (3)
2. Managing your recurring bills and living costs (9)
3. Creating a realistic personal budget and knowing how much you can spend (1)

As customers "hire" DMMs, Jobs to be Done that are in the 'current battlefield' become hygiene factors. Look at the shift for these two jobs in the quadrant below among DMM users:

1. Managing your recurring bills and living costs (9)
2. Creating a realistic personal budget and knowing how much you can spend (1)

To evolve their propositions, DMMs need to look to Jobs to be Done in the growth space. Whilst some DMMs offer ways to save and grow their money, as I highlighted earlier, none of them offer an end-to-end experience for doing:

1. Building up long term savings for specific events e.g. getting married, buying a house (5)
2. Building up or maintaining a financial ‘safety net’ to fall back on when you need to (6)

These jobs have the highest customer opportunity score which means they ranked the most important and the most difficult to get done, yet very few DMMs offer solutions for these Jobs to be Done.

Don’t be bound by your category. Redefine the market.

The key message to take away from this report is that customers don’t want rigid products. They want truly digital services that help them make progress on the important jobs in their life.

By adopting jobs thinking you can design services customers will love. This will likely mean stitching together various APIs to deliver on that end-to-end experience. The more you focus on delivering services around your customers’ jobs, the more you’ll redefine your category. Customers don’t think about the things they buy in terms of traditional industry categories so don’t be bound by them.

Download the report for more data, insight and detail on the Jobs to be Done and how we apply those to product design.