FinovateFall 2019: PFM is making a comeback
FinovateFall 2019 was the biggest Finovate show ever – more than 1,600 attendees joined us for three days of fintech demos, key insights and high-impact networking.
The energy in the room was palpable, and all aspects of the financial technology community were on display. There was way too much to take in over the three days for me to do justice to here, but here are a few of the key takeaways from this year’s edition of our New York showcase.
The resurgence of personal finance is a lesson for innovators
The very first personal finance management (PFM) solution I ever saw was on stage at FinovateFall 2010 (roughly ten months after I joined the Finovate team). Yodlee’s APIs were still brand new at that point, and we had a couple of different companies who were using their technology to give banking customers the first account aggregation/budgeting tools.
PFMs continued to evolve, getting prettier and more effective, and by 2014 or 2015, it felt like the technology had gone just about as far as it could go. While the technology looked good (and I still maintain that most people would benefit from more awareness of their finances and active budgeting exercises), it was becoming clear that most end-users weren’t too interested in the technology. By 2016, we were getting steady feedback from attendees that they considered personal finance solutions to be more “boring” than “innovative”, and they wanted us to stop putting them on stage.
Fast forward to FinovateFall 2019, and the idea that personal finance was “boring” is looking pretty laughable. While nobody was showing a monthly budgeting or expense-categorisation tool, we had several companies on stage who were demoing solutions that are taking PFM to a new level. Instead of focusing on the day-to-day expenses, these companies were tackling the biggest financial decisions that people have to make, ranging from solutions that help students decide how much college debt they can take on to solutions that can help families prepare for unexpected financial shocks like a major illness, divorce, or the unexpected arrival of a new child.
Getting these major financial decisions right is absolutely vital for long-term financial health. So is being able to anticipate how major life events will affect your finances. Innovations in this area have the very real potential to make a huge impact on the everyday lives of millions of people, and they represent a win for banks and their customers. Not too boring now, is it?
The work being done by early innovators in the PFM space is enabling the resurgence of personal finance we’re seeing now, and with the benefit of hindsight, we can see that PFM innovation didn’t reach and endpoint, it just reached a plateau. Unfortunately, it plateaued in a place that wasn’t very appealing to end-users. The solution, though, wasn’t to abandon it; it was to keep pushing it forward, taking it to a place where it could offer more value and more insight.
Will these new takes on personal financial wellness be popular with customers? Only time will tell. But by adding more value, tackling harder questions, and responding more effectively to the pain points of real consumers, it’s pretty clear that personal finance is very alive, and very relevant for the banking industry.
For innovators, the lesson is clear: if you’re “bored” with a subset of fintech, don’t abandon it – think about how you can push it forward into someplace exciting.
The rising importance of AI is rippling across fintech
As I wrote after FinovateSpring earlier this year, artificial intelligence (AI) is officially here, and the fintech world is shifting because of it. More and more fintechs are using AI in their product stacks, and that’s creating a ripple effect in two key areas: data, and security.
If AI is the engine that will power fintech innovation in the next few years, data is its fuel. The quality of that fuel was a key topic at FinovateFall, both among the presenting companies on stage and the attendees around the room.
Machine learning (ML) is made possible by large data sets that can “train” a computer to predict the most likely outcomes. The more data it has, the more accurate a machine can become. It’s not just the quantity of data that matters, though, it’s the quality. If you feed AI flawed or incomplete data, you’re going to get flawed or incomplete results. Innovators are responding to this need by offering tech solutions specifically designed to harness, organise and clean data and make it ready for AI. While big data has been a key topic in fintech for a few years now, its importance is skyrocketing, and the industry is responding.
The importance of data is also flowing into the security space. Storing personal data securely has always been a priority for banks, and fintech has always had a very robust security sector. Up until now, though, the data that was being secured was more static in nature. By and large, financial institutions simply needed that data to sit somewhere safely until it could be referenced or amended with new account information.
Now that data needs to be used in AI solutions, it needs to move to more places, go through more processes, and be seen by more people (and machines). Balancing the usability of data with the obligation to keep it secure at every step of the way is adding a new dimension to the security space, and as AI continues to grow, the size of the problem will continue to grow as well.
Make room for the new kids on the block
FinovateFall 2019 featured more seed-stage and early-stage startups on stage than any of our other shows in recent memory. It’s great to see the creative ideas coming from these new companies, and making sure there’s room in fintech for challengers is vital to the ecosystem. Fintech’s search for “unicorns” will (and should) continue, but complacency is the death of progress, and fresh ideas are the death of complacency.
No company exhibited this more successfully than Zogo Finance, whose founder Bolun Li became the youngest innovator to win a Best of Show trophy at a Finovate event. Zogo leverages partnerships with financial institutions to reward kids for learning financial literacy. As someone who sat through (and admittedly made fun of) financial literacy programs designed by banks for kids just three years ago, Bolun is well-positioned to challenge the status quo.