MoneyDesktop Business Case

PRIVATE & CONFIDENTIAL - © 2014 MoneyDesktop Inc. All rights reserved.

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Why Change?

Financial Industry Shift

Why PFM?

Why MoneyDesktop?

Smarter Data Analytics

Improved ROI

Insight & Target

Conclusion

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The Business Case For

PFMOverviewThe business case for Personal Financial Management (PFM) — and MoneyDesktop (MD) specifically — continues to get better and better each year. As proof, we’ve gathered data from dozens of compelling sources. This data collectively answers three key questions:

1. Why Change?

2. Why PFM?

3. Why MD?

The answers to these questions showcase why MD continues to bring a phenomenal return on investment (ROI) for financial institutions everywhere.

Let’s get started.

Account holders are changing. There is an ongoing shift away from traditional brick & mortar banking. Technology is providing better ways for account holders to interact with

their money and with their financial institutions.

Why Change?Anyone who follows business news knows that industries across the world are being revolutionized. From Amazon to iTunes to Netflix to Twitter, new technologies are rendering traditional business models irrelevant. Consumers now demand e-books instead of hardcovers, digital music instead of CDs, video on demand instead of video rentals and online media instead of newspapers. This isn’t news. Everyone knows this.

What may be surprising is how quickly the change has occurred.

Look at the book industry, for example. In less than eight years, Amazon went from being the industry underdog to becoming a force so powerful that Borders couldn’t compete for market share:

$$$Business Case for PFM01

$7.0B

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This might reflect your personal experience. Think of the last time you bought a book. Chances are you didn’t drive to a retail store, dig through the shelves and wait in line. You likely signed into Amazon and made the purchase — perhaps by downloading the book directly to an e-reader.

Today’s consumers have adapted. They’re not only accustomed to the digital revolution — but they expect it, along with all the conveniences it brings.

It’s the same story, over and over:

$$$Business Case for PFM 02

Put simply, companies like Borders and Blockbuster were slow to adapt to the digital revolution and were unable to recover. On the other hand, industry pioneers such as Amazon and Netflix saw the shift as an opportunity. By adapting and catering to new consumer expectations, these pioneers delivered exactly what users demanded.

Music

Movies Advertising

2B

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Digital

Physical

Vinyl Cassettes CDs

SingleDownload

AlbumDownload

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Blockbuster Revenue Netflix Revenue

$2.2 B

BANKRUPT

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Newsprint Ad Revenue Online Ad Revenue

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0

$34M $10M

Data: Newspaper Association of America Interactive Advertising Bureau Trailing four quarters.

Source: Tal Yellin / CNN Money

Source: Online MBA Programs

8,000B

0‘10‘09‘08‘07‘06‘05‘04‘03‘02‘01‘00‘99‘98‘97‘96 ‘11‘95

10 Biggest Banks All Other Lenders

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ASSETS

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ALLOTHERS

Business Case for PFM03

Something similar is happening in the financial industry. There has been an enormous shift in asset concentration and customer loyalty during the past two decades. For instance, the 10 biggest banks in the US now have more assets than all 13,630 other lenders combined.

One reason for this shift is that the biggest banks have better met users' demands for robust online and mobile banking solutions.

Take Bank of America (B of A), for instance.

B of A was the first financial institution to launch mobile banking on the iPhone, and the results were impressive. More than six million people downloaded the app, and a quarter of a million joined B of A specifically to use mobile banking.1

The app generated enormous returns for B of A. To illustrate, from June 2011 to June 2012 more people switched to B of A than any other financial institution in the US.

All this growth came despite the fact that B of A was deemed as the main villain during Bank Transfer Day in November 2011 (a grassroots movement to switch from big banks to credit unions). Additionally, during this time Bank of America scored the lowest of any financial institution on a customer satisfaction survey — nearly 16 percentage points below the industry average. 2

10 Megabanks Now Have More Assets Than All 13,630 Other US Lenders Combined

Bank of America, the villain of Bank Transfer Day, is now the single biggest destination for customers switching to new banks.

Source: AlixPartners

Bank of America

JPMorgan Chase

Wells Fargo

U.S. Bank

Capital One/ING Direct

CitibankTD & PNC - 2%

Other

21%

12%

10%

5%

5%4%

12%

10%

5%

5%4%

39%

Source: FDIC/CUNA

Business Case for PFM 04

In retrospect, Bank of America’s user acquisition might not be surprising. After all, consumers in the financial industry favor convenience over customer service by a margin of 15 percentage points. 3 B of A simply gave users what they wanted.

It follows that when financial institutions focus primarily on customer service, at the expense of digital convenience, they risk losing their user base. Users demand convenience, and companies that don’t meet user demands don’t survive.

All of this illustrates the necessity of investing in online and mobile banking solutions especially since the volume of transactions handled at a physical branch has declined by more than 45 percent across the industry since 1992, while the cost per teller transaction has skyrocketed.4

This means that focusing primarily on a traditional growth model (e.g., building branches and hiring new tellers) is merely an expensive way to fail. It also means that the revolution in the financial industry is not slowing down (as evidenced by the sharp decline in transaction volumes from 2007 to 2013). If anything, the change is speeding up. Users are visiting physical branches less and less, and they’re demanding digital channels more and more.

It’s not a surprise, that a host of new digital players such as PayPal, Simple, Moven, Walmart, and Google have moved into the financial space. Together with innovative megabanks, these disruptive companies and technologies could be viewed as the Amazons and iTunes of the financial industry — innovators that represent a tremendous threat to smaller market players.

Eventually, these disruptive companies will give their users the option to do everything digitally that could be done in a branch. Given this option, why would users choose to drive to a branch, wait in a line, sign a paper deposit slip and get

a receipt? If users increasingly avoid similar experiences when purchasing books, music, movies and news, why would they choose something different for banking?

The answer is simple. They wouldn’t.

In sum, it’s clear that when financial institutions don’t innovate alongside their competitors, they risk stagnated growth (like Barnes & Noble) or going bankrupt (like Borders). Keep in mind that only one generation needs to make the switch to digital banking en masse, and the traditional model will become totally irrelevant.

And that’s why change is so crucial.

"Are there people who still prefer going into a bookstore? Sure, but that didn’t save the economics of book sales. The facts are brutal when it comes to declining branch activity. The American Bankers Association reported in 2008 that the Internet had surpassed the branch as the channel of preference for day-to-day banking, and the branch’s decline has sped up since then in favor of mobile and Internet, with no signs of slowing."

- Brett King

"We are seeing a lot of customers starting to use mobile as their primary channel, and I think we'll see that trend increasing for the first time, we're able to improve the customer experience while being able to potentially reduce the cost ...Mobile customers are more engaged and tend to stay longer."

- Ravi AcharyaSenior VP of Digital Services, JP Morgan

"Borders isn't just a victim of a challenging economy. The company made some poor decisions over the last decade and failed to adapt to new ways consumers shop and read books. It clung to an outdated strategy way too long and reacted slowly as more nimble competitors took its business away."

- Rick NewmanMarket Analyst, US News

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AVERAGE MONTHY VOLUME(left scale)

COST PER TELLER TRANSACTION(right scale)

Focusing primarily on the branch is an expensive way to fail.Source: FMSI

The average cost per teller transaction at community banks and credit unions has more than doubled in the past two decades as monthly volume has declined sharply.

Why PFM?Luckily, there’s still time for traditional players to innovate and remain relevant. To do this, financial institutions need to adopt a PFM solution that meets users' demands to see all their accounts, balances and transactions together in one place.

The demand for PFM is high. Specifically, 85 percent of account holders say that having one place to manage all their finances is one of the most important services a financial institution can offer, 5 and 52 percent of account holders say they would leave their financial institution for one that offers better money-management capabilities.6

The truth is, no one wants to log into multiple institutions to stitch together a complete picture of their finances. Consumers will go where they can experience the least friction, and the institution with a seamless solution will win and retain users.

As online marketer Bryan Eisenberg claims, “Where there is friction, there is opportunity.”

One key opportunity here is that users of PFM are far less likely to leave your financial institution. To illustrate, PFM users boast an attrition rate as low as two percent, while non-PFM users have an attrition rate of more than six percent.7 Since the average user in the industry is valued at $250 per year, this four percent difference between PFM and non-PFM users add up quickly — to $100,000 for every 10,000 users every year.

The long-term effects of increased user loyalty can’t be overstated. Recently, many Americans have become deeply loyal to mainstream financial experts like Dave Ramsay and Suze Orman, experts who directly influence people’s lives by helping them get in control of their finances. PFM software plays a key role in this process, building the same sense of loyalty that someone like Ramsay or Orman have. For instance, 76 percent of PFM users say that the software has helped them get in control of their finances and 72 percent say, “I finally know where all my money is.” 8

PFM allows financial institutions to fulfill their core role as a service provider — helping people manage their money. Once banks and credit unions can achieve this and really

make a difference in people’s lives, loyalty will follow. In fact, some banks have reduced the number of accounts closed by up to 50 percent after introducing PFM. 9

It's no wonder, then, that the biggest banks are adopting PFM solutions at such rapid rates.

PFM adoption at the biggest US banks is set to increase by 150 percent in a three-year span. Based on data like this, Celent Research claims that “from a relationship perspective, PFM will be the most important" innovation for financial institutions. Celent also predicts that more than 52 percent of the total online banking population will have signed up for PFM by early 2014. 10

Senior decision-makers at large financial institutions mirror this enthusiasm. Joy Marshall, VP of Internet Services at Wells Fargo, says that PFM "is absolutely central to our online strategy," and Dottie Yates, VP of Online Design at Bank of America, says that "the concept of PFM is driving everything we do."


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PFM Adoption by Top 50 US Banks

Source: Celent

Such enthusiasm will rise as more financial institutions realize the staggering ROI that can be achieved with PFM. For example, when PNC Bank first released Virtual Wallet, an innovative PFM platform, they attracted around 26,000-40,000 new users each month (65 percent of which were new to the bank). 11 Adoption rates for Virtual Wallet have continued at nearly the same rate for the last few years, and it now has more than one million users — a data point that represents a terrific investment for PNC.

But PFM isn’t just about acquiring and retaining users. It also brings a ROI in the form of increased online banking traffic. For instance, users of PFM log in to online banking twice as frequently as non-PFM users. Additionally,

You can see that the possible revenue from additional cross-sales is enormous. That’s because PFM is a data sponge. The data that it holds is the key, and the ability to organize it and take action is the holy grail of effective marketing.

We’ll dive into the details of Big Data in the next section, which is about MD’s top-tier PFM solution. For now we want to point out that the potential ROI of PFM is massive.

The phenomenal ROI is exactly why big banks are quickly adopting technology and investing millions of dollars to develop their own solutions.

"Users of PFM tools are more profitable, have higher balances, consume more products and services, and are less likely to leave for another bank."

- CiscoThe Next Growth Opportunity for Banks, 2011

"Javelin data illustrates that financial institutions that install compelling personal finance management tools stand to reap the benefits of increased customer loyalty, higher usage, lower costs and added revenue."

- Javelin Strategy & Research

"There is an ROI for (PFM...) through increased customer loyalty, higher usage, lower costs and added revenue."

- Online Banking Report

"[PFM] can be an even more powerful retention technique than other online features, even bill payment. Why? The average user with a dozen or so payees could move their bill payment account to another bank with an hour or two of work. But with current practices, it’s much more difficult, if not impossible, to move transaction history to another bank."

- Javelin Strategy & Research


since users spend more time interacting directly with the financial institution rather than with a third-party app like Mint.com.

Finally — and perhaps most importantly — PFM represents an enormous win in the realm of Big Data.

Picture what happens when a user aggregates all their accounts through your financial institution. You’ll have insight into a wide range of data not previously available. You’ll see every checking account, term deposit and loan that the user has, and you’ll be able to use that data to make informed cross-selling decisions.

When one particular financial institution implemented PFM they saw that “users increased the average time they spent in the secure site from one to six minutes.”13

The implications of increased online traffic are enormous. Forrester Research calculated that for a mid-sized financial institution the cost savings from additional online banking use alone equaled $118,969.14 This is because each minute the user spends online means that the user can find answers to their questions online rather than via phone. Each minute also equals additional revenue from cross-selling

Every financial institution wants to increase high-quality loans and decrease single-service households, and Big Data is the ticket to do just that.

Instead of relying on gut impulse or market fads, you’ll be able to know exactly what your customers need. For example, say that a user aggregates a car loan from one of your competitors. You’ll then be able to give the user a targeted ad that can undercut the competitor’s monthly payments and win that user to you from your competitor.

Here’s the full ROI breakdown from Forrester Research:

$118,969 $241,781 $368,561 $499,437

$339,188 $586,389 $729,775 $882,848

$847,969 $1,465,972 $1,824,437 $2,207,120

$1,306,125 $2,294,141 $2,922,773 $3,589,405

Cost savings from additionalonline banking usage

Revenue retained by increasedcustomer retention

Revenue from additionalcross-sales

Net Benefit

Benefits Year 1 Year 2 Year 3 Year 4

"We want to be a bank that adds value to our clients with every interaction, and MD allows us to fulfill that mission anytime & anywhere."

- Rick Claypoole

Why choose ?


Take one look at the market and you’ll see that not all PFMs are created equal. Most of them lack an engaging experience and look like they were made in 1998, back when AOL was in vogue. In other words, the interface is functional but the design and experience is hardly impressive when held up against the standards that users — particularly millennials — have come to expect in the era of Web 2.0.

This is where MD can help. The MD experience is consis-tent — and consistently beautiful — across desktop and mobile platforms. Our design exceeds the standard of any other PFM (including big-name solutions like Mint.com), and we’re continually creating new ways to visualize and interact with finances.

Best of all, each financial institution that uses MD gets all the credit for the design when they integrate our PFM seamlessly into their online banking platform.

But MD isn’t just about beautiful and functional design. We’re innovating across the board, which has led us to win four consecutive Best of Show awards at Finovate (the largest Fintech conference in the world), sign more than

400 financial institutions in the three years since we were founded, and see a 445 percent increase in recurring monthly revenue from 2011 to 2012.

Fortunately, you don’t have to invest millions of dollars to develop your own PFM solution. MD offers the strongest PFM on the market, and we’ve done all the development for you.


Online Banking 1998 or 2014?

We also fully integrate every element of Web 2.0 — including interactive HTML5 widgets and the latest iOS and Android technology. This is crucial because mobile banking is set to balloon by more than 300 percent in the next four years,15 and mobile traffic is already almost 30 times higher on average than branch traffic.

Simply put, mobile banking is the way of the future, and any PFM that doesn’t lead with an engaging mobile platform won’t garner consideration or adoption in the 21st century.

For Example:Here's data for one financial institution that

reflects the industry average:


Web Site VisitsPer Month

7-8

Mobile App VisitsPer Month

28-30

Branch VisitsPer Month

1-2

Smarter Data AnalyticsMD is also at the forefront of revolutionizing Big Data for financial institutions. To this end, we’re releasing Insight and Target — two data analytics platforms that can supercharge your ability to provide users with what they want.

Improved ROIMD has a track record of giving financial institutions a terrific ROI.

To illustrate, let’s look at one of our own clients — an institution with assets in the ballpark of $2-$5 billion. This client is currently on track to reach 25 percent PFM adoption rates within three years (i.e., 45,914 PFM users out of 183,654 total online users). Since the attrition rate for PFM users plunges to 1.5 percent from 7 percent for the typical online user, the client’s estimated cost savings for PFM user retention alone equals $631,311 per year.

In addition, this client will see $180,784 in net interest income and $137,741 in new cross-sell opportunities. All of this brings the total potential ROI for this client to $949,836 annually.

And that number doesn’t even include the huge potential for ROI through implementing Insight and Target, which are set for release in early 2014.

When a user aggregates their external accounts from various institutions via our PFM, we make that data viewable and searchable for you. With MD’s FinSmart technology, financial institutions can create intelligent ads that make people want to take action. You can even measure ROI and quickly see how many views, clicks and conversions each offer generated.

This ad is so smart that the user can immediately see how much money they’d be saving by switching auto loans. FinSmart ads are not only different for each user, but they are built from that user’s unique financial data. The result is an offer that actually matters to the user, and catches their attention. This means that ads become useful instead of a nuisance and user conversions skyrocket.

In short: you’ll be the financial institution that wins and retains users.


After all, who isn’t pleasantly surprised to learn they can save hundreds of dollars by simply switching loan providers? Smart ads will soon become the standard in advertising, and the institutions at the forefront of adopting this technology will reap the rewards.

7% 1.5%ATTRITION RATES

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CONCLUSION

For instance, one of our clients is on track to gain 2,297 new loans, with a total loan volume of $26,435,000 all because they’ll use Insight and Target to advertise to users with more precision than ever before. They’ll see a potential ROI of $464,390 in vehicle loans, $919,737 in credit card revenue, and $685,050 in mortgage/home equity. This will bring a total potential ROI for Target and Insight to $2,069,176.

Add this to the total potential ROI for PFM in general and this client is looking at a grand total of $3,019,012 annually.

Year after year, this will make for tremendous cost savings for the client, especially because they’ll be pulling users from competitors and taking more and more wallet share as a result. First adopters of PFM (like this client) will see the biggest returns, and they will be the financial institutions that stay most relevant as we move further into the 21st century.

Best of all, you can plug your own data into our ROI calculator to see how your financial institution will stack up. Ask us how it works, and we’ll gladly set you up.

The financial industry is following in the footsteps of the news, music and entertainment industries. More and more, account holders are demanding a convenient and engaging banking experience that is on par with other online and mobile apps they use everyday.

Account holders expect cutting-edge technology and design with a genuinely engaging user interface (UI) and user experience (UX), and their expectations will be met one way or another. The answer to whether these account holders stay with their financial institutions or switch to third-party pioneer competitors, comes down to the ability of FIs to harness the power of PFM in order to enhance their online and mobile offerings.

At its heart, PFM is a financial service. It fits perfectly with the long-standing goal of the industry: to help people find more ways to make their money work for them. By implementing the right PFM, your financial institution can attract their business and become their primary financial institution (PFI).

At this point, you have to make a choice. Will you continue to focus primarily on building and supporting offline channels, even in the face of declining branch traffic? Or, will you change your focus to meeting user demands for digital banking technologies and driving the PFI relationship through online and mobile channels?

PFM is and will continue to play a central role in building the future banking experience, both online and mobile. Financial institutions everywhere are realizing the way to become an account holder’s PFI in the 21st century is to offer a primary financial application with PFM at its core.

"MoneyDesktop is doing more than just putting lipstick on a pig. Its patent-pending Bubble Budgets combines colors, variable sizes and movements to give users an undeniably clear picture of their budget status on a yearly, quarterly, monthly, weekly, or even daily basis."

- Jim MarousAuthor, Bank Marketing Strategies

"If I know anything about [MD], they’ll be ready to show us (and inspire us) to drive a singular engaging user experience. Now if only the rest of Fintech would follow suit."

- Bradley LeimerMechanics Bank

"While many of the PFM providers were trying to copy the success of standalone solution Mint.com, we saw more opportunity in creating a cohesive bundle of benefits for consumers, financial institutions, and online banking partners."

- Ryan CaldwellCEO, MoneyDesktop

"Visually, its PFM tools are stunning, and watching them demonstrated onstage made me want to look — and interact — with my finances. Trust me, that never happens."

- Mary WisniewskiAmerican Banker



Appendix

Please note that sources for all charts appear with the accompanying graphic.

[1] Brett King, "Bank 2.0: Modality Shift" (TED Talk) 2011

[2] American Customer Satisfaction Index, "Benchmarks By Industry" 2012

[3] Yodlee Study, "Mobile Banking Plays Key Role in #1 Factor for Customer Loyalty" 2013

[4] Financial Management Solutions Inc. (FMSI), "Branch Transaction Volumes Decline" 2013

[5] Decipher Research, "PFM-Retention Case Study" 2010

[6] Intuit, "Financial Services Poll: Uptick in PFM" 2011

[7] Swimming Upstream, "The Bottom-line Impact of Offering Online Financial Management" 2010

[8] Aite Group, "PFM Public Survey" 2012

[9] Online Banking Review, "PFM Adoption Rates" (via Meniga) 2010

[10] Celent, "Devil Is In the Details" 2011

[11] Bloomberg Businessweek, "PNC Lures Gen Y With Its 'Virtual Wallet' Account" 2008

[12] Pittsburgh Business Times, "PNC's Virtual Wallet tops 1 million" 2012

[13] Forrester Research,"The Business Case For Personal Financial Management" 2012

[14] Ibid.

[15] American Banker, "Mobile Banking Will Grow 300% Over the Next Four Years: Aite" 2012


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