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What is the Total Addressable Market (TAM) of personal financial management tools, including the market that is not yet using any of these tools?
Hello! Thanks for your question about the TAM of personal financial management tools. The sources I found most useful for answering your question are IBIS and BBVA Innovation Center. While there is no pre-compiled statistic readily available for the TAM of this market, I have been able to triangulate an estimate based on available information. The short answer is that the TAM of this market is $3.476 billion globally and $0.293 billion in the US. Below you will find a deep dive of my findings.
GLOBAL MARKET
IBIS puts the global value of the personal finance and money management software market at $1 billion in 2015, the most recently available report. Although the expected growth for the coming period isn't specified here, it is worth noting that the report states that the "industry is currently in a period of slow growth". This growth will mostly come from "licensing by banking institutions and a switch to the software-as-a-service model", so it can be anticipated that growth will not much exceed that already seen over the previous 5 years, which the report gives as 0.4%. Using this number, we can calculate 2016 market value at (1 x 1.004 =) $1.004 billion and 2017 market value at (1.004 x 1.004 =) $1.008 billion.
According to eWise, "71% [of customers] do not take a proactive approach to financial management". This means that the market identified above represents only 29% of the TAM. Applying this figure, we can calculate the full TAM of the market as (1.008 / 29 x 100 =) $3.476 billion worldwide.
US SPECIFIC TAM
In order to find a TAM specific to the US, I have had to make a few assumptions. Forbes identifies that the PFM (Personal Financial Management) market's main target is millennials, with banks adding "electronic arrows to their quivers through online banking so they can attract and keep customers —especially Millennials."
Pew Research identifies that there are 75.4 million millennials in the US, while BBVA Innovation Center states that "49 million Americans use PFM apps". Assuming that the majority of these are millennials, this means that in the US, use of PFM in one form or another stands at (49/75.4 =) 65%, a little over twice (2.24) as many as the 29% identified in the global market above. This figure roughly corresponds with BBVA's identified "67% of millennials" who are interested in PFM tools.
Worldwide, there are 2 billion millennials. This means that the US contains (75.4/2000 =) 3.77% of the worldwide millennial population. With US consumers 2.24 times as likely to use PFM as the worldwide average, this means that the US market accounts for (2.24 x 3.77 =) 8.44% of the global market, or (0.0844 x 3.476) = $0.293 billion ($293 million) annually.
POSSIBLE ERRORS
While the global market statistics are reliable to 2015, and can be reasonably estimated, the US statistics here are less reliable. Some assumptions have had to be made which may not match the reality. Particularly, this assumes that worldwide millennials are only half as likely as US millennials to use PFM tools for financial management.
Statista's personal finance market outlook, however, identifies that "technology eager users located in the US accounted for the highest global share" in 2016, with "almost 90% of all Robo-Advisor managed assets" located here. This alternative statistic suggests that the potential TAM for the US market could be as high as (3.476 x 0.9 =) $3.128 billion, with a current market size of (1.008 x 0.9 =) $0.907 billion.
CONCLUSION
To wrap it up, the TAM of the personal financial management tools market is $3.476 billion globally and $0.293 billion in the US. However, the US figure could be as high as $3.128 billion.
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