Whether you’re a bank or credit union, chances are the topic of your customers’ financial wellbeing has been top of mind lately.
Frankly, it’s no wonder. COVID-19 has wreaked havoc on the economy, disrupted age-old business models, and threatened your customers’ ability to earn a living. While expanded unemployment coverage and debt relief have helped, they’re band-aid solutions.
The fact is, many of your customers are financially unwell. According to a consumer study conducted by Accenture, 75% of people haven’t saved enough to cover six months of living expenses. Shockingly, only 29% spend less than they earn. Finally, just under half admit that they don’t know how to manage their money.
And this survey was conducted before COVID-19…
People are in desperate need of help, which is where you come in. Today, we’re going to unpack how banks and credit unions can improve customers’ financial wellbeing. First, we’ll break down what financial wellbeing is all about, then how you can make a difference.
What is financial wellbeing?
Financial wellbeing is subjective. For example, someone who’s wealthy could have poor financial wellbeing, while a person with much less might feel like they’re thriving. Interestingly enough, Gallup found that banks struggle to support the financial wellbeing of customers who make over $200,000 per year.
So, if financial wellbeing isn’t just about personal wealth, what is it about?
Here, we’ll turn to EY’s definition, which is all-encompassing. In their words, financial wellbeing is “the ability to make confident, well-informed money-related decisions resulting in financial security for both the short and long term.”
Gallup research proves that banks can have an outsize impact on a customer’s financial wellness. In fact, consumers that were polled all agree that they feel a deeper sense of wellbeing when you:
- Help them achieve financial goals
- Understand their financial circumstances
- Make managing their finances as easy as possible
- Enable better financial decisions
- Deliver solutions tailored to their needs
- Put their interests before your own
So, by checking off all these boxes, you can play a pivotal role in making your customers feel more confident about their finances. And if you have any doubts, the numbers prove it. Banks that satisfy at least four of the wellbeing statements above maintain an NPS of 94%.
How you can make a difference
This list is by no means exhaustive. The truth is, there are plenty of ways you can improve your customers’ financial wellbeing. Here, we’ll focus exclusively on the low-hanging fruit. That is, tactics and techniques you can start implementing today.
Revisit your data infrastructure
You have plenty of consumer data at your disposal, but are you taking full advantage of it? Cleaning up any data quality issues you might have is one fix. Being able to collect and use data from a variety of different sources above and beyond your transaction data is critical. Additionally, you should be able to surface actionable insights from your data.
A paradigm shift is also needed. Many banks engage with customers from specific lines of business, using a product-first mentality instead of one that’s customer centric. By deconstructing data silos, you can gain a better understanding of which products and services your customers need across all your lines of business, adding more value to their lives.
Some organizations have also begun to form data partnerships. Take the Consumer Financial Protection Bureau and the Financial Health Network, which are using proxy metrics, like whether a customer has adequate liquid and long-term savings, and applying them to financial data owned by providers. This can offer far more context about an individual’s long-term financial wellbeing. More than that, it can provide guidance on how to improve customer outcomes.
Personalized financial wellbeing support
Much has been said about personalization—and with good reason. Banks have been adding personalization capabilities to their digital channels for years now.
That said, there’s urgency for institutions to start improving their mobile experience today. Mobile app visits eclipse branch visits at a rate of 80:1, and that was before the pandemic. TSB has actually seen their mobile banking registrations triple since COVID-19. Consumers clearly prefer doing business over their phones. Unfortunately, many banks are lagging.
When personalization is deployed effectively, it should help you respond to customers’ needs in real-time. In situations where financial stress is likely to be high, this is especially important, as financial institutions are able to quickly assess consumer pain points and treat them.
While many banks are turning to personal finance management software, keep in mind that these tools only provide a very narrow view of your customers, based entirely on their transaction data. Having a more holistic picture based on someone’s activity across different contexts, puts you in a better position to serve them.
If you’re interested in learning more about how you can leverage personalization to offer financial wellbeing support, let’s chat. We’d be happy to fill you in on what we do and provide an overview of other vendors in the marketplace.
Financial literacy programs and tools
Search for budgeting tools on Google, and you’re likelier to see a list of fintechs like Mint or YNAB (You Need a Budget) than an actual bank. Clearly, there’s a market demand for services like these and while some banks do have market offerings, like educational content for young savers, their products clearly aren’t robust enough to meet current needs.
Even at the best of times, consumers struggle to manage their own money. By educating and empowering them, banks can position themselves as trusted experts and advisors.
By adopting some of the pointers on this list, you can start contributing a deeper sense of financial wellbeing to your customers. Plus, you can differentiate yourself from other financial institutions.