Changing Banks’ Approach to Financial Wellness

Fintechs are finally having their moment in the sun. Last year, venture capital firms showered fintechs with record-breaking funding – a 169% increase since 2020 according to CB Insights’ 2021 State of Venture Report – and that’s just the tip of the iceberg. Researchers predict funding will surge beyond 2021 levels, especially as emerging blockchain and digital asset companies aim to compete for market share.

One could argue that the global pandemic is partly to blame for this shift. Fintechs enabled many financial decision makers, consumers, and households to navigate the crisis with easier access to traditional banking services like lending, investing, and payments. Financial wellness became the top priority for customers and thus, a new opportunity to better serve banking customers emerged. Seeing this, financial institutions (FIs) made big moves by investing heavily into digital experiences, forming new banking relationships with its customers and making alliances with growing fintechs.

Banking Customers Want More Than Just an Easy Button

It used to be that customers valued ease and convenience more than anything else. Today, Americans are coming out of one global crisis and immediately entering a new one – inflation is up 8.5% in the U.S., the price of goods and fuel keeps climbing, and conflict overseas threatens geopolitical stability and economic security everywhere. Ease is no longer the priority, stability is. Fintechs and FIs have an opportunity to promote financial wellness the way that its customers truly need it – without hype, fanfare, and marketing slogans.

Modernization

If you have to ask, “what do banking customers  really want?” the answer is simple: modern tools and solutions to modern-day financial challenges. Fintechs have been extremely successful at doing this by expediating processes that traditional institutions would normally take days or weeks to complete. Modernization in the form of automation, speed, personalization, and seamless digital experiences is the key for all FIs to improve the customer relationship and retain loyal followers.

Banks often get a bad reputation for being slow to change or having an anti-technology attitude, but that’s hardly the case at all. Banks like Capital One have reinvented themselves as a powerhouse banking technology company through a series of acquisitions and investments in innovation. While fintechs have the advantage of speed and less red tape, traditional banks have money and muscle to modernize the banking experience, and truly promote financial wellness for customers.

Modernization also requires embracing emerging tools for different demographics. Embedded finance and banking-as-service platforms, for instance, enable non-banks to serve up banking experiences for their customers. Buy-now-pay-later appeals to younger customers with less purchasing power and credit. It’s the combination of collaboration and modernization that will enable FIs to build out their banking capabilities and uncover new revenue streams that support customers throughout various stages of their banking journeys.

Financial Education in Local Communities

After a tumultuous two years, customers are looking for ways to protect their finances, grow their savings, and invest wisely for the future. This might sound like personal finance basics, but current global economics have created a wider chasm between the “haves” and “have nots”, and put many Americans at financial risk regardless of how money-savvy they might have been prior to 2020.

Traditional banks have an opportunity to build trust and loyalty with their customers by providing greater access to education around their financial products as well as financial literacy tools that can help users save. New data from the J.D. Power 2022 U.S. Retail Banking Satisfaction Study reveal that customers want guidance on how to protect, save, and grow their money. FIs have the advantage of longevity and trust already built-in with their customers. Why not be their educational financial resource to show them how to better use the tools at their disposal?

There’s a greater emphasis now in elevating the underserved and underbanked communities. These communities are seeking out ways to uplift themselves, protect their future, and harness the financial tools and solutions that meet them where they are financially right now. Credit unions (CUs) are uniquely positioned to offer educational resources and digital solutions that can support these underserved communities best, and as such, CUs must invest in technological solutions that can be used to build financial stability for working families and local business owners.

Meet Them Where They Are

Fundamentally, demand for seamless, personalized digital experiences from con

sumers and corporate customers hasn’t changed much. However, their needs have shifted in recent years and customers want their FIs to meet them in whatever financial stage they might already be in. They also want FIs to move with them on their journey. Similarly, corporate customers want their preferred banks to scale with them and connect to their evolving business needs.

The issue is knowing what stage exactly each customer is in their financial journey. Banks and credit unions need contextual data and insights to better understand each individual customer. A financially stable individual might need tools on retirement planning, budgeting, or investing, while a less stable or financially “unhealthy” customer needs assistance with the basics.

A financial wellness strategy goes above and beyond having a checking account or mobile app. Banks have the resources to change how consumers bank and how they build financial health.

Partnering with key fintech providers, making strategic banking acquisitions, and creating a financial wellness strategy will all improve banks’ relationships with its users.

By Trish DaCosta, Director of Communications, KCD PR

Learn more about Fintech Wellness – A goal whose technology has come at Fintech Talents North America on May 12.