4 Ways to Reach Consumers, Manage Economic Uncertainty

Today’s economy is hitting consumers hard. Inflation is pressuring their bank accounts, as their normal expenses became more expensive.

Credit card debt had its largest increase since 1999, with borrowers reaching a minimum of 90 days of delinquency at a higher rate than before the pandemic. America’s crushing amount of student loan debt is reemerging from its Covid-19 hibernation. Add to that a laundry list of challenges: Unprecedented modern-day bank runs, a rising interest rate environment not witnessed since before the iPhone launched, an inverted yield curve that has been a precursor of the past seven recessions, and U.S. household debt increasing at levels not seen in two decades. Existing home sales fell 22% year over year, while new auto loan originations and loan delinquency rates are not trending positively either.

According to a new study by Alkami, 49% of consumers say they’re worried about finances. Bankers need to be keenly aware of what this means – for consumers and their institutions.

While inflation continues to challenge for consumers and the financial institutions that serve them, the very definition of “money” and “payments” is changing. Four factors – buy now pay later (BNPL), cryptocurrency (crypto), earned wage access (EWA) and peer-to-peer payments (P2P) – are coloring the financial landscape. These new financial options are tempting many consumers to take on more debt or risk and creating more competition for their banks against fintechs and neobanks.

The good news is that banks are in a unique position: consumers should benefit most from a rock solid foundation laid down by their trusted community financial institutions. These institutions have long delivered unprecedented value to customers holders at a more personal level than the megabanks and neobanks. It’s just what people need now.

As the financial landscape keeps changing and evolving, banks need to roll with the waves to provide account holders with solid, foundational support. Banks should consider:

• Forming a committee with all of the right people in the institution. To build and maintain a data-driven strategy across the bank’s ecosystem, bring in the right stakeholders involved from the very beginning. Often this includes key representatives from each discipline: marketing, IT, risk, governance, operational roles and customer service. Banks have the data: using it means staying ahead of the curve by anticipating account holders’ needs and serving them relevant, personalized messages and offers. Analyze and dig deep into your institution’s own internal data to build trends around the account holder base. Your committee should start by deciding the goals of your financial institution – and only then build data and digital strategies to get you there.
• Helping account holders with a financial wellness program. Budgeting, saving, shifting expenses and priorities are all tactics that can help account holders get a handle on their finances and feel more secure. Tools like savings calculators can provide reassurances to financially stressed Americans and help bolster deposit accounts for FIs in a competitive deposit market.
• Developing education, guidance and advice on market trends surrounding crypto, BNPL, EWA and P2P. Consumers are looking for clarity on these trends. Becoming an expert and offering advice to account holders is one strategy to build loyalty.
• Analyzing account holder data for patterns of distress and proactively reaching out with new credit or deposit offers. Consumers who are feeling the pinch of financial stress may not be sure what to do about it. Get a lifeline front and center.

Optimizing the digital banking channel with both sales and service in mind. Account holders will continue to self-serve through the digital banking channel, but they’re also looking to buy products. They will surely come across convenient alternatives from competitors or other financial services – options that may not always be in their best interest. In this moment, banks should be the convenient choice consumers want – and the confident source they need. But doing so requires the bank’s digital channel to become equal parts sales and service.