Why Digital Transformation Strategies Should Address Financial Wellness

For banks, financially healthy customers are more profitable and more loyal, sticky customers. That means that effective financial wellness programs are not only the right thing to do for customers – they can also be a powerful tool for growth, even when net interest margins are under pressure.

Consumers who understand the basics of personal finance tend to be more engaged and profitable for the financial institutions they bank with, according to a study by Raddon Research Insights. A thoughtful strategy can make financial wellness programs an important resource for the communities they serve. As a former banker who is passionate about financial wellness and the impact it has on people’s entire life, I want to share my experiences and explain what other bank leaders should consider when strategizing their institutions’ financial wellness offerings.

Rethinking Financial Wellness
First, a financial wellness initiative that resonates for one bank’s customers may not be a good fit for another bank in a different market. Yes, community banks are uniquely positioned to support customers with financial education services and other financial wellness resources. But a bank located in a college town that primarily serves university students should approach financial wellness and education differently than a bank in an area that’s popular with retirees.

Keep in mind the market and community your bank operates in, and your bank’s budget for its financial wellness program. This makes it much easier for your team to identify the opportunities that will make the greatest impact on customers, without being distracted by the latest digital innovations that may be interesting, but not relevant, to your institution’s needs.

Beyond that, how our industry thinks about financial education needs to change. There is no shortage of content in the market that tells consumers what to do to be financially healthy – but there are very few tools and products that actively help them take steps toward a healthier financial future.

People do not engage their bank with hopes of getting a new buy now, pay later solution, a mortgage or an auto loan. They engage their bank to help them buy a home for their growing family. Or they need to buy a car for the commute to their new job. Today’s customers want their bank to help them reach these important life milestones within their household budget and unique financial situation. Personalization should be a key aspect of any financial wellness program and services that banks roll out.

Personalized Guidance Is Key
A personalized approach gives banks a way to help customers make smarter financial decisions at their exact moment of need. Understanding consumers’ savings priorities and what they are actively saving for can help banks determine where they can make the biggest impact on their customers’ financial health.

Fortunately, Plinqit’s State of Savings Report indicates that an overwhelming majority of Americans – 91% – want to grow their savings and are putting aside at least some money this year. One of the top categories for saving this year was for paying off debt, which is notably different from saving money for the future or for a planned purchase. Yet, this is no surprise, given changes in the economy have led many Americans to rack up additional debt and the Federal Reserve’s interest rate hikes that have made it more expensive to borrow. The State of Savings Report reveals that nearly half of Americans, 42%, are putting money aside to pay down their debt. This is even greater of a focus for consumers between the ages of 18 and 34.

If this group is focused on paying down debt, banks should consider how they suggest personal loans and ways to refinance credit card debt. Credit card debt was the most cited type of debt that consumers are prioritizing paying down this year.

As consumers navigate the complexities of life events, unexpected expenses and economic challenges like inflation, saving money and achieving financial wellness can sometimes feel out of reach. Knowing how much money to put toward savings goals versus debt payments, when to start saving for retirement and other important financial decisions can overwhelm consumers. Banks must meet customers wherever they are in their financial journey to offer personalized financial guidance based on their goals.

Thoughtfully planning your bank’s financial wellness and education strategy will empower your institution to establish healthy financial habits among customers while supporting your bank’s future growth.