FCTI - Blog

What is the "NEW" Financial Health?

Posted by Rebecca Hellmann on Jul 17, 2019 6:45:00 AM

We’ve all heard (discussed, planned, promoted, etc.) terms such as “financial wellness,” “financial literacy,” and even “financial health.” They are well known within the financial services industry as studies have shown US consumers have a bad relationship with money. It has also been proven that most people have a desire to improve their situation regarding money and achieve financial freedom.

It is with this in mind that many banks and credit unions say they are actively creating programs intended to focus on the education of financial basics. But rapidly changing technologies may have them aimed at the wrong part of a moving target.

The Old Guard

Consumer-survey-financial-situationAs it has become clear that financial stability is a growing pain point for most consumers, banks and credit unions have strategically implemented a myriad of “financial health” programs. These action plans include newsletters, online resources, webinars, and in-person classes.

Some financial institutions even encourage the use of budgeting applications such as Mint, YNAB (You Need a Budget), and PocketGuard for their mobile users. Around 34% of 18-to-34-year-olds are using these applications to help them keep tabs on their expenses. These applications are often hooked into a user’s bank and card accounts to track debits and expenditures against a set budget.

But how effective are these programs in assisting account holders with their finances? In this goal, both budgeting applications and financial education programs may be falling short.

There is a “correlation between people regularly logging in and their ability to stick to a budget,” says Steve Tigar, chief executive of Money Dashboard, another popular financial management application. (BBC) Certified Financial Planner Sally McCray cites a lack of accountability as the reason most using only financial applications often fail to meet their savings targets and lack a realistic picture of expenses. (CNBC)

There is a similar story when it comes to financial education where lack of use, accountability, and focus can leave consumers with a continued lack of know-how. Studies have shown knowledge taught in personal finance courses is forgotten in as little as 20 months. Experts suggest financial counseling is not fully absorbed until it aligns with consumer goals.

The “New” Financial Health

You don’t know your account holder’s financial lives, argues Ron Shevlin, Managing Director of Fintech Research for Cornerstone Advisors. So how can you help them manage their financial health?

In his webinar, “The Impact of Data in the Digital Age”, Shevlin proposes the advent of artificial intelligence (AI) and aggregation of analytics into paid service platforms will lead allow financial institutions to have a deeper understanding of their account holders beyond the two-dimensional view of expenses. The result? A new form of competition in which the bank or credit union who best improves their account holders’ financial understanding, situation, and health wins.

The “New” Financial Health (NFH), Shevlin proposes, will be:

  • Behavioral driven
  • Integrated with other forms of wellness (such as mental and physical)
  • Measurable

As past research has taught us, even this NFH cannot take hold without customization and accountability. AI and analytics can help account holders monitor current financial plans as well as generate specific goals based on user input and behaviors. Some financial institutions have already begun to integrate some of this into their current tool kits.

  • Alliant Credit Union’s Money Management and Budgeting Tool does everything a third party budget application can accomplish, including pulling in and monitoring outside accounts.
  • Citibank’s Citi® Financial Tools also pull in non-bank accounts to provide a complete budget. However, Citi goes a step further by analyzing current spending and allowing for the creation of financial goals.
  • PNC Bank’s Virtual Wallet includes multiple tools beyond general budgeting. Their Savings Engine® lets users set and track specific savings goals. The Money Bar® and Calendar gives account holders an accurate picture of how much of their current money is designated elsewhere versus how much they have to spend.
  • Simple’s Safe to Spend is a standard budgeting tool which allows account holders to identify funds for upcoming expenditures to avoid overspend.

All of these applications are working slowly toward a more in-depth way to promote account holder financial health. However, they lack one more crucial component for eventual success – accountability. While it could be argued this aspect is provided through notifications and alerts, they require a human element to help reinforce the desire to meet and exceed financial goals.

One institution, Umpqua Bank, while lacking in the mobile budgeting tools, has already begun interjecting a human component for their account holders. Umpqua’s Go-To application connects their account holders directly with a financial adviser through mobile chat. This connection sets Umpqua in a unique position to provide one-to-one accountability in addition to any budgeting and health integrations the add in the future.

The Takeaway

While “financial health” may be the calling card and differentiator on which many small- and mid-size banks and credit unions take pride, technology is quickly changing the field. As 2020 quickly approaches, it may be time to evaluate priorities and expenditures with a focus on the “New” financial health.

The 2019 Guide to Marketing Channels & Strategies

Topics: credit union marketing, bank marketing, digital banking, consumer budgets, household budgets


Written by Rebecca Hellmann

Rebecca Hellmann has been researching and writing in the payments technology industry for over six years. Prior to the payments industry, Rebecca developed marketing, branding, and content for businesses such as Bil-Jac, Benjamin Franklin Plumbing, and Homestead Furniture. She currently works as Director of Marketing for FCTI, Inc.
Find me on: