With technology, banks can offer personalized advice to their clients, and increase the level of loyalty towards the institution itself
Although financial health is a relatively new concept, it is one the banking sector is perfectly positioned for. By offering tools that help customers improve their well-being, banks increase loyalty and even strengthen their own institutions.
So, what is financial health? According to BBVA’s definition, it is a status in which clients can “perfectly fulfill their financial obligations and are in a situation of tranquility regarding their financial future.” The US Consumer Financial Protection Bureau says that financial well-being implies having security, and options, when managing money.
It is clear this concept is becoming a significant trend in the banking sector.
Most consumers, ranging from the mass market to the wealthy, want to improve their financial health, according to a study conducted by EY. And now, with the economic crisis generated by the COVID-19 pandemic, the need to help customers strengthen their financial situation is even higher.
Consumers’ interest in optimizing their finances, together with the technological abilities that banks have today, create a new opportunity for financial institutions.
Think about this: banks store more and more information about their customers. Data lakes allow institutions to simplify the process of delivering information for compliance and regulatory purposes and analyze risks in the portfolio, among other advantages.
But data lakes are also vital in offering better services and products to clients, in particular those related to financial advice and wellness tools. These information repositories provide new ways of understanding and serving digital users. For example, the data can be leveraged to develop an economic well-being “score” to be displayed when entering the bank's mobile application. This gamification tool would analyze the user's current status - taking into account their spending, debt, savings, and investment, about their peers - and offer suggestions to improve it.
Thanks to big data and artificial intelligence, banks can offer their clients the option of saving a small amount each day, week, or month, thus helping them grow their wealth. Or suggestions about spending could be included in the dashboard of the mobile app. For example, small but frequent expenses can add up quickly. Banks could present these amounts grouped so that their customers see where their money is going - and thus better manage their finances.
Offering tools to strengthen clients’ financial health helps to improve the institution's level of customer loyalty. That’s logical: if the bank can help customers improve their well-being, they are more likely to stay with the institution, and recommend it.
But if you can help your clients improve their financial health, the benefits go far beyond client satisfaction.
On this point, the Center for Financial Services Innovation describes several direct rewards for financial institutions of improving client financial health:
With digital financial health tools, banks can help their clients while also strengthening their own institution. The best bit is that this is a win-win solution.
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