Traditional financial institutions need to move beyond the status quo. Tapping into consumer engagement means that banks and credit unions have to become more than just an institution that handles transactions and offers loans. Financial institutions need to place greater focus on how they can ensure the financial wellbeing for their customers. This opportunity comes at a time when customers want assurances to know that banks have their interests in mind.
But how can this be done? In the digital age, fostering a relationship with customers is not an uphill task. Through leveraging data and AI technology financial institutions could vastly improve the customer experience.
Why is Financial Wellbeing important?
According to a report by Fiserv only 38% of consumers expressed satisfaction with their financial health. Which means that financial institutions will need to have an array of data and analytics to truly understand and respond to consumer needs.
Yet, this raises a question for financial institutions because the rise of this need for financial security could bring on platform operators from established organizations such as Google, Amazon or Apple. As such, they could easily create platforms to promote an ecosystem of financial health. This leaves banks and credit unions with a dilemma, whether to become the provider of such a service themselves by creating their own platform or to allocate themselves within the established ecosystem. As EY says “In other words, will your firm be the aggregator, or be aggregated?”
Formulating a Strategy
If financial institutions choose to be providers the options are to partner with a fintech company or to access these capabilities through the acquisition of a Fintech company. The capabilities of a fintech and financial institution will shift the narrative and help banks and credit unions gain consumer loyalty and trust.
The strategies involved do not change the products or services provided by banks or credit unions in fact it is merely allowing them to appear to consumers when they need it most. Because a big part of financial wellbeing is knowing when to respond and what to suggest. The three main ways this can be done is through providing help to the consumer:
1. To identify the right products and services suited to their needs
2. To access those products and services
3. To respond to challenges and unexpected situations
How to Apply these Strategies
So far the way this has been done is through offering a concierge-like service to consumers to allow them to access these products when needed. Another way is through the creation of easy to use platforms that are accessible and simple.
But for either of these models to work and make a substantial difference in consumer retention, trust is important. Financial institutions have to be willing to foster a relationship with their consumers beyond a traditional transactional one.
For the time being it seems banks are falling behind in that regard. In a recent study by Gallup Credit unions scored 25.5% while banks scored 14.5% when consumers were asked to compare who looks out for their financial wellbeing. But there is hope, through deep consumer knowledge and leveraging data financial institutions can improve consumer engagement and promote financial health.
What is clear though is that the relationships between financial institutions and consumers are shifting. It’s not enough to merely provide savings accounts and loans. If customer engagement, retention and acquisition are the goals then this can only be done through providing consumers with the ability to achieve financial wellness.