Financially healthy customers are good for business

Increasingly, companies compete on the financial health of their customers. Discover 7 ways to build consumer financial health into the fabric of your business.

Thea Garon is a Director at the Financial Health Network. She excels at helping companies understand and improve their customers’ financial health.

Nearly a decade after the financial crisis, too many financial service providers are going about business as usual.

Overdraft fees drive revenue streams, while products and services are primarily designed to benefit the most affluent customers. According to the FDIC, America’s biggest banks collected $11.45 billion in overdraft and non-sufficient funds fees in 2017, an increase of $10 million from 2016.

But there are signs the tide is turning. Earlier this year, the Financial Health Network conducted a study of more than 650 senior executives to assess how financial service providers are investing in financial health as they seek to engage customers meaningfully and profitably. (article continues below)

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The turning tide.

We found that, increasingly, financial service providers understand the importance of putting their customer’s financial health at the center of their business.

For example, 69 percent of executives said that improving their customers’ financial health is a “strategic priority.” The same number said that financial health is both “profitable” and “a way to increase customer loyalty.” But we’ve still got a long way to go: just half said they had launched a product to improve customer financial health.

Building financial health into your business is easier than it may seem. In this article, we’ll look at seven ways to get started.

  1. Survey your customers to assess their financial health.
  2. Develop products and services to meet their needs.
  3. Talk to your customers about their financial health.
  4. Go deeper by analyzing transactional data.
  5. Measure the financial health of your employees.
  6. Look at staffing through a financial health lens.
  7. Integrate financial health into your company's KPIs.

What is financial health?

Financial health is what happens when your daily financial systems work well; when they set you up to be resilient against adversity and seize opportunities over time.

Unlike more narrow metrics (e.g. credit scores), financial health is a framework that pulls together the multiple strands of your financial life. How you spend, save, borrow, and plan today can either contribute to or detract from your ability to be resilient and thrive in the long run.

Driving profitability.

For companies, customer financial health represents a business opportunity. It’s an opportunity to address unmet needs, expand into new market segments, increase customer loyalty, and drive long-term revenue streams.

For example, according to the 2019 U.S. Financial Health Pulse, people who say their primary financial institution helps them improve their financial health are 1.5 times more likely to be satisfied with that company and 1.3 times more likely to say they would buy more products and services from that company in the future.

Increasingly, financial service providers understand the importance of putting their customer’s financial health at the center of their business.

These numbers are supported by a 2015 Gallup survey showing that customers who believe their bank looks out for their financial well-being purchase more products from that bank than those who do not.

Increasingly, financial health is a competitive frontier in financial services. These are still early days, so there is an opportunity for companies to differentiate themselves by making consumer financial health a part of their competitive advantage. (article continues below)

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1. Survey your customers to assess their financial health.

Surveying your customers can help you gain a holistic, moment-in-time snapshot of their financial lives.

This will allow you to identify pain points and develop solutions to address unmet needs. For example, you may learn that your customers are struggling to manage their daily finances, build savings, or plan for the future.

69 percent of executives said that improving their customers’ financial health is a “strategic priority.” The same number said that financial health is both “profitable” and “a way to increase customer loyalty.”

To get started, you can leverage existing survey tools, such as those from the Financial Health Network and the CFPB. Or you can build your own questionnaire to understand how customers are spending, saving, borrowing, and planning.

In 2018, 20 participants from our Financial Health Leaders program used our toolkit to measure their customers’ financial health. Collectively, they diagnosed the financial health of millions of customers.

We are continuing to gain insights from these leaders about how to measure and improve customers’ financial health. In fact, much of the content of this article is drawn from what we’re learning from these trailblazing companies.

2. Develop products and services to meet their needs.

Armed with a deeper understanding of your customers’ financial lives, you can begin to design products and services to meet their needs.

Here’s an easy way to get started: review your existing suite of products to identify gaps and pain points. For example, some of your customers may not have a credit score. Others may be getting stuck on a certain page of a loan application.

To address issues like these, you may decide to build solutions yourself. Alternately, you could choose to establish partnerships with fintechs or nonprofits. In fact, you may find that simply adding new features or adjusting the functionality of existing products will go a long way in addressing your customers’ needs.

Financial health is what happens when your daily financial systems work well; when they set you up to be resilient against adversity and seize opportunities over time.

For example, St. Paul-based Sunrise Banks partnered with Prepare + Prosper to launch the Financial Access in Reach (FAIR) program to serve under-banked individuals in the Twin Cities.

The accounts have no overdraft fees and offer customers control over their money, as well as an opportunity to build credit. Enrollees in the FAIR program attend regular check-ins to make sure their needs are being met and receive any additional assistance they need.

Participants in the FAIR program can also provide feedback on the accounts, so Sunrise and Prepare + Prosper can adapt the products to make sure they are the right tools for the job. (article continues below)

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3. Talk to your customers about their financial health.

Discussing financial health is a great way to deepen relationships with existing customers and attract new ones.

By discussing the results of a survey through digital or in-person channels, you can begin a conversation with your customers about how they can improve their financial health—and how your company can help.

These are still early days, so there is an opportunity for companies to differentiate themselves by making consumer financial health a part of their competitive advantage.

For example, Washington State Employees Credit Union (WSECU) shared financial health scores through a pilot project with their members and asked them for feedback on the experience. More than half of respondents said they found the tool to be useful, and 40 percent were interested in receiving additional tools or guidance.

“Our members appreciate the snapshot the financial health assessment provides. They are hungry for support in taking next steps,” said a spokesperson for WSECU. “We’re now working on our next iteration of the assessment, which will include recommendations and actions members can take depending on the categories where they scored the lowest.”

Among other things, WSECU learned that less financially healthy respondents preferred a more personalized approach, while healthier respondents favored online self-service resources.

4. Go deeper by analyzing transactional data.

While collecting survey data can help you get the big picture of your customers’ financial lives, analyzing transactional and account data provides more nuanced insights.

Account data includes any information you have about your customers: things like credits and debits, bill payment activity, and engagement with online banking. Analyzing this data on an ongoing basis helps you understand your customers’ financial health without having to survey them each time.

Armed with a deeper understanding of your customers’ financial lives, you can begin to design products and services to meet their needs.

The Commonwealth Bank of Australia (CommBank) has generated a new measure of financial wellbeing based on customers’ financial data; it’s called the Financial Wellbeing Scale. Using this measure, CommBank has learned that certain behaviors are more/less important depending on when they occur in a customer’s financial health journey.

For customers at the lower end of the Financial Wellbeing Scale, gaining control over day-to-day finances (e.g. paying bills on time) is most important. For customers in the middle of the scale, building short-term savings is most important. And for customers at the higher end of the scale, having a sustained savings habit is most important.

CommBank is using these insights to identify new ways to serve customers and improve their financial health. In practice, that takes the form of educational content, digital tools, and new product experiences. (article continues below)

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5. Measure the financial health of your employees.

Financial health can also be a useful lens for assessing the financial wellbeing of your employees.

Collecting survey data, as well as assessing administrative data (e.g. participation in retirement plans, adoption of healthcare benefits) can help you understand whether your current solutions are meeting your employees’ needs.

Orienting your business around your customers’ financial health is a journey; it won’t happen overnight. But investing in it will contribute to your competitive edge.

Regions Bank surveyed its employees about their financial health and shared the results with them. When they asked for feedback, most employees said they found the tool accurate and thought it was important to share with customers in the future.

Most employees, it turned out, were not surprised by the results of the diagnosis. But they did find it to be an emotional experience, suggesting that customers should get the opportunity to take the assessment and receive their results privately.

Going forward, Regions decided that discussing your results with a personal banker would be optional.

6. Look at staffing through a financial health lens.

Currently, many financial service providers are organized by product or business unit. Re-organizing teams around financial health will ensure that your company is putting customer financial health at the center of your business.

Assigning individuals and/or teams with internal responsibility around financial health can help. It can be a single person (preferably at a senior level) or a financial health council that crosses departments—or both.

Financial health should not be relegated to one department or team. Rather, you should embed it into the core operations of your business.

A great place to start is ensuring that your product teams are structured to incorporate best practices related to consumer financial decision-making.

For example, the Commonwealth Bank of Australia has ensured that a team of behavioral scientists are embedded in the design and delivery of new products. The bank also has a team of data scientists who are responsible for helping product teams identify customer challenges and opportunities during the roll-out of a new product, feature, or initiative. (article continues below)

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7. Integrate financial health into your company KPIs.

Financial health should not be relegated to one department or team. Rather, you should embed it into the core operations of your business.

Tracking positive outcomes for your consumers—such as whether the roll-out of a new product results in higher savings balances—can help your company understand whether it is truly making a difference in your customers’ financial lives. It can also help you make money.

To that end, consider tracking financial health as a key performance indicator (KPI). Set targets around it, and track it in reports to leadership on an ongoing basis.

The evidence is mounting: investing in financial health will contribute to your competitive edge.

Rodney Drake, Vice President of Product and Client Strategy at Valid Systems, is attempting to do just that.

“When it comes to segmenting the financial health of our customers, our most significant challenges lie ahead,” said Drake. “Our goal is to leverage our customers’ financial health as a predictor of certain business factors. That will require a good deal of finetuning and analysis over time.”

As Drake implies, orienting your business around your customers’ financial health is a journey; it won’t happen overnight. But the evidence is mounting: investing in it will contribute to your competitive edge. Indeed, in the competitive financial services industry, it is quickly becoming table stakes.

Thea Garon is a Director at the Financial Health Network. She excels at helping companies understand and improve their customers’ financial health.

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