5 easy ways your bank can help its financially distressed customers
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Since the onset of the global pandemic, financial wellness and resiliency have become a key focus for many banks and credit unions looking to help their customers bounce back from financial uncertainty.
But how are FIs really working to solve financial distress?
For many customers, the basics of everyday financial management pose the greatest challenge in achieving financial wellness, even when that ‘wellness’ entails a short-term plan that helps them reach a long-term goal with their finances. This presents financial institutions with significant opportunities to help customers, but only if they’re willing to redefine their approach to what that help looks like.
Let’s break down seven simple yet effective ways financial institutions can help their customers who are in financial distress.
Embrace digital banking tools becoming digital wellness tools
Recently, big tech and neobanks have become more attractive to underbanked and financially stressed customer segments because they focus on empowering customers to take action with their finances, rather than just make product recommendations.
That’s because these tools they’re using to manage their everyday finances aren’t just banking tools—they’re wellness tools.
Imagine if customers received customized insights based on their spending and purchase behaviors, all delivered to them in their mobile banking app. Or recommendations on where they could be saving money on their weekly grocery bill or if they’ve gone over their average spend this month on a utility bill, and how they can scale back.
Having these kinds of personalized insights, along with tips and advice that make sense for customers as humans (and not just another customer), not only aids in guiding customers towards more prudent financial decisions, but can also help to make them more literate about their finances and more aware of how they can spend wiser, and save smarter.
Your digital banking tools thus become wellness tools rather than another mobile banking app. And transforming your digital banking tools into digital wellness tools is absolutely necessary for helping customers who are experiencing financial distress.
Empower customers using financial literacy
Even with new tools, new innovations, and new ways of banking, both financial institutions and customers often take financial literacy for granted—that’s because it’s rarely the focus of a bank’s digital banking tools or a credit union’s everyday services. Beyond a weekly newsletter or a table of pamphlets in branches, it’s highly unlikely that all of your customers are well aware of and deeply knowledgeable about their finances (and managing spend in general).
So, it’s fair to say that financial illiteracy needs a bit of a revamp. But it isn’t just reserved for the younger generations.
44% of Americans, for example, don’t have enough cash to cover a $400 emergency
Meanwhile, 49% of Canadians claim they’re $200 or less away from being able to cover their bills
And around 6 million Britons believe they will never be debt-free
What if there were more education, more information, and more tools targeted towards customers’ actual needs? What if they had digital resources that could easily help them learn about saving, interest, inflation, and all of the buzzwords we hear as customers, but don’t always understand?
This is where normalizing financial education and literacy is crucial. Whether a customer has just signed up with your bank to open a new account or has kept a basic account or line of credit with you for years, giving them the resources they need to learn about their finances could be the difference between a customer who’s struggling, and one who’s thriving.
Use personalization to drive financial guidance
As customers, we’ve grown so accustomed to this level of personalization that we expect it from everything—not just our grocery delivery and streaming services, but our banks, too.
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We trust these services to know us on a deeper level, so we give up our data and get lots in return. And not just product recommendations, either. That’s because personalization isn’t just about products, something big tech is already capitalizing on.
Instead, its true potential lies in building authentic, trust-based relationships with customers by using their data to understand what their real needs are, then serving up financial guidance in the form of advice, recommendations, services, education, and information that benefits them on a wholly human and personal level. It’s not just about selling products—and it shouldn’t be.
There are 3 key ways in which personalization can be wielded to help financially distressed customers
Personalize at scale—if you know what’s stopping your customers from achieving financial wellness, you can offer the right advice, solutions, and tools to other customers like them, going through similar financial journeys
Personalize at the right time—knowing what your customers are struggling with allows you to personalize advice and solutions at the right time, right when they need it
Encourage healthier habits—if you truly know what your customers’ challenges are, you can provide a sequence or “curriculum” of solutions and advice that help them build healthier financial habits to succeed
Image credit: Sensibill
Financial guidance used to be relegated to in-person meetings with a branch representative or regular check-ins with financial advisors, but those traditional approaches to financial assistance don’t do the trick anymore. Instead, you need to be meeting customers where and when they need you with guidance that stems beyond things like basic account management, or savings.
Change the way younger generations approach loans and credit
According to research from Morgan Stanley, younger generations like millennials are now the driving force behind net new-long demand, projected to become the largest segment of loan borrowers over the next ten years.
As a financial institution, with this knowledge comes great responsibility—current credit standards often encourage risky financial behaviors and incentivize people to spend more and take on debt that they’re not necessarily equipped to pay back sets customers up to fail.
By changing the way younger generations approach loans and credit, you can nurture more financially resilient customers that trust you with their financial futures. This doesn’t mean pushing millennials or Gen Z customers into onboarding products they don’t need. It actually means:
Educating younger customers about loans, borrowing, interest rates, lines of credit, and more
Providing valuable content that informs millennials and Gen Z’s about their options, and the difference between these products
Helping younger generations understand loans and credit by better evaluating their needs and which products + services make sense for their unique financial situations
The above points don’t just pertain to millennials—in fact, more Gen Z customers are using credit cards and loans, too. But they use credit and loans differently, mostly for major purchases, according to research from Morning Consult. Changing the way younger customers approach loans and credit could be the difference between those financially struggling and thriving customers.
Treat customer relationships like partnerships
In the rush to evolve and accelerate the growth of digital and mobile banking experiences, many banks and credit unions approached digital transformation with a near-term mindset. But innovation doesn’t just serve the short-term—it thrives when it’s part of a larger, long-term strategy to give customers more control and confidence over their finances. And that strategy? Well, it should revolve around partnerships.
Out-of-the-box communication, marketing, and personalization is common across many FIs, but if banks and credit unions hope to keep their customers from turning to alternative banking providers—and help them achieve financial wellness—customers need to be viewed and treated as partners, not just paying customers.
What does this entail? Well, for one thing, customers’ data should be used to understand them on a deeper level so your FI can help them make more informed decisions. It also means empowering customers to choose the right products, services, and tools that make the most sense for them—and ultimately, provide transparency in communication.
Your competitors are already transitioning from customer relationships to partnerships, adopting the partner mentality and approach. 84% of banking execs know that their FI needs to treat customers as partners if their FI hopes to survive in a post-digital world, while 79% agree experiences and tools need to be more human-centric.
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Now’s the time to help your customers thrive
There’s never been a better time to help customers take charge of their financial wellness—especially those experiencing financial distress. The question is, how will your bank be there for them, and are you prepared to go the extra mile to help customers thrive?
Want even more ways you can drive financial wellness for your customers? We’ve got a guide for that 😉 Grab your free copy of our Financial Wellness guide below 👇
Meet the author, Liv 🌿
Liv is our Director of Marketing and a B2B marketing expert. She's worked across multiple industries, and has successfully turned her apartment into a plant jungle.