How banks can prioritize customers’ financial health

Financial institutions’ best interest includes supporting customers through money hardships and helping them bounce back from debt and delinquency.

The measures that have helped struggling households weather the pandemic are disappearing.

There are no more stimulus checks, interest rates are rising and the eviction moratoriums that have protected renters for more than two years are ending.

Yet, the financial struggles of those households are not going away – and the institutions that rely on their business must contend with a consumer base that is anxious and aggravated. The good news is that 83% of lower-to-middle income families want to receive information and resources from their banks and financial institutions.

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Meeting their needs – and transitioning from temporary relief to permanent recovery – will require financial organizations to pay attention and to change their business strategy, which may include expanding their ESG programs.

Customers, regulators, and shareholders expect banks not only to state their values as good corporate citizens but to show them through actionable means, including new products, partnerships with nonprofits, strategic investments and services for customers that go beyond their traditional services. Most of all, banks should be working diligently to help their customers build their savings, make their payments and achieve greater financial wellness.

Those who turn to their banks when suffering from financial hardship and delinquency will be able to avoid the pitfalls of predatory lenders, and scams that prey on panic and misunderstanding. In addition to avoiding further hardships, customers who know they can turn to their financial institutions for help grow more loyal to their financial institutions, and become closer to achieving financial health.

It is in financial institutions’ best interest to support their customers through financial hardships and help them recover from debt and delinquency. Customers already trust their banks to operate with sincerity and legitimacy – they should be able to trust them to recommend products, resources and referrals for improving their financial health, too.

When faced with a delinquent customer, financial institutions must first approach them with compassion and empathy and ask questions like: “Why is this customer falling behind on payments? What other problems are they dealing with? Have they encountered food insecurity, unemployment, a spike in rent or an unexpected medical bill?”

Help begins with recognizing the person behind the problem, recommending resources that address the root issue, and using the innovative technology that exists to make this easy and efficient for banks to do.

That might look like providing access to programs at the local or state level that help to address the underlying problem leading to the customer’s inability to pay, such as food assistance, utility subsidies and employment services.

It might include connecting delinquent borrowers to the Homeowner Assistance Fund (HAF) or referring them to the U.S. Department of Housing and Urban Development (HUD)’s certified counseling agencies, which help people through the complicated process of loan workouts, modifications, and foreclosure prevention.

When the federal government provided citizens with stimulus checks, we imagined it would jumpstart our struggling economy. Instead, households primarily spent their stimulus payments on necessities like groceries and on paying back credit card debts.

Stepping up for your customers also includes empowering your employees. When interacting with customers, employees should have every resource at their fingertips – including risk-mitigation tools that promote action, break down silos and prioritize health innovations in collections and across banks.

By providing their customers with financial assistance resources and prioritizing their customers’ financial health, banks can make all the difference. This is not a step that should be abandoned when the pandemic ends, either. Changing the way we think about and work with people who experience financial emergencies – and providing the resources they need to get back on their feet – should be part of financial institutions’ strategic business strategies going forward.

Rochelle Gorey is the co-founder and CEO of SpringFour.