According to the Consumer Financial Protection Bureau’s (CFPB) definition, 40% of U.S. consumers are considered financially vulnerable. These consumers are diverse in geography, stage of life and financial status, but have one thing in common – they are not receiving the support they need from their financial institution.
The CFPB measures financial vulnerability by an individual’s ability to control day-to-day and month-to-month finances, absorb financial shocks, stay on track to meet financial goals, and make good financial choices for their lives. Individuals with a high income and a college education can fall into this category if they consistently struggle with managing their finances.
There is a clear opportunity for banks to better serve the financially vulnerable segment within their customer base, but how can they do so?
They can start by building a single source of truth. This comes from having a clean data environment that consolidates, standardizes and defines information from core and ancillary systems. Such an environment allows a bank to have a holistic view of their customers, which can enable them to identify financially vulnerable customers. They can use this data to monitor behaviors and proactively flag risky financial problems.
Once a bank has established a single source of truth, it can create intelligent profiles from the data. These profiles can be built from transaction data that reveal details about which products a customer uses, how they transact and what they might be looking for in the future.
This internal data can be combined with externally sourced data to generate insights that can be used to create or supplement their customer profiles. Many banks struggle with creating profiles because their data is kept physically or in multiple systems. Having a clear and consistent way of viewing the entirety of the banking relationship makes for more personalized interactions that are tailored to individual customers’ needs.
Half of the battle is understanding your customers’ needs and the other half is educating them about new or existing products and services. Having a playbook for banker conversations with customers can help solve the latter issue. A great playbook provides bankers with the knowledge and confidence to listen to a customer’s needs, comfortably address concerns and offer a solution.
Investing in the human counsel aspect of banking is often overlooked, but it is an important part of making data more actionable. Bankers that feel confident and knowledgeable about a given product or service can humanize the banking experience, which can help build trust and long-term relationships.
Banks should also consider assigning a banker or team to a specific relationship. A Gartner study shows that financially vulnerable customers are more than twice as likely as financially healthy customers to seek help from their financial providers when handling unexpected situations. These situations include medical emergencies, unexpected car repairs and providing financial help for a family member or friend. An assigned banker or team can create stability and form a strong relationship. It may also be easier to measure, inspect and coach their behavior based on best practices and lessons learned.
Knowing the full relationship, bankers can share more personalized and meaningful offers, as well as teach the financially vulnerable customers how to optimize existing banking products and services. The same Gartner survey reveals 70% of these customers have access to a checking account, 76% have either debit or credit cards, and 41% have taken out a mortgage.
Even with all of their access to banking products, these customers need help understanding and using these products. Banks should teach their customers how to use their products and services to better approach savings, get rid of debt and improve credit scores, while also providing tools to help keep people on track in their financial journeys. These customers can become more profitable for the bank once they’re fully optimizing the use of the products and services at their disposal.
When looking at bringing humanity back into banking, banks often focus on ways to reintroduce the human touch in today’s highly digitized banking environment. However, serving the financially vulnerable and helping all clients flourish financially, regardless of their income source or demographic, is also a big part of delivering humanity. By providing them with the support they need to improve their financial lives, financial institutions can unlock a whole new world of growth and revenue opportunities.
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