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Creating customer loyalty through financial wellbeing

How are retail banks promoting financial wellbeing, and why is this integral to their customer strategy? How retail banks promote financial well-being and benefit from it

Laura Smettem

Laura Smettem,
Senior Field Marketing Manager UKI and The Nordics

Banks need to offer customers a greater opportunity to manage their financial health. After all, this creates a win-win situation: cCustomers enjoy the positive effects of financial well-being, while banks reap the rewards of higher customer loyalty.

Just as healthy eating and exercise have a positive impact on quality of life, healthy money management habits have a positive impact too. Among other things, financial well-being gives a sense of security for the financial future. Conversely, financial worries, along with workload and time pressure, are among the greatest causes of stress and can even lead to "financial burnout".

What does financial wellbeing actually mean?

Financial well-being is a state based on the ability to make confident, well-informed financial decisions that lead to financial security in the short and long term. Specifically, itthis means being as well informed as possible in the four fields of financial well-being (saving, spending, planning and financing) and acting in the best possible manner.

How do you achieve financial well-being?

There’s no blueprint on how to achieve financial well-being though. Various factors play a role. For example, a regular income forms the foundation. However, it’s a common misconception that financial well-being only affects people who have a low income. A report by the Financial Times reveals that people earning over £100,000 a year felt the same level of concern about their personal finances as those earning less than £10,000 a year.

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In the overall context of well-being, financial well-being plays a supporting pillar – a negative feeling can thus lead to stress and anxiety

The ability to make confident, well-informed financial decisions is key to financial well-being. A good financial education is integral. Good money management should be addressed, taught and practised as early as possible. General knowledge of financial matters also plays an important role in order to be able to make well-founded decisions later on.

Yet in the UK, there's still considerable room for improvement. We hear calls for financial education to be introduced as a separate school subject for children, and for financial well-being to be addressed at an early age. In a study by Revolut, for example, 43 percent of respondents said that they would have liked to learn about money management back when they were in school.

On top of education, there’s also the financial experience that an individual gains in the course of their life. As with all areas of life, you learn from positive experiences, but also from mistakes. It’s vital important that the right lessons are learned and applied for the future.

What role do banks play?

It’s not within a traditional banks' business model to provide financial education. However, there are other ways banks can help their customers achieve financial well-being.

Bank customers are looking for ways to monitor and improve their financial well-being. However, this is a challenge for many, as they don’t usually get a holistic view of their financial situation from their bank. Traditionally banks only provide customers with general financial data and offerings. This leads to a purely transactional relationship between bank and customer and ultimately a lower customer satisfaction and loyalty.

All banks should provide their customers with a clear and holistic overview of all their accounts to enable them to better understand their financial situation. Actionable, data-driven insights and personalised advice  at the right moments also contribute to increased financial health.

Find the preferred financial partner thanks to personalisation

Just as the Spotify or Netflix home pages look different for every user, it should also be the same in the banking app. Instead of generic and identical offers for all users, banks should show information and solutions individually adapted to everyone's current life situation.

For example, by booking a flight with a credit card, banks can identify a trip abroad at an early stage and inform their customers that fees may be charged for withdrawals or card transactions. At the same time, a suitable alternative – such as a travel credit card – could also be offered to help avoid fees. In addition to providing a positive experience for customers, a bank can also establish itself as a partner that proactively helps and makes an essential contribution to improving financial well-being.

Another example of how banks can contribute to the financial well-being of their customers is by using digital financial managers. Users access the interface of the finance manager via the app or online banking in the browser and are presented with a clear overview of how much money they spend on rent, housing, investments, insurance, visits to restaurants, supermarket purchases, sports, etc. The app is also available as a free download. In addition to better transparency, the financial manager – thanks to the available data – can also, for example, make automated and active suggestions on how the customer can save or invest money.

A digital financial manager is particularly well received by young people and younger bank customers. For example, a GfK study commissioned by Backbase reveals that almost 90 per cent of 18-29 year-olds would like such a service. Perhaps this can also be explained by the fact that, especially at a young age, people generally have little experience of financial matters and this is therefore seen as a helpful support tool. Banks can therefore impress here, especially their young customers.

How do banks integrate financial well-being into the offer?

If banks want to play a leading role in the financial well-being of their customers, they need to provide their customers with a good overview of their accounts and deliver actionable, data-driven insights, personalised advice and personalised offers at the right moments.

Banks already have all the data they need to do this, but to free the data from silos, analyse it, present it clearly to customers and make the right suggestions at the right time with machine support, an engagement banking platform is needed. The unified platform enables the comprehensive analysis of the data lying in the silos, the targeted delivery of personalised offers to customers and cost-efficient advice: Thanks to the platform, advice no longer has to be provided in person at the branch, but can also be provided via chat or video call.

By positioning themselves as trusted partners for all aspects of their customers' financial lives through these services, banks can increase customer loyalty and lifetime value.

How do banks benefit from their customers' well-being?

It’s in the interest of retail banks to promote their customers' financial well-being. Why? Customers who see their bank as a partner for financial well-being remain loyal to their bank. At the same time, it’s very likely that the financial situation of bank customers who are supported in this way will improve, meaning that numerous cross-selling and upselling opportunities will arise. For example, those who have saved money through good financial decisions can, fulfil their dream of owning a home with the help of a mortgage from their bank. Or open a share deposit account. Customers' financial well-being leads to a win-win situation. While customers enjoy the benefits of their financial well-being in many areas of life, banks benefit from high customer loyalty and also tap into cross-selling and upselling potentials