The human face of banking: building financial empowerment

Federica Bonato, global retail banking solution marketing, Finastra

June 2, 2021 | Finastra

To explore the relationship that people around the world would like to have with their financial institutions, Finastra conducted a unique piece of ethnographic research. We spoke to people across five continents including Africa, the Middle East, Europe, Asia Pacific, and the Americas. We asked them about the functional and emotional aspects of their relationship with their bank and whether they felt empowered by their financial institutions. Each participant shared a photo, which was like a mind map, showing seven objects representing their financial goals.

Our key objective with this research has been to better understand consumers’ views about the current state of digital banking and uncover any barriers and perception issues that may limit consumer adoption of innovative products and services. The study also explores how technology can help empower customers and how Open Banking can make a positive difference. The full report is available here.

Our study was conducted in the second half of 2020 and early 2021 at a time when COVID was affecting everyone’s lives. The pandemic has had an inevitable impact on the way people think about and interact with their financial institutions. It has also accelerated the digitalisation of consumers’ interactions with their banks with usage of banking apps increasing dramatically.

Knowledge, control and freedom

The study uncovered three key enablers or steps that lead individuals to build a good relationship with their bank and optimise their finances: Knowledge, Control and Freedom. People first need knowledge about the products, services and tools their bank can provide – a practical understanding of what is available to them to help them manage their money. This in turn gives them a sense of control, and with that comes a feeling of freedom – the independence and peace of mind that gives the individual the power to enjoy their finances. At the heart of everything, customers expect personalisation. This means that they, the individual should be at the centre of all interactions – not their bank.

People want banking to centre around them and be done on their own terms: “My way, within my limits and according to my timings.” The bank’s role is to enable the individual with tools that help them build  knowledge and feel more in control of their financial life.

Supporting financial empowerment

Survey respondents generally agreed that financial empowerment isn’t about how much money you have – it’s about having the clarity, tools and understanding to work towards your financial goals, no matter how much money you’ve got.

Today, most people see their banking relationship as passive and in many cases this has been exacerbated by the pandemic. The bank is simply a place where money is stored rather than something that is dynamic and a source of growth.

Challenger banks are more proactive in engaging with customers than the incumbents. This is perhaps best illustrated using a mobile phone analogy where established banks act like mobile network operators, providing the service but at the same time almost invisible to the customer. In contrast, digital-first challenger banks are like smartphones – holding the customers’ attention with daily interaction. Of course, the incumbents also offer mobile apps allowing customers to make payments and transfers, but the challengers have typically led the way with features such as ‘save your spare change’, or ‘create savings pots’ and in encouraging customers to have a healthier, more positive relationship with their finances.

Challenger banks are helping customers along their journey and helping them reach their financial goals:  using everyday language, a customer-centric approach, easily customisable and flexible tools and the use of visual cues. Many challengers are also using data insights to offer products and services to meet customer needs. Add Open Banking into the mix and customers can move ahead further – saving and investing in a way that’s just not possible with traditional banks.

While incumbent banks have some catching up to do, it would be wrong to dismiss the vital role they continue to play. Most individuals we spoke to continue to have their salary paid into these banks whom they trust with their money. But in many cases challenger banks are becoming the day-to-day interface for discretional spending with the outside world.

Education and technology go hand in hand

Increased engagement via digital apps does not automatically mean that people are truly engaged in their finances and have all the knowledge they need to plan ahead. Digitally competent people do not necessarily understand what to do with their money as they may lack the right knowledge.

In some cases, the accelerated digitalisation that the pandemic has created, has dismantled the relationship between traditional banks and their customers as it’s removed the need for any interaction in a branch and taken away communication and dialog. Building this dialog remains essential – but in a 21st century way. Offering a better overall digital experience is key, but there’s also an opportunity to help consumers through financial education and by giving them the tools that will help achieve their financial goals.

In its recent report on financial wellbeing, Forrester states: “Financial services providers need to redefine their sense of purpose, adopt more socially responsible and sustainable business models and put customers’ financial well-being at the core of their strategy… To drive customer engagement, create new value, and drive growth, financial services firms need to pursue a values-based business.”

This is the time for established banks to learn from and start to think like challengers and be more proactive in helping people on their journey to #Financial Empowerment. Those that invest wisely in digital transformation will be rewarded with the opportunity to play a more active role in helping customers achieve their financial goals.

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