The Cornerstone of Greater Customer Engagement

On Apr 23, 2021

The economic impact of Covid-19 has triggered the most unequal recession in modern U.S. history, delivering a mild setback for those at or near the top and a depression-like blow for those closer to the bottom.

Recovery is slow for many key demographic groups, including mothers of school-age children, Black men and women, Hispanic men, Asian Americans, younger Americans (ages 25-34), and people without college degrees. No other recession has pummeled society’s most vulnerable like this one.

We have a real challenge helping people in the bottom and middle income ranges. These are people who are falling behind and falling apart. There are too many “chutes” and “traps” that make it difficult for them to get ahead. For many, they are one medical bill or job furlough away from experiencing a significant economic free fall.

This crisis has exposed many fault lines in our country. This situation prompts several questions:

Now that we know that so many people are not financially well, what should be done? What role should the banking industry play?

The Importance of Financial Wellness Is Not Understood

For years, many people have not taken advice on the importance of saving for a rainy day and not taking on too much debt. Financial wellness services and programs have been lacking, and that has exacerbated the challenge for many people. With the economic uncertainty many Americans face today, we’re dealing with the uncomfortable reality that millions of households could see their life goals in jeopardy.

Several widely recognized economic factors contributed to this financial burden – wage stagnation, rising expenses, educational debt, among them. Other contributing factors are less well known. For example, the way we have treated personal finance has been too narrowly focused. For too long society has treated financial security as something exclusive and not inclusive and essential for our overall well being.

While financial knowledge is important, it is not enough. Financial wellness is achieved when people can apply financial knowledge to manage their economic lives effectively. That requires the ability to make good financial decisions, spend money within one’s means, and plan adequately for emergencies and the future. If society — and the banking industry in particular — want to tackle financial wellness, there needs to be a holistic approach to personal finance. This requires a shift in mindset.

Personal finance should not be looked at as a specialty topic. It needs to be more universal and viewed as integral to people’s well being. This is not just a business topic, it is a topic that supports the ability to live a healthy and happy life.

The Challenge:

Banks and credit unions should not be financial wellness bystanders, but should step in and make a difference.

The banking industry has specialists like financial advisors who are trained and certified to help people achieve their financial goals. But financial wellness is still a personal responsibility. People need to become more self sufficient and empowered through greater knowledge and confidence.

Our research indicates that many people remain uncomfortable talking about their financial situation and challenges. This remains a hurdle that needs to be overcome. If nothing more is done, we will face an alarmingly divided society and suffer all of the associated consequences.

An Agenda for Action

First, we should not overlook all the meaningful steps financial institutions have taken to assist those impacted by the pandemic, including distribution of stimulus checks/debit cards, forbearance on loans and more. Fintech companies have also been active in the market. But more needs to be done, and it should take a more holistic approach as opposed to narrow…