As many as three-quarters of consumers have admitted to feeling anxious when interacting with mobile banking services, signalling an increasingly worrying trend that has emerged admit the cost of living crisis. And as consumers seek to weather such stormy conditions, they’re increasingly turning to their banks for support.
As banks and their digital apps have evolved, their accessibility to consumers has increased and with this, so has the onus on the banks to act in favour of their customers’ financial ambitions, including offering support and education against rising financial anxiety.
Richard Kalas, client solutions director, GFT
In this article for The Fintech Times, Richard Kalas of the digital transformation business GFT, details the steps that digital banks can and should be taking this year to help consumers manage their finances.
As GFT’s client solutions director, Kalas helps its retail banking clients address their strategic and operational challenges in the new digital economy with innovative solutions and services.
Prior to joining GFT, he was a solutions architect with Meniga, having held similar roles at Ubiquem and Temenos, leading solutions for organisations such as Metrobank, JPMC, UBS and The Bank of England.
Here, Kalas also delves into the data from GFT’s latest banking disruption index on consumer financial wellbeing and the role customers expect banks to play in supporting their money management:
Combating financial anxiety in 2023; What can banks do to help protect their customers?
The ongoing cost of living crisis continues to pose significant challenges for consumers. As of December 2022, UK inflation had risen 9.2 per cent over the previous 12 months, impacting interest rates, mortgages and consumer spending power.
Now as recession looms, the multiple factors that are driving this economic uncertainty (energy prices, the war in Ukraine and global supply chain issues) show no sign of slowing down. Consumers need to be prepared to weather a lengthy period of financial discomfort. The priority for banks going forward is to make sure that their customers are educated on the tools available to help them right now and in the future.
It is under this cloud of financial uncertainty that the team at GFT decided to focus our second quarterly ‘banking disruption index’ on the ongoing financial anxiety and squeeze that consumers are feeling in their day-to-day lives. Additionally, we looked at the digital banking solutions that are helping to alleviate these issues.
Our latest research into this topic has helped show how severe the current situation is for consumers. We have identified several crucial issues, including consumer perspectives and financial institutions’ strategies to assist them.
Financial anxiety is rife
Our latest survey found that as many as three in four (77 per cent) bank customers are currently feeling anxious when checking their mobile banking apps. This statistic won’t be overly surprising, given the context above, but this doesn’t change the state of affairs that people are currently in.
Our data also shows that over a third of customers (37 per cent) are checking their banking apps on a daily basis. This daily anxiety, coupled with the cost of living crisis, is affecting how proactive customers want their banks to be in engaging them in financial matters.
In previous years, customers have been happy with their banks being silent partners, holding their money but not delving into their spending habits. However, this now appears to have changed.
On the sideline no longer
Now, more than half (57 per cent) of customers would like their bank to be proactive in contacting them if their spending habits point towards financial difficulty, according to our data. This shows an openness from customers to engage in potentially difficult conversations surrounding personal finance that previously they might have shied away from.
For banks and fintechs, this is a rare but valuable opportunity to demonstrate some of the new engagement capabilities and finance tools that modern technology has allowed them to incorporate.
Given the importance of financial support, these tools are having an immediate impact and this has been reflected in our data. Our latest research shows 26 per cent of consumers want the ability to flag upcoming bills and whether they have enough money to cover them. Additionally, 22 per cent of customers desire daily and weekly insights into their spending habits, while 21 per cent indicated they would value immediate notifications after making a purchase.
Thankfully, due to advances in open banking apps and neobanks, these sorts of solutions and attributes that consumers want are now built-in as standard. This is having a positive impact on the overall level of satisfaction that customers are feeling when it comes to their banking experiences. Our latest research shows that out of a maximum score of 100, current positive sentiment sits at a strong 79.
Stemming the flow of financial stress in 2023
Thanks to the data featured above, we have a clearer idea of the sorts of solutions that customers need to help combat their financial anxiety as we proceed into 2023.
Alongside the solutions already mentioned, customers are once again toying with the idea of ‘buy now, pay later’ (BNPL) offerings. These BNPL solutions came under increasing scrutiny in previous years for their lack of safety measures and precautions.
Our latest data shows that one in seven (14 per cent) of people who don’t yet use BNPL services, would do so if their bank offered it, This demonstrates another clear signal to the banking and financial world that the customer is on the lookout for solutions to help insulate themselves from the impact of the recession.
Of course, if customers are going to engage with new financial tools like BNPL, they will require a higher level of financial education and onboarding to ensure they use them to their fullest potential. With more open and active channels for communication to provide educational support for customers, digital banks are offering more tailored help through their modern banking applications.
Financial education tools such as Personetics, Tink and Meniga have led the way in supporting consumers to help track their spending and budgeting, with banks now following suit by integrating similar tools into their banking apps.
Fintech’s role in recovery
It is becoming increasingly clear that the UK is destined for a long recession. Despite the government’s best attempts to avoid an economic downturn, consumers are undoubtedly going to be worse off this year than they were in 2022. With this unfortunate situation becoming a reality, banks, fintechs and other financial institutions need to come together to help support their customers and protect them where possible from the brunt of the recession.
This can be through the seamless integration of new solutions and tools within banking apps, increased communication and additional notifications from banks to their customers.
With further financial education and advice about how best to manage and protect the money customers currently have, we can be sure that banks are doing their best to help customers’ financial wellbeing in these challenging times.
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