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Why Should Financial Institutions Focus on Account Holder Financial Wellness?

Improve Account Holder' Financial Wellness | Alkami
Today’s younger generations of account holders expect personal financial management tools at their fingertips

Now is the time for financial institutions to prioritize leveraging technology focused on the financial health of their account holders. Two recent surveys, highlighted below, found a gap between what account holders want — help and guidance — and what their financial institutions are delivering.

The J.D. Power 2023 U.S. Retail Banking Satisfaction Study found account holders are concerned about inflation and an uncertain economy, and it’s affecting both their financial wellness and the relationships with their primary financial institution.

The number of account holders with $10,000 or more in their primary bank declined by 16 percentage points, from 44 percent a year ago to just 28 percent now. Some 30 percent have shifted their deposits to another financial provider. Meanwhile, account holders categorized as “financially unhealthy” rose by 9 percent.

One important finding from the study: Bank customers are struggling, but advice and guidance from their primary financial institution is lacking. The study found just 21 percent of account holders have received financial wellness guidance in the past year, but — and this is key — the ones who have are “significantly more likely to have opened a new account with their primary bank.” Almost half of those who received actionable guidance from their financial institution self reported to have done so.

Those findings are underscored by a Financial Health Network study, recently reported by the Financial Brand, that found account holders who believe their financial institution cares about their financial health are:

  • Three times more likely to be “very satisfied”
  • Three times more likely to recommend their financial institution
  • Five times more likely to be interested in purchasing additional products from their financial institution

Those findings contain a very big caveat — or an opportunity, depending on how you view it. Most account holders, 80 percent, expect their primary financial institution to help them focus on financial wellness. But only 14 percent believe it’s actually happening.

It’s clear. Account holders, especially those who are struggling to navigate in today’s inflationary economy, want help, guidance and options. If struggling account holders feel their financial institutions have their backs, it will naturally enhance loyalty, increase retention and ultimately boost the institution’s bottom line.

Beyond addressing the needs of the account holder ecosystem…Why is it vital for banks and credit unions to offer financial wellness tools and support NOW?

Fintechs are coming to market with new alternatives by the day. Emerging players like Mint, Rocket Money and more are supporting their users’ financial health, and once in the app, users find relevant offers for more financial products. It’s opening the door to account holder attrition right under their primary financial institution’s nose.

Financial services marketing presence on social media is becoming so prevalent that there’s even a new word for it: Finfluencers. Short video platforms are becoming a powerful resource for financial wellness advice with some hashtags racking up billions of views. Fintechs are able to tap into these industry-specific influencers by making them paid spokespeople for their products. But, shouldn’t financial advice be coming from one’s primary financial institution rather than a “random,” possibly credential-less person online?

Banks and credit unions need to deliver a personalized experience, backed by data, that empowers account holders with self-service tools, ongoing education, credit score monitoring, and personalized, actionable advice as they work to achieve financial success.

Have their backs. Be a financial wellness partner.

Megabanks like Bank of America (BoA) are offering digital financial wellness tools. Launched in 2020, their Life Plan digital tool is currently being used by 10 million of their account holders, who in turn have added $55 billion to their BoA accounts, as of December 2022. The goal of Life Plan, according to BoA, was to provide account holders with personalized insights into their financial goals and strategies to help achieve them. 

You don’t have to be a megabank to offer these services to account holders. Regardless of asset size, it’s possible for every financial institution to help their account holders get a handle on their finances. It’s an opportunity financial institutions can’t afford to miss. So how can financial institutions deliver a best-in-class financial wellness experience within digital banking? 

Find a partner that offers some of the best tools on the market:

Appealing to a younger generation

These types of tools are especially attractive to Generation Z (Gen Z/Gen Zers). A strong percentage, 20 percent of Gen Z, are somewhat or very likely to use an AI-powered financial advisor, compared with 18 percent of millennials, 17 percent of Gen Xers, and 9 percent of baby boomers, per a Yahoo Finance/Ipsos survey.

Financial institutions could be missing an opportunity with the Gen Z audience. Experts predict a massive upcoming transfer of wealth from the silent generation, baby boomers and Generation X (Gen X/Gen Xers) to not only Gen X and millennials, but to Gen Z as well. Capturing their business now helps hold onto their share of wallet. While baby boomers have more wealth and millennials are greater in population, Gen Zers are estimated to have $360 billion in spending power, and that’s not all. Just entering adulthood and already thinking about saving for retirement, this younger generation is thoughtful about their finances. Another prime area for advice and guidance from their financial institution.

There’s just one complication for financial institutions…Gen Z is also the least likely generation to stay loyal to their financial institution and the most likely to cherry-pick solutions they can find in an instant on their smartphones. For an in depth look at attracting Gen Z account holders, click here.

Strategies to effectively improve digital banking users’ financial wellness
How should financial institutions begin to dig into their account holders’ financial wellness? Using data is the place to start.
By offering these features, financial institutions can demonstrate their care about their account holders’ financial journey, not just today, but into the future. Discover more about Alkami’s financial wellness solutions.
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