This month, a lot of people will receive bills but no payslip. In just three weeks, the coronavirus outbreak has propelled the world economy into a downward spiral – with financial consequences that have already spread from Wall Street through Main Street to households all over the globe. For the Great Recession of 2008, this took three years.
No wonder that governments have scrambled to work out relief plans to contain the economic fallout, while mainstream media is flooded with articles on money management during the coronavirus pandemic. Banks, of course, are bound to play a crucial role in stabilising paralysed markets and consumer confidence.
Here’s how personalisation can help them guide customers through the crisis.
Say it right
As in any crisis, communication is key. Clear, transparent and proactive communication, that is. Let your customers know how they can access banking services through digital channels and what support options are available for those facing COVID-19-related financial hardship. This is no time to be vague or generic. Detailed, timely and personalised content will make or break banks’ crisis communication and management efforts. And most probably, their future. Educating customers on the use of online and mobile banking platforms will go a long way towards building a valued, trust-based relationship well beyond the current crisis.
Map out customer needs
In-person banking might be out of the question, but that doesn’t mean you can’t (or shouldn’t) focus on customers’ personal needs.
Our advice is to segment customers into three groups based on how the coronavirus economy affects their finances. Those who’ve been hit the hardest will be easy to spot with no salary coming into their current accounts. In line with their business strategy and national relief efforts, banks can offer them a rescue loan or some much-needed information on available relief.
Another group will include people who have no problem keeping their heads above water, either because their income has been unaffected or they have enough savings to weather the current economic turmoil. Due to stay-at-home orders, these customers might even be saving more than before and appreciate some advice on where to put their extra income.
A bit harder to spot are those who are likely to face financial hardship further down the road. Using advanced data analytics, however, banks can run peer comparisons and check cash flow patterns to predict looming financial problems. This brings us to:
The 50/30/20 Budgeting Rule
Aka the need-want-save method. The concept was first popularised by Harvard bankruptcy expert and US Senator Elizabeth Warren in her book, All Your Worth: The Ultimate Lifetime Money Plan. The basic rule is to take your after-tax income and allocate 50% to needs, 30% to wants and 20% to savings. It’s nothing new or complicated, but in uncertain times like this even the most budget-conscious customers could use some help with their finances. Not to mention those who live from pay cheque to pay cheque.
Looking at customers’ current balances, spending patterns and upcoming payments, financial service providers can tell how long customers have before their funds run out. And if a customer becomes high-risk, advise them on where to shave off costs. Show customers how to cut back on want-type expenses, such as take-out meals, hobbies or subscriptions. Been there, done that? More often than not, essential spending can be trimmed, too. Help customers find more budget-friendly grocery stores or deals and discounts on their favourite brands.