Put that foam roller away, there’s a new fitness trend in town. It doesn’t require a gym but it does require plenty of strength, and we’d all better hop on it as soon as possible. We’re talking about financial well-being, of course, the lack of which can take as much toll on consumers’ lives as physical unfitness. Researchers have found that worrying about debt increases people’s stress levels while decreasing their resilience against mental health problems, such as anxiety and depression.
But what is financial fitness anyway and why should we care – no matter which side of the bank counter we’re sitting on?
“In the simplest of terms, financial well-being can be defined as being debt-free. Or maybe even having some money put away for future plans or a rainy day,” József Nyíri, W.UP’s vice president of business development, says. Which begs the question: why would banks want to help people get there? After all, charging interest on loans is how retail banks make their money.
“To get the full picture, we must look at financial fitness from a broader perspective,” József points out. According to EY, financial well-being is “the ability to make confident, well-informed money-related decisions resulting in financial security for both the short and long term.”Gallup’s researchers have shown that customers expect banks who champion financial fitness to understand their financial situation, help them reach their goals, keep an eye on their needs and offer solutions to the challenges they face, among other things.
Those who tick these boxes are eyeing an NPS of 94%, no less.
Just like with workout programmes, however, one size does not fit all when it comes to getting people’s finances into shape. Financial expert Dani Pascarella writes on Forbes: “I’ve worked with young professionals who are making six figures but are drowning in credit card debt. I’ve also worked with clients who are earning a very modest salary yet have a fully stocked emergency fund, are debt-free and are investing for retirement and other goals.” That’s where personalisation at scale comes into the picture.
“Banks are sitting on an insane amount of data that, if used right, can turn them into a powerhouse for financial guidance and responsibility. Machine learning algorithms can tell which customers need help with avoiding late fees, paying back loans or saving up for a future investment,” József explains. For many of them, even the simplest advice could make a huge difference. One of the most common questions UK debt solution provider PayPlan’s advisers get is how to set a budget,the Financial Times reports. In fact, 81% of British adults say that budgeting is the no. 1 financial skills they wish they had been taught in school.
Financial wellbeing use case examples of W.UP
“There are a number of uses cases for banks to help customers stay on top of their finances, like showing them how much money they can safely save each month or which expenses are mandatory and which are optional and may be lowered,” József says. He adds: “Most people with problem debt had actually struggled with making ends meet for years before getting into serious financial trouble. Based on the data banks have on customers and their spending habits, they can see it in a matter of months if someone’s finances are going downhill and they have a responsibility to warn them.”