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Financial Fragmentation

Moving the Focus from Financial Literacy to Financial Health

Allison Vielhaber
Apr 12, 2023

Largely celebrated as a time to share financial calculators and tips on how to budget with the masses, April has been known as financial literacy month since 2003 with the goal of teaching and reminding Americans how to establish and maintain healthy financial habits. 

Unfortunately, financial literacy alone is not enough. 

As explained by Jennifer Tescher, CEO of the Financial Health Network, “Financial literacy programs don’t work. Financial education rarely leads to lasting knowledge gain, and it does nothing to change behavior.”

Tescher explains that the idea that we need to simply teach people to be more financially healthy, inadvertently suggests they aren't trying hard enough, or that it's all their fault. In this era of extreme inequality, increased income volatility, and frayed safety nets, it’s borderline insulting to suggest knowledge and behavior alone are the main causes of people’s financial challenges.

Making a Difference

With so many deeply ingrained systemic issues at play and only 31% of Americans considered financially healthy, making an impact on the financial lives of your accountholders can feel like an uphill battle. Yet, it’s one worth fighting when you take into account Americans’ financial health ties directly to the health of your balance sheet and income statement.

Below are three ways you can go beyond financial literacy to facilitate the behavioral changes that make a difference to your accountholders’ financial health (and simultaneously protect your bottom line):

1.    Become a financial hub. Financial fragmentation has created challenges for accountholders and financial institutions alike, as people use an increasing number of tools to manage their financial lives. 

For your accountholders, this fragmentation challenges their ability to understand their full financial picture and make informed decisions about necessary behavioral changes. For banks and credit unions, it means you’re unable to provide solid advice or capitalize on opportunities to deepen your relationships.

To combat this challenge, use open APIs to give your accountholders the ability to aggregate their external accounts. When you supply the opportunity to aggregate financial data within the digital banking experience and encourage its use, you create a 360-degree view for your accountholders and your institution.

2.    Offer the right tools. To be considered financially healthy, your accountholders must be able to save, spend, borrow, and plan for the future. To take part in that journey, you must offer the right tools.

Most accountholders prefer to give business to their existing financial institution if help is available when and where they need it. But if a process is too slow, includes too many steps, or is simply easier to accomplish somewhere else, accountholders are likely to fragment their relationship with you in favor of convenience.

To ensure you’re offering the right tools, take the time to map your solutions to your accountholders’ needs. This will help you identify gaps in your ability to serve those looking for better ways to save, spend, borrow, and plan. Furthermore, consider performing an experience audit to identify points of friction that can be costing you relationships and inadvertently sending your accountholders to third-parties for help. 

As a reminder, you don’t need to grow all your financial solutions in-house. Strategic relationships with fintech providers can help you embed solutions you may not be able to offer on your own. Look for solutions that can benefit your accountholders in their quest to attain financial resilience and further your desire to maintain relationships and share of wallet.

For example, credit monitoring and coaching, investments, or gamified savings – many of which have already built integrations into popular digital banking platforms like our Jack Henry™ Banno Digital Platform™ –making it fast and easy to deliver behavior-changing tools to your accountholders.  

3.    Defend your accountholders and strengthen trust. As fraudsters become more sophisticated, it becomes harder to protect your accountholders and their financial data from losses.

While your high-tech cybersecurity and fraud prevention solutions work their magic behind the scenes, bringing conversations about best budgeting tips and practices, shared responsibility, and common dangers to the forefront of your accountholders mind is often overlooked. 

Make it easy for your accountholders to learn about fraud prevention on your website or within your digital banking app. Educate vulnerable populations and caregivers about common scams and ensure your front-line employees are adept at recognizing and responding to red flags. 

When you make the work you’re already doing to defend your accountholders public and facilitate open conversations about security, you’ll strengthen trust, help your accountholders protect themselves, and avoid the financial stress that comes with fraud losses at the same time.

Be the Change This Financial Literacy Month

As you navigate financial literacy month, challenge those in leadership at your institution to think more broadly about supporting the financial health of your accountholders – beyond the annual reminder to save cash by skipping a latte or two each week. 

Look for opportunities to partner with local agencies, like Skyla Credit Union did to help fight the financial health crisis one person at a time. 

Consider taking a deeper dive into supporting the financial health of your accountholders and your institution by developing a comprehensive financial health strategy that leverages technology and human connection to drive actionable change.

And remember … becoming a financial hub, offering the right tools, defending your accountholders, and strengthening trust will help you empower the financial health of your accountholders and protect your bottom line.

Learn more about protecting your bottom line and empowering financial health by creating a comprehensive financial health strategy.

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