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What It Costs To Target Today’s Financial Consumers

The CFPB looked at where consumers get information driving their financial decisions, and how much money is spent in the U.S. to provide that information. Now the big question remains: what’s the ROI of these investments?

The Consumer Financial Protection Bureau (the CFPB) looked at the information sources consumers are exposed to when they make financial decisions. To understand the wide range of information sources consumers could be exposed to in making financial decisions, the CFPB commissioned a study of the size and scope of the financial information field. The results give an overall indication of the relative amounts spent in the U.S. on financial education and on the marketing of certain types of financial products.

The CFPB divided financial information into two categories: financial education and financial services marketing.

In the U.S., billions of dollars are spent on financial industry marketing efforts, about 25 times more than is spent on financial education. The study found that approximately $670 million is spent annually on providing financial education by federal, state, and local governments, financial institutions, nonprofit organizations, charitable foundations, and others. At the same time, the financial services industry spends approximately $17 billion annually marketing consumer financial products and services (not counting marketing of products related to retirement, college loans, and other investments).

The $670 million spent by government and civic organizations amounts to $2 per person per year on financial education. In comparison, the $17 billion in financial services marketing translates to about $54 per person per year.

( Read More: Financial Marketing Budgets – Woes, Worries & The Sweet Spot )

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What the Financial Industry Spends on Marketing

The CFPB found the total amount spent annually by financial institutions and other financial service providers on consumer financial products and services, including both awareness advertising and direct marketing, is approximately $17 billion.

Financial services providers spend approximately $5.5 billion on awareness advertising annually. Awareness advertising includes delivering general promotional messages not intended for immediate sales of products, through channels such as television, radio, newspapers, and the like.

The CFPB found that awareness advertising spending on financial products and services broke down by media type in the following way:

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Awareness advertising can also be broken down by product type. More than 40% of the approximately $5.5 billion spent on awareness advertising is spent on marketing credit cards. When the marketing of other products such as mortgages and vehicle loans are added, more than half of awareness advertising spending is devoted to credit products, as opposed to other banking and financial services.

24% of awareness advertising was related to banking services (including checking, savings, and general banking promotion). 19% was spent on advertising related to other services (including ATM networks, credit counseling, check cashing, and consumer financial promotions)

Direct Marketing

Financial service providers spend approximately $12 billion on direct marketing annually. Direct marketing includes such channels as Internet display advertising, direct mail and other methods aimed at prompting individuals to make an immediate purchase or generate a lead. Direct marketing spending on financial products and services can be broken down by media type:

  • 44% internet display and search
  • 16% direct response TV advertising
  • 22% direct mail
  • 8% direct response print ads
  • 4% social networking
  • 2% direct response radio ads
  • 2% marketing emails
  • 2% other methods

( Read More: 5 Things You Should Know About Credit Union Marketing Budgets )

Financial Education Spending in the Public and Private Sectors

The CFPB took a one-year snapshot of spending in the United States on financial education. For the purposes of the study, the CFPB defined “financial education” as follows:

Financial Education represents a process of lifelong knowledge and skills development required to achieve financial literacy, learn to mitigate financial risks, protect assets and ensure on-going effective management of one’s savings, credit, debt, housing and other resources to maximize financial well-being of individuals and society.

They included services such as housing counseling, credit counseling, school-based financial education, financial counseling and coaching, and community-based financial education.

Federal Government. The federal government spends approximately $230 million on financial education; of this total, approximately $130 million is spent on direct provision of financial education. The remaining $100 million is spent on supporting services around financial education, including services such as grants and contracts to other organizations (including those that directly provide financial education), technical assistance, training, and research.

Financial Institutions. Financial institutions spend approximately $160 million on financial education. Of this total, approximately $31 million is spent on direct provision of financial education. The remaining $129 million is spent on supporting services around financial education, such as funding to other organizations (including those that directly provide financial education), technical assistance, training, and research.

State Governments. State governments spend approximately $67 million on financial education. Of this total, approximately $7 million is spent on direct provision of financial education. The remaining $60 million is spent on supporting services around financial education, including services such as funding to other organizations (including those that directly provide financial education), technical assistance, training, and research.

Municipal Governments. Municipal governments and school districts together spend approximately $46 million on financial education. Of this total, approximately $31 million is spent on direct provision of financial education. The remaining $19 million is spent on supporting services around financial education, such as funding to other organizations (including those that directly provide financial education), technical assistance, training, and research.

Private Philanthropies. Philanthropic giving related to financial education exceeds $40 million. All of this funding falls into the category of supporting services for financial education, as opposed to direct provision of services.

Non-Profit Organizations. Non-profit organizations spend approximately $550 million on financial education; of this total, approximately $472 million is spent on direct provision of financial education. The remaining $78 million is spent on supporting services around financial education, such as grants, training, research, and other services.

Download CFPB Report

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