How Financial Marketers Can Come to Grips with the Growing Wealth Gap

In the wake of COVID-19, consumers have become more divided economically than ever. It’s vitally important now for banks and credit unions to acknowledge these divides and design banking products around sharply divergent consumer needs. Here's what several leading institutions are doing.

Although the wealth gap has been growing for years, COVID-19 and its economic fallout has significantly deepened those wounds. Income inequality in the U.S. is as its highest level in more than 50 years. With the federal minimum wage at only $7.25 and women making just $0.81 for every dollar a man makes, the road to progress will be rocky at best.

The economy is rebounding overall, but that performance is uneven, with unemployment still hovering close to 7% as of October. Consumers with invested assets are more likely to have a positive financial impact from the events of 2020, while those without a foothold in the stock market missed out on a period of unexpected growth. Even worse, those who lost their primary source of income, even for a short period of time, will be set back even further if the pandemic continues to wreak havoc on the economy.

Notably this recession has had the biggest impact on women — particularly Hispanic women, immigrants, and young adults with less education. According to Mintel research, “Pink-collar” occupations (e.g., caregiving, teaching, and hospitality) were hit ever harder by the lockdown phase of the pandemic. And Catalyst research reports that women of color are the most likely group to hold an essential job, which are often low-paid and do not provide and sick pay benefits.

Given this growing economic diversity, financial marketers have to find new ways to innovate traditional products that will resonate with this next era of consumerism. Here we look at both sides of the economic coin. First, with those fortunate enough to be on the plus side of the curve.

Marketing to the ‘Haves’

Consumers who have maintained at least one steady source of income throughout the pandemic while simultaneously cutting back on spending in areas such as travel, dining and entertainment can be considered lucky members of the “Haves.” Being in this fortunate financial position has enabled many consumers to consider financial options that may not have been available to them prior to 2020, such as increasing their savings, paying down debt or even investing. Financial institutions of various stripes have been vying for a piece of this segment.

Account-opening incentives are higher than ever
High-yield savings rates are nowhere near where they used to be, but many financial institutions are trying to make up for that with account-opening incentives. Key Bank, for example, mailed offers with a maximum incentive of $500 and a relatively low deposit requirement. Recipients had the option, for example, to open a Key Advantage Checking account or Key Privilege Select Checking account and make one single direct deposit of $1,000 or more within 60 days of account opening.

Key Bank 500 dollar offer

Citibank made a splash in the mailbox with an account-opening offer sent to current credit card customers for up to a $4,000 cash bonus. But there was a pretty hefty deposit requirement attached. Citibank’s tiered schedule was outlined in the campaign, with incentives ranging from $50 for a $10,000 to $24,999 new-to-Citibank deposit all the way up to $4,000 for $1,000,000 or more in deposits and minimum balance.

Citi 4000 cash bonus offer

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Innovative digital deposit products on the rise
Alternative bank HMBradley is one of the newest examples of a brand looking to reinvent the way consumers save. This hybrid checking/savings account boasts up to 3% APY as a reward for better saving habits. At the end of every quarter, HMBradley calculates a customer’s savings rate and awards an APY based on that level of saving. A 20% savings rate or more earns the highest APY of 3% — enticing compared to the industry standard of 0.08%.

The hybrid account is connected to a rewards credit card offering 3% cash back on a customer’s top spending category each month. According to an HMBradley email, “You’ll earn 3% cash back on your top category each month, 2% back on your second biggest category, and 1% on everything else. The rewards adjust to your spending, so don’t worry about going out of your way to earn cash back.”

HM Bradley credit card offer

Change the rate conversation
Ally Bank, notoriously vocal about its impressive savings rates that defy industry standards, had to pivot in 2020. In an effort to steer attention away from its declining rates, Ally changed the conversation and focused new marketing efforts around its investment products. Ally also prominently features women as the subject of its marketing imagery, utilizing a message of choice and flexibility. The digital-only bank also highlights the opportunity to select the investment strategy that most aligns with the customer’s investment style, separating out its Managed Portfolio offering from the Self-Directed Trading option.

Ally Bank managed portfolio

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Marketing to the ‘Have Nots’

The financial needs of consumers on the other side of the economic coin — notably those who lost their primary source of income during the pandemic or are financially worse-off as a result of it — their financial needs are going in a much different direction than the “Haves.” A number of financial institutions have recognized that the needs of this segment can be met effectively and creatively.

Debit cards get a contactless spin
Any time there’s an economic downturn or financial uncertainty, many consumers tend to favor debit over credit, and that has been the case in the COVID recession. Visa predicted a $100 billion annual shift to debit cards as a result of the pandemic. Debit cards can offer some of the same contactless benefits as a credit card, and Comperemedia, a Mintel company, has observed debit taking a more prominent focus in marketing campaigns this year, especially with a touch-free spin.

In direct mail offers sent in the fall, Capital One, for example, emphasized the “contactless convenience,” $0 fraud liability and instant card lock feature on its 360 Checking debit card, positioning it as the best card for “everyday purchases.”

Capital one postcard contactless card

Wells Fargo, on the other hand, has been utilizing social media for most of its debit card marketing with posts that positioned its contactless debit card as an easy way to shop and bank “without missing a beat.”

Wells Fargo contactless card

Microloans offer timeliness and pricing transparency
Indicative of the growing consumer need for flexible lending options that can bridge the gap to their next paycheck, microloans are another product that’s seeing increased growth in 2020. U.S. Bank was an early entrant in this space with its Simple Loan product. Cash App is another brand offering these small-value, short-term loans, anywhere between $20 and $200 for a flat 5% fee.

Bank of America is the latest to offer microloans to customers, announcing its intent to take on payday lenders by offering customers $100 to $500 loans for a flat $5 fee. The loan, also referred to as a cash advance, must be paid back within 90 days, and only customers who have had a checking account with the bank for at least a year are eligible to apply.

As we continue to see growth in this space, communicating convenience and easy-to-understand pricing will be paramount for acceptance.

BNPL demand surges with online shopping
Amid the lingering economic instability we are experiencing, consumers need and expect more payment flexibility, and buy-now-pay-later (BNPL) services (also called POS lending) deliver just that. According to Mintel, 50% of consumers are open to using BNPL options to purchase expensive items online.

Given the widespread movement toward online shopping, it should come as no surprise that the bulk of the advertising spend for BNPL services is concentrated in social media. For example, Klarna and Afterpay, two of the leading providers of POS lending, spend more than 50% of their marketing budgets on Instagram alone, according to data from Comperemedia.

Brands that are able to pivot strategically, as the above companies have done, and lean into the reality of a very divergent marketplace will have a greater chance of reaching consumers with the right product, driven by the right message and received at the right time, whether those consumers are “Haves,” Have Nots” or anywhere in between.

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