Message from America to its traditional financial institutions: “We trust you and we have a list of services we’d like to obtain from you that you don’t currently offer. P.S. We’re not going to wait long for you to offer those services. In fact, some of us are already moving to providers who can meet our real needs today.”
This warning can be drawn from research by FICO. Its survey, conducted by Nonfiction Research, found that 86% of Americans say they’re satisfied or very satisfied with their current bank. But that figure is misleading.
In the same survey, only 1% of the sample mentions a banking institution when answering the question, “What is crucial to the future of your financial success?”
Key Insight:
High satisfaction rates give a false sense of security. They just mean that consumers feel traditional financial institutions do well at providing traditional services — same old same old.
The research found that many people would like to see new and innovative services made available that no more than a handful of companies is providing (if that). And one in two consumers would prefer to pay their current banking institution to provide these services than make the switch to some other financial institution, fintech or other provider.
Underlying all this: Over half of consumers surveyed — 53% — say they aren’t on track financially. They don’t necessarily know where they should be, but they sense something’s wrong. 64% of Americans say they have no written financial plan and 36% don’t even have a formal monthly budget.
Financial Angst Makes Consumers Desperate for Innovative Help
The study portrays a country that has become so confused by personal finance that about a quarter of those surveyed — 27% — would pay for “self-driving” budgeting and investing. Further, “banking customers aren’t just open to new services from banks, but open to entirely new business models and ways of paying for service,” the study report states.
Many consumers surveyed admit that they are often trying to match the lifestyles they see portrayed by influencers and friends on social media, to the detriment of their finances. At least one out of four respondents gave the following as being crucial to the future of their financial success:
- Making smart decisions on big purchases 41%
- Developing a healthier relationship between money and happiness 35%
- Handling debt better — using it properly, paying it down 32%
- Determining if they are “on track” for the lifestyle they want — and how to adapt if they aren’t: 30%
- Figuring out how to earn more via a higher-paying job 29%
- Learning the “best practices’ of people who have reached their financial goals 28%
Consumers “are experiencing an avalanche of unmet financial needs,” the report states. “Banks don’t currently offer solutions to these unmet needs, but could.”
Key Insight:
The potential for institutions willing to work at this new call for financial stress relief is vast. The study found that tens of millions of high-earning “mass affluent” people would be willing to pay for services that could solve their headaches, if traditional institutions offered them.
FICO’s report predicts that institutions that develop and market a new generation of personal financial management aids will not only hold onto large portions of their current consumer bases, but also grab share from laggards.
Read More: Tectonic Shifts in Consumers’ Life Views Financial Marketers Must Grasp
The Help That Americans Want Their Traditional Institutions To Provide
A white paper connected to the study makes an uncomfortable point about current financial innovation. Slick as much of it is, it sometimes makes it easier for consumers to go off their financial rails. Such services have “removed a lot of the friction traditionally associated with big purchase decisions,” the paper states. “This is great for merchants, but not necessarily for consumers who are looking to balance their desire for convenience and instant gratification with the need to stay on track financially.”
An example: “Think of Peloton partnering with Affirm to offer ‘buy now, pay later’ loans at the point of sale.”
Underscoring the urgency of devising these services instead of merely putting the usual offerings out there — or abetting irresponsible behavior — is consumers’ readiness to move.
Wakeup Call:
70% of banking consumers surveyed say they would be “likely” or “very likely” to open an account at a competing institution if it offered them help managing their finances.
FICO asked more specifically about the guidance consumers want. This table drawn from the report gives a sense of the huge potential of these new ideas:
Many Americans would pay for financial services not offered currently by traditional banking institutions
| Percentage of Americans who would pay |
Number of Americans who would pay |
|
|---|---|---|
| Help negotiate money situations on your behalf | 29% | 71 million |
| Self-driving budgeting and investing | 27% | 66 million |
| “Can I afford it?” advice on big spending decisions | 27% | 66 million |
| Advice on how to ask for/earn more at current job | 25% | 61 million |
| Weekly emails that help deal with status anxiety, social media, and the tempation to compare yourself to others | 21% | 51 million |
| Learning how your financial status stacks up against your peers | 19% | 47 million |
Source: FICO Bank Customer Study
The table below gives a sense of how flexible people would be about payments if they could only obtain services that will help them with their money challenges rather than accounts that merely provide ways to save, store, manage or move funds:
Americans are open to different ways of paying for new banking services
| Percentage of Americans who would pay |
Number of Americans who would pay |
|
|---|---|---|
| A monthly subscription for unlimited usage | 45% | 110 million |
| A one-time fee for lifetime access | 28% | 69 million |
| An hourly rate for the work | 14% | 34 million |
| Using credit card points | 13% | 32 million |
Source: FICO Bank Customer Study
Read More: Consumers Threaten to Bail If Banking Providers Can’t Improve Digital CX
How Traditional Institutions Can Meet New Needs
The report gives five recommendations for banks and credit unions trying to move forward on this new front:
- Facilitate better decisions, not just transactions.
- Overcommunicate, because consumers want constant assurance that they are on track with their money. And they want proactive input when they aren’t.
- Create a community. “Financial services (unlike social media) can be collaborative (not competitive) and encouraging (not envious).
- Advise on debt. Even now, debt is relatively easy to build. Consumers need assistance understanding when and when not to borrow to meet their goals.
- Test new business models. Consumers will pay for services that meet these objectives, but banks and credit unions will have to find the right price points.