The cost of living has increased approximately 8.6% over the last year. Americans averaged $90,460 in debt (including credit cards, personal loans, mortgages and student debt) in 2021, according to debt.org. Federal interest rates rose dramatically to combat a 40-year high on inflation.
This is the sobering financial reality that consumers are facing today. As a result, new research from MX shows that 40% of U.S. consumers surveyed believe their current financial situation has changed for the worse due to rising costs compared to last year.
Half of the respondents also say they are saving less money today, while 32% say the amount of debt they owe has increased. Across generations, Gen Z may be most optimistic in the face of these economic challenges, while the majority of Baby Boomers are less confident.
The State of Customers Today:
2022 has set consumers back — big time. More people are saving less money and taking on additional debt.
It’s no surprise that the research also shows exactly half of respondents agree that thinking about money makes them anxious. And nearly half (47%) agree that money is their primary source of stress. How can financial institutions and fintechs help?
Previous MX research shows that consumers said level of trust and security was their top factor when choosing a financial provider. Trust may also be the key to keeping customers for the long-term and supporting them through ever-changing financial situations.
3 Ways Banking Providers Can Ease Financial Stress
Open finance gives financial institutions and fintechs greater access to consumer financial data, enabling them to innovate and meet the needs of consumers in many ways, including three areas that the research data shows can make a difference for consumers:
1. Proactive and personalized support
When asked where they would go to get help with a question about their finances, only 29% of respondents said they would turn to their primary financial provider. This points to a clear opportunity for financial providers to become a trusted resource in helping consumers reach their financial goals. If they don’t, consumers may turn elsewhere.
Financial stress fundamentally changes consumers’ expectations of their financial institutions. Rather than staying with the institution they’ve had for years, they are more open to looking for an institution that will provide the tools they need to succeed financially.
These solutions can take the form of financial tools and apps that help them better manage a budget, pay down debt, or provide proactive notifications and personalized insights to help them better manage their finances. In fact, MX’s previous research showed that 70% of respondents expect their financial services providers to give them personalized notifications and insights. At the same time, 63% want their financial services providers to proactively help them better manage their finances.
Investing in solutions that engage consumers, enable increased financial wellness, and provide access to real-time insights will garner the most loyalty among their customer base.
2. Protecting personal data
When money-related stress is at the forefront of your mind, the last thing you want to worry about are concerns over fraud and risk. Two-thirds (67%) of respondents in the MX survey say they trust their financial providers to protect them from fraud and other security risks. In addition, 69% of those who have a primary financial provider say they trust them with their personal data.
However, there is still an opportunity to do more to safeguard consumers. One in four respondents say they have been victims of fraudulent transactions on a financial account in the past two years.
A Scary Trend:
The number of customers who have been a victim of fraud in the past two yearsOne in Four
3. Translating transaction data with context
Data without context means nothing for consumers. When asked if they have seen a transaction on their financial accounts that they didn’t recognize at first glance in the past two years, more than a quarter (27%) of respondents said it happens sometimes or more frequently.
An unrecognized transaction on their account can be a source of anxiety for consumers — whether it means not recognizing the purchase or wondering if someone has unauthorized access to their account. This highlights the importance of data cleansing and categorization to translate unclear strings of transaction data into clear information.
Golden Opportunity for Financial Institutions
Consumers aren’t going to give their trust to institutions that only provide basic financial functions like balances, transaction history and monthly statements. Amid financial hardship, consumers are looking for — and expecting — a more personalized banking experience.
Open finance is the vehicle that can enable financial institutions and fintechs to deliver the next-level experiences. It is about extracting more value from the data so that you can deliver exceptional customer experiences, discover new business models, make smarter decisions, mitigate fraud and risk and support overall financial wellness.
MX powers the open finance economy by unlocking the value of financial data with secure and reliable financial APIs. MX enables trusted access to financial data and makes it actionable for intelligent decisions and personalized money experiences.