How Virtual Financial Coaching Can Fuel Growth for Banks & Credit Unions

The long-established advantages held by community financial institutions are eroding. Many younger consumers now equate good service with good technology, not people. To create sustainable differentiation, smaller institutions can embrace affordable technology that addresses a growing need among consumers: financial wellness.

Why should a person open an account or apply for a loan with a credit union or community bank? One of the most cited reasons from experts such as NerdWallet and U.S. News is that these institutions have stronger customer service. However, the customer service differentiator is debatable.

The days where great service meant short branch lines and a staff that knew the customer’s name are gone. Today, the digitally native Millennial and Generation Z consumers — the largest demographic — define winning service as “leading technology.” Innovations such as cardless ATMs, along with Wells Fargo’s Control Tower dashboard, and Bank of America’s digital assistant Erica trump relationship banking. In fact, for younger generations, calling a customer service number or walking into a branch is seen as “too much effort” and “forced person-to-person interaction.”

Community banks and credit unions face a systemic scale disadvantage in the technology acquisition race with mega and regional banks that have multibillion-dollar IT and innovation budgets. This disadvantage has fallen more heavily on credit unions. The University of Michigan American Consumer Satisfaction Index (ACSI) has ranked banks ahead of credit unions for the last two years. With branch traffic most likely permanently depressed, credit union’s member service disadvantage will only grow.

Community Financial Institutions Must Walk the Talk

Some believe that credit unions and community banks, with their key competitive differentiators neutralized, face an existential crisis. But they need not panic. There is a defensible, winning strategy that builds on their historic strengths in deeper relationships and better service.

That strategy, however, requires community financial institutions to double down on their stated mission, which usually says something like: “A lifelong partner in customers’ financial success” or “Committed to member financial well-being.”

Building a long-term relationship and delivering guidance to help people achieve their financial goals is the ultimate customer service.

A Significant Edge:

A J.D. Power study noted that overall customer satisfaction increases 229 points (on a 1,000-point scale) when customers are offered advice that completely meets their needs.

When it comes to helping people achieve their financial goals, community financial institutions are better positioned than large banks to deliver that promise.

In the case of credit unions, a commitment to member financial wellness and goal achievement is typically in the organization’s DNA. They are quick to invest in financial wellness and education efforts. U.S. News agrees, noting that credit unions lead in financial counseling and financial literacy resources. By contrast, the largest banks, which command the majority of market share, are shackled with Wall Street’s quarterly earnings yoke.

Prior to my current role, I ran a team of financial health coaches at a megabank. Even though the team was beloved by customers, earning sky high satisfaction scores, and was featured in the bank’s brand advertising campaign, I had to battle to keep the team alive. Finance executives wanted proof of a positive short-term ROI, while compliance executives worried that bankers could go off-script, introducing too much risk. Ultimately, the team was disbanded.

Ensuring that products and channel touch points support consumer financial goal attainment is a heavy lift, but one that does not require community banks and credit unions to recklessly throw resources at the objective. They can make major strides implementing this defensible strategy by deploying the latest technologies, a customer segmentation strategy, and the unique capabilities of each channel.

Focus on Advising Priority Segments in Branches

Community financial institutions can exploit their relationship advantage by delivering ongoing in-person advice and guidance to their priority segments (e.g., affluent or emerging affluent). In the past, staff turnover, compliance risks, and the inherent complexity of ongoing financial guidance has made this a difficult strategy to execute. Advances in AI-powered digital engagement solutions enable branch specialists to execute a first-rate financial check-up.

The artificial intelligence guides the specialist — based on CRM data and the person’s check-up answers — to ask the next best question. The result is a succinct, yet holistic assessment where the AI recommends the next best product to help consumers achieve their financial goal. Equally beneficial, all branch specialists can execute like top performers.

Reimagine Digital Channels with a Virtual Advisor

The banking industry’s usual sales strategy for the digital channel is to create online brochureware and require consumers to read all the copy and determine the best product for themselves. Just as in the branch channel, AI solutions offer a better customer experience. The same tool that guides staff in the branch channel can serve all customers as their “virtual advisor,” delivering financial check-ups and next best product recommendations.

The good news is that AI-powered digital engagement solutions are changing the landscape and enabling credit unions and community banks to meet the challenge of improving consumer financial well being. These low cost and quick-to-implement solutions deliver advice that is personalized (driven by conversational AI), ongoing, and always compliant (bots do not go off script).

Will people use a fully automated digital solution to improve their financial situation? Looking at the available data, the answer is yes.

Getting People What They Want:

Number of consumers who are interested in using a virtual financial coach to help them meet financial goals, according to Aite Group

Commonwealth, a nonprofit organization working to strengthen the security of financially vulnerable people, concluded in its research that conversational AI plays a pivotal role in improving financial security. It found that people who experience financial hardship are three-times more likely to use a financial app than people that did not encounter financial difficulties. In addition, 69% of the individuals who use GreenPath Financial Wellness’s Virtual Financial Coach to help them review their credit report find an error and use the coach to dispute the error, proving that digital solutions are not only used, but also deliver tangible value.

The environment has possibly never been more threatening to community financial institutions. The good news, however, is that they can use their current strategic disadvantage as a motivation to boldly move to a more defensible strategy — one where they lead the financial industry with a value proposition that delivers the advice people need to secure financial wellness and achieve their long-term financial goals. Given advances in AI and digital engagement solutions, the investment to implement such a strategy is manageable.

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