Imagine walking into a grocery store and your bank’s mobile app instantly pings you with an alert. It says that you typically spend $100 when you shop at this particular store, but that you have already spent $450 of your monthly $500 grocery budget. It then warns you that, if you want to stay on budget, you need to either spend less money elsewhere this month or postpone a savings goal.
It’s an entirely hypothetical situation, but in the view of some banking industry experts, it shouldn’t be.
After all, bank mobile apps already employ tools that track savings, spending and debt. If banks are serious about helping customers better manage their finances, then they should considering ways to marry savings, spending and debt data with emerging technologies to give them a more complete picture of their financial standing, said Tiffani Montez, a senior analyst at Aite Group.
“Tools today don’t really show the relationship between those three things that, of course, lead you to the fourth thing, which is financial health,” she said.
Montez recently co-wrote a report on financial wellness that looks closely at how technology is helping consumers achieve it and where it might be falling short.
Financial wellness, as defined by Aite Group, is the ability to manage one’s finances and meet long- and short-term goals around saving, spending and debt.
Yet for many households, financial wellness remains elusive. A decade out from the financial crisis,
Aite Group surveyed over 5,000 U.S. consumers to better gauge what kinds of financial wellness tools consumers want and when. Respondents said that they are most interested in using virtual financial wellness tools to reduce debt (76%), with achieving savings goals a close runner up (75%) and tracking finances the third most popular option (73%).
Financial wellness tools could include the personal financial management tools many banks have built into their mobile banking apps, as well as direct-to-consumer mobile apps, like Mint or Acorns.
But Montez said those kinds of tools are more like progress reports and don’t work together to give consumers insight into how their choices today will affect their long-term financial wellness. Banks can — and should — do more to give consumers real-time insights they can act on right away.
Today’s tools don’t “provide you any insight as to, had you changed your behavior in certain ways, what that could have meant to your financial picture for that particular month,” she said.
Emerging technologies, notably artificial intelligence, can help make this happen and banks certainly have reams of customer data at their disposal. But legacy core systems can be a roadblock to allowing banks to providing guidance in real time.
“It’s true that [financial institutions] have a lot of data, but the way the data is stored and structured, it’s in silos and it’s not very easy to use that data to create a full financial profile of the customer and then make offers,” said Anju Patwardhan, managing director of CreditEase Fintech Investment Fund.
Another problem is that data is often not easily shareable across different channels and business lines, said Lane Martin, a partner at the consulting firm Capco.
“Financial institutions have uncommon insights with respect to customers and their personal data: where are they spending money, when they receive lump sums of money, where that money goes,” he said. “Breaking down those silos is a real challenge for our clients in terms of how do they share data freely across their own organization.”
Broadly, consumers told Aite Group they want to use financial wellness tools to save money and pay down debt. But the survey also find that priorities vary among age groups.
Consumers 50 and older, for example, are more interested than younger consumers in using tools to understand how they manage their finances and where they could improve.
Younger consumers, on the other hand, are more interested in receiving help with preparing and filing their taxes. They are also more interested in receiving notifications about upcoming bills than older consumers are.
“There is a difference, depending on age, as to the type of capabilities a consumer is interested in. … If you think about messaging and value proposition, you might want to target the tools differently depending on the segment you’re going after,” Montez said.
