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How Financial Education Can Improve Customer Experience

Financial literacy remains a serious problem in the United States. 

Consider these findings:

  • Only 57% of adults in the US are financially literate.
  • As of 2021, more than 30% of US adults did not have enough savings to cover a $400 emergency.
  • A lack of financial education has led to inadequate household and retirement savings and high levels of credit card and student loan debt.
  • Younger demographics are a vulnerable group and an important target for financial education programs.

As a result, 37 states have taken steps to address financial literacy legislation in 2022. Traditional financial institutions are also taking on the challenge of providing financial education through traditional classroom lessons, workshops, and coaching. While these programs demonstrate impact, there is also concern that a growing lack of trust in financial institutions and a general wariness of sales pitches make it harder to reach younger generations with traditional education measures. 

These realities present an opportunity for fintechs to champion financial education in a way that resonates with a new generation of customers. Fintechs are uniquely qualified to play a role in closing the financial literacy gap due to the range of products they offer and the different channels at their disposal for customer communications. 

Why is financial education important?

Without an understanding of basic financial concepts, people are not well equipped to make decisions related to financial management. People who are financially literate have the ability to make informed financial choices regarding saving, investing, borrowing, and more. The Economic Times reports that, for teens, in particular, it’s pivotal to teach the need and importance of money management. (It’s not too early to start considering Generation Alpha as well, as this demographic represents the next big opportunity to create financial literacy at an early age.) Parents can play a large role in ensuring teen financial literacy as well, so it’s important they have the understanding and tools as well. 

Fintechs fulfill this role better than more traditional companies in the sector because they tend to serve mostly digital natives and because personalization and AI are baked into their DNA.

Customer loyalty can be boosted through secure and personalized conversational banking by sending financial tips and recommendations to users depending on their demographics, behavior, and lifestage.

How technology is improving financial literacy 

The pandemic has fueled increased interest in digital banking, even among those who previously were regular branch customers. As a result, on average, one in three digitally active consumers uses two or more financial technology services

Banks have traditionally understood the importance of personalization in terms of understanding where consumers are in their life stages, and therefore what products might be appropriate to them. It wouldn’t make much sense to target a person who is near retirement age with offers on how to reduce their student debt burden. 

But thanks to technology, it’s never been easier to:

  • Improve the customer experience through personalized, data-driven offers based on life stage and other demographics
  • Build loyalty through engagement on the channels customers most prefer
  • Take advantage of increased reliance on mobile apps
  • Enable security measures such as two-factor authentication, biometric authentication, and other forms of online verification

How fintechs are setting the pace for financial education

Here are some ways fintechs are helping to promote financial education to their customers.

Mobile-first experiences

There’s ample evidence pointing to the popularity of mobile apps, but just in case you like things quantified:

If you have something you want to communicate to your customers you’d better have a way to do it through a mobile app! Most fintechs are mobile-first technologies that were designed around app usage, rather than figuring out how to adapt existing services to a mobile environment. It is for this reason that many traditional financial institutions choose to partner with fintechs to digitize existing products, services, and operations. 

Different content for different channels

There are a host of channels that fintechs are using to transmit financial knowledge to their users in
ways that are seamless, secure, and engaging. The key is to make the information relevant to a user’s
situation – for example, if the user is traveling, do they need to learn about foreign transaction fees?   

Some of the channels enabled by digitization include:

  • Push notifications –Send quick tips based on specific user actions to their app, including time-sensitive notifications. For example, if tax time is approaching, could a link to an article about new tax rules for the year be helpful? (Encourage users to enable push notifications for your app in their smartphone settings.) 
  • Chatbots – Because chatbots are based on two-way conversation, they’re ideal for sending quick financial quizzes with multiple choice answers and explanations for both correct and incorrect answers, money-management tips followed by “Any questions?”, and an option to press 1 to continue, 2 to speak to a live operator, etc.
  • WhatsApp – Use this platform to answer questions about finances, either manually with live service agents and specialists on standby, or with the help of chatbots that can answer the most common questions customers have, such as how to find their latest statements or learn about low-interest loans.
  • SMS – Provide news updates related to the economy, interest rates, and banking news that your customers would appreciate, along with links for further information.
  • Emails – Here is where you can provide more in-depth, personalized guides, charts, or tools that can make a difference to your customers’ financial life. These can be targeted, for example, if a customer downloads a guide for first-time home buyers, content that explains how mortgages work would be relevant.

Fintechs and mobile-first companies understand that financial communications don’t have to be stodgy and
rigid. A tone that is friendly, understandable, and light, especially when engaging through mobile
channels, is likely to resonate with today’s digital savvy customers.

Segmentation and personalization to contextualize content

When communicating  financial education to customers, it’s important to speak at the level of sophistication
of your audience regarding the market, your products, etc. Before sending educational messages through any channel, it’s essential to segment your customers so that the messages have context and are more
relevant to their needs.

To properly segment your customers, identify:

  • What is the customer’s life stage?
  • How long have they been a customer?
  • What products or services have they purchased from you in the past? 
  • What is their monthly income?
  • What are their financial goals?
  • Are they a credit risk or do they make their payments on time?
  • What content has the customer reviewed on your website/app?

Having a unified, omnichannel database allows you to segment users to detect behaviors and patterns that can help you target communications. Understanding a customer in depth and knowing the details of their financial situation will give you insights into what content to share with them. Omnichannel solutions go even further and allow you to create educational chatbots, visualize unified data, understand each customer’s unique journey, predict behaviors, and have all the communication channels you need in one place.  

See conversational banking in action

Check out how we helped Reflect improve their customer engagement.