According to a poll conducted by Pew Charitable Trusts, out of 7,000 U.S. households: 57% don't consider themselves ready for a sudden financial setback; 55% say they break even or spend more than they make each month; and 1/3 have no savings—at all. Shocking, isn’t it? Financial literacy is a topic that often slips through the cracks. That’s why as a financial institution, it’s essential to educate your customers. You’ve heard the saying “knowledge is power,” and in this case, the knowledge that you pass on to your customers can help your bottom line. And, since you have their best interest in mind, it will also allow you to build trust and customer loyalty.
So, how do you start educating your customers?
First, it's important to realize that teaching people about their personal finances isn't like teaching grade school where everyone progresses at the same pace. Some of your customers may be very knowledgeable about their finances and some less so—but that’s okay! Stop and think about the different life events that your customers may be experiencing. Some could be opening a checking account for the first time, while others are looking for ways to grow and increase their assets. And, many could be taking significant steps toward retirement. The opportunities for them to learn are endless, and luckily, they have you there to help them every step of the way.
Engage with your customers. If you aren’t sure what they want, ask them! Now, you can use this priceless bit of information to create educational content. Did you know that in the retail banking industry, customers who are fully engaged bring 37% more annual revenue to their primary bank than do customers who are actively disengaged? Fully engaged banking customers often have more products with their financial institution, from checking and savings accounts to mortgages and auto loans. Plus, they have higher deposit balances in their accounts than less engaged customers. Cultivate your customer relationships by offering financial literacy resources that many are starved for, and your time and effort will pay off in a big way (i.e., customer loyalty, stronger relationships with a variety of generations, and increased sales).
We’ve already confirmed that there’s a lack of financial literacy in today’s U.S. households and that education can help to improve this situation, but how can you incorporate financial literacy with your core products? It can be difficult to know what resonates with your specific consumer base, so test different methods. Offer free webinars designed to help set a solid path to financial wellness or provide free worksheets for topics like budgeting, financial goal planning, or paying off debt. If you’re looking to take a more transparent route, try offering tips and facts on your website, in your lobby, or through social media.
Although building loyalty through financial literacy may not seem that difficult of a task, in our day and age, it’s becoming more and more competitive as we fight for our customers' attention. Our everyday lives have become increasingly more digital and now, more than ever, financial institutions need to focus on building and strengthening their customer relationships while thinking progressively and keeping ahead of the times—and the competition. Digital education is a powerful tool that can be accessed frequently in consumers' daily activities. And, if they don't get it from you—their trusted partner—trust that they will get it somewhere else. By leveraging digital channels, you can reach the digitally savvy customers, like Millennials, who prefer to handle some or all of their banking transactions online.
Building loyalty, trust, and credibility with your customers is something that all financial institutions strive for, but many are missing the mark and falling short. Financial literacy just may be the secret weapon to reaching those goals. Create an accurate and clear picture of what you envision for your customers. Start by answering these three questions:
Where do you stand now when it comes to customer loyalty?
Are you providing the education that is essential for your customers to make responsible financial choices?
Where do you see your institution in the future?
While financial literacy is not the be-all and end-all of financial well-being, it does make a significant difference when helping build the confidence, skills, and knowledge that your customers need to effectively manage their finances.
What is your financial institution doing to educate your customers? Let us know in the comment section below.