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  • Writer's pictureRoy Urrico

FIs Must Help Consumers Through Financial Concerns: TransUnion White Paper

Source: TransUnion white paper, "Overlooked Areas of Effective Financial Wellness Strategies."

By Roy Urrico

Finopotamus aims to highlight white papers, surveys, analyses and reports that provide a glimpse as to what is taking place and/or impacting credit unions and other organizations in the financial services industry.

A recent second quarter of 2023 Consumer Pulse Study from TransUnion, a Chicago-based information and insights company, revealed sustained financial uncertainty among Americans. Nearly half (46%) reported their incomes were not keeping up with inflation and the vast majority (79%) cited inflation as a top financial concern.

In response to consumer unease, TransUnion also released a white paper, Overlooked Areas of Effective Financial Wellness Strategies, that identifies effective strategies credit unions and other financial institutions miss in their financial wellness programs.

Lindsey Downing, TransUnion.

“Financial institutions are under increased pressure to provide the guidance, support and education that help consumers secure their financial well-being. As trusted advisors, banks and credit unions are in a unique position to help guide accountholders on their financial journeys,” the TransUnion financial wellness white paper noted.

"TransUnion's recent survey of consumer sentiments shows that many Americans are still deeply worried about inflation and its impact on their personal finances," said Lindsey Downing, senior vice president, TransUnion Consumer Interactive. "Beyond basic financial education around saving and spending, there are other factors that can significantly impact financial wellness. Credit unions can benefit their members with holistic financial wellness programs that include often overlooked elements such as credit literacy, identity safety, and financial inclusion."

Defining Financial Wellness

The white paper from TransUnion’s TruEmpower, which provides a suite of solutions focused on digital engagement touchpoints, explained while individual organizations may describe financial wellness in various terms, the Consumer Financial Protection Bureau (CFPB) provides guidance that serves as an effective standard for the industry. The CFPB uses four criteria to define financial well-being:

1. The capacity for a consumer to have control over their finances.

2. The ability to handle a setback.

3. Being on track to meet financial goals.

4. The freedom to make choices so the consumer can enjoy life.

TransUnion suggested when consumers adopt smart, effective habits related to these financial basics, they are generally acting in a way that enhances their financial stability, and better enables them to reach their goals and weather most unexpected setbacks they encounter.

A Case for FIs to Help

The white paper presented the case for financial institutions having a thorough and effective financial wellness strategy. “Consumers expect products, services and educational programs designed to help fortify their financial well-being, and the benefits to the organization for delivering them can be significant. Yet many banks and credit unions develop cookie-cutter strategies based on their organizational structures rather than consumer-focused considerations.”

The report added, “To differentiate their offerings, financial institutions need to expand their financial wellness strategies to include credit literacy, identity safety and financial inclusion. By doing so, they not only deliver programs that meet the needs of consumers — they build stronger foundations that can deliver greater engagement, trust and revenue.”

This works to the advantage of many financial institutions. “Banks and credit unions typically know how to talk to consumers about the basics of budgeting and planning,” said the white paper. “The products and services offered by financial institutions are designed to help consumers along a continuum that ideally improves their financial situations — making them eligible for more advanced and profitable offerings.”

Three Effective Strategies

The report maintained financial institutions with the most effective financial wellness strategies typically incorporated three subject areas. “When banks or credit unions incorporate them into their financial wellness strategies, it can make their programs particularly beneficial for both the consumer and the organization.

Provided below is a summation of effective wellness strategies stated in the white paper:

· Credit literacy. Despite the significant role credit scores play in their financial lives, many consumers do not understand them, citing a recent report from FICO, which revealed 20% of Gen Z consumers claimed they know little to nothing of credit scores. “Effective financial wellness programs recognize many consumers lack a sufficient understanding of credit, and therefore incorporate content designed to improve credit literacy among accountholders.” The report noted as those consumers become aware of the importance of credit health and, more importantly, how their actions can shift their credit scores both positively and negatively, it gives them control as they work toward their financial goals.”

· Identity safety. The white paper noted a single identity crime can dismantle a consumer’s ability to achieve financial wellness “While a few forward-thinking financial institutions have begun connecting the dots between identity safety and financial wellness, most banks and credit unions historically have excluded identity safety from their financial wellness strategies. Too often, that separation is a result of silo-based thinking: organizing their strategies based on the FI’s department structure rather than thinking like a consumer.” TransUnion also pointed to a misconception that can dissuade banks and credit unions from including identity safety as part of their financial wellness strategies. That misperception is that consumers are lazy when it comes to cybersecurity. “A financial institution understandably will not want to waste time and effort trying to get accountholders to protect themselves when it traditionally views identity safety as tangential to financial well-being.”

· Financial inclusion. The good news, said the TransUnion white paper, is 63% of consumers said they definitely would not switch banks and 78% said they definitely would continue to bank with a financial institution that helped them during difficult economic times. “It’s therefore in the best interest of banks and credit unions to engage with these consumers now; evaluate them using a more holistic view of their situations; and empower them with the necessary knowledge, tools and financial products.” In addition, the study pointed out that credit unions and banks can build lasting relationships with unbanked consumers by connecting them with the financial education, credit literacy, identity protection tools, and financial products and services that lift the barriers they face, enable them to take control of their situations, and put them on the road to brighter financial futures.

The white paper maintained, “As trusted advisors, banks and credit unions are in a unique position to help guide accountholders on their financial journeys. Today’s consumers actively seek that guidance, particularly given the growing sense of uncertainty that many of them are experiencing. The challenge facing many financial institutions is deciding how they can establish effective financial wellness initiatives that aid their accountholders.”


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