Financial literacy describes a person’s ability to understand the basic concepts of economic principles, including personal financial management, budgeting, saving, and investing money.[1] For consumers, having a firm grasp of these principles can mean the difference between making smart decisions that lead to more buying power, lower interest rates, and achieving financial goals, or making decisions that could negatively impact their ability to improve their financial standing. Many consumers make most of their financial transactions online; 7 out of every 10 US adults are enrolled in digital banking, and 95% bank online often or occasionally. However, only 31% of these consumers have a comfortable level of financial literacy.[2] Unfortunately, the convenience of banking online without the knowledge to do so safely can put consumers at risk of online threats like identity theft and fraud. Consumers need and want help from their financial institutions to build and maintain financial literacy. Increasing consumers’ knowledge of basic financial principles may help them make better decisions, improve their financial standing, and remain loyal, confident customers to your business. Only 1 out of every 7 consumers feel financially literate A recent survey from Goldman Sachs reported that only 13% of respondents correctly answered five questions designed to assess their basic financial literacy.[3] With only 1 out of every 7 people having a strong sense of important financial concepts, this illustrates the severity of the gap in financial knowledge among U.S. consumers. But this lack of understanding does not necessarily discourage them from using digital tools to manage their finances. Nearly a third of Americans still feel comfortable banking online, despite lacking financial literacy.[2] Consumers who use online tools to manage their personal finances without the appropriate understanding of how to use them effectively, may run the risk of making poor decisions that can negatively impact their financial well-being and confidence. A lack of knowledge about digital privacy in consumers may also put them at risk of digital threats such as identity theft and fraud. Having access to the necessary tools to monitor their accounts and activity can empower them to take quick corrective action if a fraud event occurs. Lacking financial literacy is causing Americans to save less and lose more Consumers can experience significant monetary losses when they don’t have a basic comprehension of financial concepts regarding budgeting, saving, investing, and managing personal financial accounts. A survey of Americans reported losing an average of $1,506 each in 2023 because of a lack of personal finance knowledge, resulting in an estimated total of $388 billion across the country.[4] A recent study also showed that nearly half of U.S. consumers only have $500 in savings,[5] which is far less than the recommended six months’ worth of expenses. While many consumers may feel that they can’t afford to spend the time or effort to become more financially literate, the reality is that most of them can’t afford not to. Consumers need financial help, and they’re seeking it from the financial institutions they do business with. Consumers want support from their financial institutions The uncertainty regarding personal finances can create stress among consumers, but it can also present an opportunity for financial institutions to provide guidance and resources to the people who need it. 25% of Americans say they don’t have anyone they can ask for trusted financial guidance.[7] By delivering valuable support to consumers on how to save, budget, invest, and manage their finances, businesses can serve as a much-needed resource to help them make better decisions and improve their financial standing. Partnering with Experian® to offer these useful products and services can help businesses empower their consumers to improve their financial standing in a variety of ways. For example, financial guidance can include credit education programs and resources designed to help consumers increase their credit scores and strengthen their credit standings. More than 65% of consumers enrolled in the Experian® credit education program saw an improvement on their credit scores.[8] In addition, businesses can also help protect their consumers from threats of theft and fraud with Experian® identity protection services. These solutions are expertly designed to monitor for potential online risks, identify incidents of theft, and help quickly resolve fraud events if they occur. This added layer of protection can further fortify consumers’ financial power and optimize their ability to make strong financial decisions. When businesses offer these services from Experian® to help consumers increase their financial literacy, those consumers may be in a better position to borrow more money and open new accounts. This can help brands foster stronger relationships with their consumers, encourage them to continue doing long-term business, and drive additional revenue. By helping improve consumers’ financial literacy, businesses can increase the financial power of their customer base and improve their bottom line. Click here to learn more about how to implement a financial wellness program to help your consumers improve their financial literacy and increase their financial power. [1] Masterclass, Financial Literacy Definition, Importance and Key Principles, 2023. [2] EMarketer, For US banking consumers, financial literacy is a bigger barrier than digital proficiency, 2024. [3] EMarketer, Despite a major gap in financial literacy, Americans are saving more for retirement than last year, 2023. [4] National Financial Educators Council, Financial Illiteracy Cost Americans $1,506 in 2023. [5] Yahoo Finance, Nearly Half Have Less Than $500 in Savings: How To Build Up Your Balance in 2024. [6] Bankrate, Average credit card debt in the U.S., 2023. [7] Annuity.org, 47+ Fascinating Financial Literacy Statistics in 2023. [8] Experian Internal Data, 2023 credit lift study for users tracked from Dec 2020 – Dec 2022.
Capturing consumer attention has always been at the heart of winning revenue and loyalty for businesses. But in a world where digital and social media use have skyrocketed, consumer attention is increasingly scarce. Financial institutions must combat diminishing consumer attention span and exponentially rising advertising costs, while continuing to ease consumer financial stress and increase their bottom line. Using financial management services to drive user engagement can be an effective strategy to win the race for consumer attention. A recent global study by Yahoo and OMD Worldwide shows that Gen Z consumers lose active attention for ads after just 1.3 seconds—less time than any other age group.[1] As Gen Z gradually becomes a larger segment of the buying population, it’s crucial to attract their attention and gain their trust, along with that of other key demographics like millennials, Gen X, and baby boomers. The companies that succeed in standing out from the competition are those who can provide services that consumers value and keep them coming back to engage. A study by Harvard Business Review found that “highly engaged customers lead to a 23% increase in share of wallet, profitability, revenue and relationship growth.”[2] This shows that offering these services can bring highly desirable benefits to consumers while also generating valuable revenue opportunities for businesses. Companies that deliver solutions that consumers need can build loyalty, create cross-sell and upsell opportunities to gain a greater share of wallet, and foster a sticky relationship with their customers. We have found that financial management solutions can be a powerful way to engage consumers while giving them services that they expect from their financial institutions. Financial management services can capture consumer attention Experian’s Digital Financial Manager™, for example, can help providers like banks, credit unions, and other institutions identify growth opportunities, while delivering much needed support and guidance to consumers looking to improve their financial well-being. Services like this could keep customers engaged and help increase your revenue. Our partners see up to a 30% increase in monthly active subscribers when Digital Financial Manager™ is added to Experian’s credit education experience.[3] Consumers may open twice as many credit cards and three times as many savings accounts when they regularly use financial management insights. In addition, our partners can drive further engagement with financial alerts, averaging up to a 53% open rate and a 75% post-alert login.[3] Research indicates that consumers want to see and manage all of their finances in a single place, rather than logging into multiple different accounts. Customers have been shown to link up to an average of 8.9 financial accounts across institutions,[4] providing partners with greater visibility into their customers’ financial habits. In addition, consumers who consolidate their accounts could save time and reduce stress when managing their finances. This is a crucial benefit, as stress can have a seriously negative impact on mental health and well-being. The impact of financial stress Financial stress is becoming increasingly common in consumers. In tough market conditions where this stress is putting a strain on consumer finances, consumers are looking for help. Most people need help managing their finances, but many of them don’t know how or where to get it. Less than 30% of Americans have a solid financial plan in place[5] and lacking financial knowledge cost individuals an average of $1,819 in 2022.[6] Without strong support from a trusted source, consumers won’t be well equipped to improve their financial health and credit standing, which can make it difficult for them to remain loyal customers to your business. Consumers aren’t the only ones experiencing financial difficulty. The banking and financial services industries are facing significant challenges as well. Challenges in the finance industry Costs associated with digital advertising have risen dramatically for financial institutions. Digital ad spending for the U.S. financial services industry reached $21 billion in 2020 and is predicted to reach $30.75 billion by the end of 2023.[7] In addition, banking has a $4.98 cost per click, the sixth highest average in the industry.[8] These are just a few of the many challenging market conditions hurting businesses’ bottom lines and making it difficult to acquire and engage customers. By offering a financial management solution, you have the potential to offset rising costs by fostering a more engaged customer base whose continued business will reliably maintain and grow your revenue. How to start a financial wellness program Empower consumers with tools to help manage their credit and finances in a single experience, and drive platform engagement with insights and recommendations that can help them reach their goals sooner. A few steps to help you get started: Identify your revenue and growth goals Whether you’re looking to acquire new customers, drive engagement and retention, or create upsell and cross-sell opportunities, a financial wellness program could help you increase wallet share and strengthen customer affinity. Provide in-demand offerings Your program should focus on services that customers expect from their financial institutions, such as credit education, financial management, identity protection and restoration, and data and device protection. Capitalize on customer engagement to create upsell and cross-sell opportunities With in-demand services, you could drive further engagement with your customers and meet their needs with aggregated financial data, offer increased credit limits, and additional deposit accounts as customers become qualified. Visit our website to learn more about Digital Financial Manager™. [1]Insider Intelligence, Gen Z has a 1-second attention span. That can work to marketers’ advantage. 2022. [2]Gitnux. The Most Surprising Customer Engagement Statistics in 2023. [3]Experian D2C Financial Management reported as of May 2023 (based on Experian.com member engagement with similar features). [4]Experian Employee Benefits Financial Management as of May 2023. [5] BusinessDIT, The State of Financial Planning, April 2023. [6] National Financial Educators Council, Cost of Financial Illiteracy Survey, 2023. [7]Statista, Financial services industry digital advertising spending in the US, Jan 2023. [8]Insider Intelligence, Avg. CPC on keywords for select US industries, Sep 2022. Disclosure: This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal issues or financial issues involved with credit decisions.