Banking sector focusing on ‘financial wellness tools’

A new study has identified the inclusion of financial wellness tools as the new “digital battlefield” between traditional banks and neo-banks.

New data showed that the banking sector is increasingly focusing on financial wellbeing to attract and retain customers.

The study commissioned by Backbase and conducted by Forrester Consulting included 450 senior decision-makers and influencers at financial services companies in the Asia-Pacific region took part in an online survey.

The results showed that banks are adopting the new focus on financial wellbeing to ensure they stay anchored in the daily financial decisions of their consumers.

Neobanks once had the monopoly over financial wellness apps, but the mainstream banking sector now sees high demand for these tools, according to the survey.

This is driving banks to make financial wellness tools an important part of their digital offerings.

Iman Ghodosi, regional vice president for Backbase in the Asia-Pacific region, said banks were surprised by the buy now, pay later boom and did not want to repeat their mistakes with neobanks and their helpful financial management tools.

“Digital money management and financial wellness are no longer a gimmick and we are not far from being the most important interface between banks and their customers in the entire sector,” said Ghodosi.

“Old institutions are now striving to build consumer trust and support with services such as spending analysis, budgeting, setting savings targets and improving creditworthiness through these tools.”

Neo banks and fintechs are forcing traditional banks to adapt

Mr Ghodosi said he believed the next six months will be a “turning point” in the banking sector and called this the era of engagement banking.

He said this period will emphasize “a unified platform approach to banking” with a priority in shaping the bank around the consumer as opposed to isolated technology investments.

“In the platform era of Netflix and Spotify, people want the same high level of customer focus and flexibility for the financial services they subscribe to,” said Ghodosi.

“They want access to their personal finances and tools to manage them anytime, anywhere, through any channel. Traditional banks are left behind and they know it.”

In the battle for market dominance, neobanks and fintechs are winning, according to the survey, which identified a number of key challenges for traditional banks in developing financial wellness tools.

The barriers that traditional banks face include: a lack of understanding of their client needs and outcomes; a lack of digital-focused culture; outdated technology; and limiting the organizational silos.

Do banks really care about your financial wellbeing?

One “interesting” result showed that financial wellness initiatives would enable banks to offer their customers more care and protection.

This is paying off people’s “dwindling” trust in banks and benefiting both consumers and banks alike.

The data showed that 72% of respondents named “preventing the exploitation of vulnerable and elderly customers” as a priority.

More than half (60%) said the focus was on “delivering secure, shared financial management solutions to vulnerable customers, powers of attorney and caregivers”.

Other tools that should be in the works include: helping customers improve their creditworthiness (80%); Personalization of financial products (74%); and prepayment and income smoothing (64%).

The big four banks already on it

92% of private customers surveyed in Australia and New Zealand said that the region is “planet” or “actively developing” its financial wellness and money management tools. More than half (60%) stated that this was of “critical priority”.

“CommBank, ANZ and others are advancing in this area and have the technological skills to take the lead against the dynamic and agile Neobanks,” said Ghodosi.

“As technology continues to redefine financial services, consumer expectations and demand increase the sense of urgency for financial services providers in Australia to capitalize on the opportunities for financial wellbeing.”

Big banks’ appetite for boosting digital capabilities was seen in Australia when NAB acquired Neobank 86 400, while Bendigo and Adelaide Bank acquired fintech Ferocia in early August, thereby consolidating ownership of Up.

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