Consumers don’t just want shiny apps and digital banking, they want to feel that their bank is a partner who can help them reach financial empowerment. That is the finding of a new ethnographic study by Finastra, which has gone beyond the normal survey format to investigate the functional and emotional aspects of people’s banking relationships. According to the research, financial empowerment is key to building productive relationships with customers and it can be achieved by focusing on three steps: Knowledge, control and freedom.

Knowledge is (the first step towards) power

When it comes to money, it’s not about how much you’ve got, it’s about having the clarity, tools and understanding to work towards your financial goals. Finastra’s research found that having an understanding of your finances and the tools available leads to a sense of control, but it can be difficult to achieve. Many respondents’ described banking as something that is difficult to understand and something they put off. This is because banks tend to talk in a language that many do not relate to, using complicated terms and conditions and unfamiliar language to talk about products, fees and interest rates. As a result, people avoid interacting with their bank, meaning they don’t gain knowledge about their finances. If people don’t feel they understand their finances, they can’t make progress on their journey because they don’t feel empowered or equipped to do so.

Effective digital banking apps allow customers to create and modify different categories of income and expenditure in real time, organized and expressed in language that’s easy to understand: for example, groceries, restaurants, gifts, shopping, fashion, health. These tools provide the flexibility that consumers need and make money management more personal, engaging, and effortless. This provides a sense of understanding that is the first step towards financial empowerment – not just knowing how much money you have, but where it’s going and what you can do with it.

In control

When people gain a sense of understanding, the next stage is taking control of their finances. Consumers start to feel in charge of their actions and are able to see the effects. But this sense of control can be lost easily. For instance, when an incumbent bank requires authorization, consumers often have to go through a multi-step process which causes delays and results in a feeling of distance between them and their bank. Conversely, well thought-out digital tools put control in the hands of the customer, for instance by allowing them to set daily spending limits which can be temporarily changed, in quick steps, to allow for a big purchase.

Customers’ sense of control increases when their interactions with their bank are better and they can take more actions themselves in a simple, relatable way. When people feel in control they can take their finances to the next level, for instance by making long-term plans and automating actions so they know they are taken care of.

Financial freedom

Once customers experience control, they gain the financial freedom of taking care of their finances themselves – with their bank in the background, providing support. They are happy with their financial situation, automated actions and money that help them set aside funds for saving and investment, leaving them to enjoy guilt-free spending. This leads to the end goal of empowerment freedom – where people feel they can fulfil their financial goals and comfortably work towards them.

It’s not too surprising that digital banks are doing these things well, but incumbent banks aren’t being displaced altogether. While customers may prefer their day-to-day interactions to be with clear, helpful and responsive apps from new challenger banks, they still trust the established banks to safeguard their money. As a result, big banks are instead being relegated to a background role of being a safe repository for customers’ cash.

For many established banks the message is stark. Instead of helping customers on their financial empowerment journey, they are giving them insufficient information, a minimal sense of control and inadequate tools to help them manage their money.

However, we are seeing many incumbent banks taking action to reverse this trend by partnering with fintechs and investing heavily in digital transformation. At Finastra we are helping established and new players alike implement a next generation digital experience with cutting-edge core banking solutions like Fusion Essence Cloud and Fusion Phoenix. These solutions are fully connected with our development platform and app marketplace, FusionFabric.cloud, which gives banks access to a totally connected ecosystem in which they can choose the apps, UI, and process flows that will ultimately deliver the magnetic experience that consumers are looking for, all through an extensive suite of open APIs.

At the heart of what people want from their bank is personalization, but this means far more than customized apps or targeted incentives. People want banking their way, within their limits and on their timing, not the other way round. In short, people want their bank to be a platform and enabler, not their boss. Banks that can provide the knowledge, control and freedom customers are looking for will be the winners, no matter what generation they are from.

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