Beware the “finhealth-washing” of financial services
Rob Levy, Financial Health Network: financial services companies have a chance to do right by doing good
Looking at recent marketing campaigns, it seems like every large financial institution cares about improving your financial health.
Prudential is running a documentary-style ad campaign about financial wellness challenges. Wells Fargo is airing commercials about its “Financial Health Bankers”. PayPal’s CEO is penning financial health op-eds in the Wall Street Journal. And Walmart, the nation’s largest private employer, is publicly touting its new financial wellness initiatives for employees.
And this is not just coming from marketing departments. A recent study by my organisation, the Financial Health Network (formerly the Center for Financial Services Innovation), found that nearly 70% of C-suite executives said that “improving customer financial health” is a strategic priority for their business. It was the second highest ranked out of 15 possible priorities.
So given how on-trend financial health and wellness has become in the last five years, I have to ask: has the industry with the lowest levels of consumer trust really turned the page and committed itself to consumer well-being? Or has financial wellness marketing become the greenwashing of financial services – that is, focusing on marketing language without meaningful products or behaviors behind them that truly help consumers?
Is the trend around financial health representing a true shift or are some of these activities good in intent but not connected to long-term commitments to improve the financial health of customers and clients, essentially a “finhealth-washing” of the industry?
In 2019, it feels that the verdict is still out. On the one hand, major banks and companies are launching products that appear genuinely well designed for financially struggling households. Chase launched Secured Banking, a no-frills, low-cost checking account with budgeting tools built-in. Wells Fargo’s financial health bankers offer customers free financial advice to help them reduce debt and improve savings. And Walmart’s partnership with Even and PayActiv allows low-wage workers to access wages before payday at no cost to the employee.
But financial health depends upon more than just what products a bank offers. Just as the environmental movement has adopted systems for measuring carbon footprint, the financial services industry is just beginning to measure its own impact on consumer outcomes. In fact, in 2019, over 30 members of the Financial Health Network are actively measuring the financial health of their customers, helping to make real their commitment to financial health.
All that said, the industry has a gap to close between “talking the talk” and “walking the walk” on financial wellness. The same study I referenced earlier found that only about half of companies have launched at least one product or service to improve customer financial health, and in many cases, that product is just a form of financial education that has proven again and again to have little impact on consumer behaviour.
Beyond financial education, only a third offer low-cost, entry-level transaction accounts like Chase’s, and only 26% offer credit products for customers with below-prime credit. On the impact measurement side, only 35% are tracking data on customer financial health outcomes, and just 19% are reporting customer financial health data at an enterprise level. It’s hard to believe that financial wellness efforts are being taken seriously if they don’t end up on the CEO’s list of corporate KPIs.
So where do we go from here? To prevent the finhealth-washing of financial services, consumers will need to bring a healthy skepticism towards financial health marketing, while demanding tangible, demonstrable proof of how a financial institution is actually going to help them improve their lives.
But more importantly, the financial services industry will need to back up its talk with walk. This requires changes in several areas of operations. Institutions will need to design or redesign their products (i.e. financial products, services and tools), their programs (i.e. financial advice, guidance and resources), and their people and places (i.e. organisational infrastructure, delivery channels, segment strategies and employee benefits).
Some institutions are already doing these things. But ultimately, institutions will have to track and measure the outcomes of their initiatives and hold themselves accountable to those outcomes. And in every case, executive leadership is the key to enabling the necessary changes to the business model.
Financial services companies should be wary of the mistakes made by the consumer sector with their greenwashing campaigns. With only 28% of Americans financially healthy, finhealth-washing shouldn’t be accepted either. Consumers need help, not slogans. Financial services companies have a chance to do right by doing good.
By Rob Levy, VP, research and measurement, Financial Health Network
My response to this paragraph is below. “All that said, the industry has a gap to close between “talking the talk” and “walking the walk” on financial wellness. The same study I referenced earlier found that only about half of companies have launched at least one product or service to improve customer financial health, and in many cases, that product is just a form of financial education that has proven again and again to have little impact on consumer behavior.”
– How are financial institutions supposed to address the underlying behaviors? That is for the clients to improve on themselves. Do you expect firms to hire 10 million shrinks to hypnotize these people into correcting the underlying behaviors that lead to impulse spending and living beyond one’s means? When it comes to actual behavioral health, most psychologists would argue that ultimately changing your behaviors is up to their patients to change on their own and develop better habits – although pharmaceutical companies might disagree and argue their pills can do all the work for them.
Also, I would like to comment on this sentence – “Beyond financial education, only a third offer low-cost, entry-level transaction accounts like Chase’s, and only 26% offer credit products for customers with below-prime credit.”
– Why would you assume offering credit products for customers with below-prime credit is in their best interest? Gee, what a great idea to help clients who already have trouble with overspending – give them access to more money they don’t have.