Financially-healthy consumers dropped to 43%. Here’s how banks must step up

J.D. Power last week, using data from its four recent 2022 studies — US Banking Mobile App Satisfaction Study, US Online Banking Satisfaction Study, US Credit Card Mobile App Satisfaction Study, and US Online Credit Card Satisfaction Study — revealed several key findings. The company found that healthy consumers have fallen by 10% in less than a year, and that overall satisfaction with digital channels has decreased despite an increase in consumer adoption. 

According to the study, the percentage of healthy consumers — people who typically don't have trouble making bill payments and have future financial stability — has decreased from 53% to 43%. 

At the same time, vulnerable consumers — consumers who have a difficult time making bill payments without being able to think of future financial stability — have increased from 25% to 32%. On average, financially vulnerable consumers are more likely to experience less satisfaction than the financially healthy. 

“We are definitely seeing a downward trend in the proportion of financially healthy customers nationwide,” Jennifer White, J.D Power's senior consultant for banking and payment intelligence, told ZDNet.

The decrease is due to several economic factors. Inflation is high, gas prices are rising, the cost of goods are steadily increasing, and wages are not keeping up. As such, many consumers are living paycheck to paycheck.

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“Inflation is obviously playing a role. It's outpacing, in many cases, wage increases,” White said. “So, that has an impact on the immediate spending to income ratio. We see in other research that the consumer usage of personal loans to help bridge gaps is increasing, which means debt being incurred is increasing, which in turn impacts financial stability.”

Another J.D. Power study found that vulnerable consumers are turning to personal loans to supplement the lack of adequate pay. Personal loans, which have a lower annual percentage rate, can be used to consolidate debt that carries higher APRs like credit cards in order to save money on interest payments.

However, relying on a loan to make ends meet isn't an ideal solution. “What we're also seeing is that consumer empowerment to manage this type of situation is also slowly eroding, which means consumers aren't feeling as strong to handle the change,” White said.

How can financial institutions better support their clients?

As the percentage of vulnerable consumers increases, so does the importance of how financial institutions support these clients in difficult times. 

Vulnerable consumers have greater needs and are far more likely to feel unsatisfied with their financial relationships. One of the biggest factors, White said, is nuisance fees. These fees, such as overdraft or minimum balance fees, tend to prey upon the financially vulnerable.

“There's a key performance indicator that says satisfaction is significantly improved [when financially vulnerable consumers] feel a financial institution completely supported them in challenging times. And one of the number one things that financially vulnerable customers are looking for is targeted, relevant personalized advice on how to avoid fees. And without it, their dissatisfaction increases exponentially,” White said. 

A major part of making consumers feel satisfied is personalization and utilizing digital tools. Personalized messages could look like reassurance messages confirming transactions were facilitated correctly between parties, messages about how best to avoid fees, and targeted ads that show banks and credit card issuers actually know the consumer.

The J.D. Power study found that, despite digital tools leading to a greater feeling of satisfaction with financial institutions, only 27% to 38% of consumers have taken advantage of them.

“Awareness is the first hurdle… Both healthy and unhealthy customers have the desire to spend within their means, and to, in some ways, manage budgeting and use other functionality. But they have different end goals in mind. Making sure awareness campaigns recognize those goals could go a long way toward improving resonance and consideration of using the tools [among consumers],” White said.

So what can financial institutions do to deliver higher levels of personalization and awareness to increase the adoption rate of digital tools? 

White said it has to be similar to when financial institutions began adopting mobile check deposits, only with greater attention to personalization. When mobile check depositing was first revealed, there were several institutions who put the effort in to make the experience easy, visible, and effective.

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With budgeting and spend-management tools, however, it has more to do with an individual's financial health rather than a simple, straight-forward functionality.

“Customers… know the bank has AI intelligence. [The bank has] information about their behaviors, and the majority of customers are okay with the bank using that to create personalized content,” White said.

Similar to how Amazon and other online brands will use consumer data — such as cookies — to push personalized ads targeting products that better fit the individual consumer, banks and credit card issuers could leverage their AI data to deliver appropriate advice and financial product recommendations.

“When I open the Delta app, it knows that I'm going to travel today and it takes me to that page. State-dependent personalization. Why can't my bank do the same thing and tell me that I have a bill due today?” White said.

These brands are getting it right

Despite the downward trend in overall consumer satisfaction with digital channels, there are a handful of institutions that still rank well among consumers.

The study found that Capital One ranked highest for banking mobile app satisfaction and online banking satisfaction. Discover ranks highest in credit card app satisfaction, as well online credit card satisfaction. Bank of America, American Express, and Wells Fargo were also at the top in satisfaction rankings. 

So what are these brands doing that those with lower rankings are not?

“We know that the customers that are most satisfied with bank experiences are customers that are interacting with all the touch points at the bank. So, they're neither wholly branch dependent nor only digital,” White said.

“In order for that experience to truly be optimized, there needs to be a way to document a customer's experience. That teller needs to have information about the customer at their fingertips like the digital tools have when they're trying to personalize content. And if we aren't keeping records about our customers in this way, there will always be this kind of disconnect. It won't be seamless,” she added.

No matter what comes next in terms of digital tools and additional functionality, it's important that brands don't neglect the fundamentals of what makes a digital experience engaging and painless for consumers. That means a clean user interface with visual appeal, easy-to-use navigation tools, speed, and security is essential.

“Institutions that have met those [fundamentals] are free to start thinking about how to use digital channels to build customer intimacy,” White said. 

Meeting those fundamentals is paramount to building consumer trust, delivering a higher sense of personalization, and therefore making consumers feel better supported in their financial health. According to White, there is one more piece of the puzzle that financial institutions are missing.

“The third [piece] is leveraging behavioral data digitally to ensure that the prompts that are appearing in a digital experience, such as welcome screens, are tailored to understanding the behaviors of the customer — the same way that a teller would need to demonstrate that if you were sitting across the desk,” White said.