Making an Investment in Financial Wellness

Sponsored by CUES Supplier member Payrailz

Historically, conversations regarding personal finances, or financial wellness, were generally kept to a minimum. For the most part, financial struggles or victories were treated as something to keep to oneself. While still the case for some, more and more doors are opening for credit unions to start important financial conversations and educate the public about financial wellness.

Part of this societal change can be attributed to the advent of technology designed to help the consumer feel more empowered in the management of their personal finances. And, as we begin to engage in these financial conversations, it is critical to understand the current state of financial wellness in the United States.

According to data from Bankrate, more than half of Americans in 2022 are could not cover an unexpected $1,000 expense with their savings. While this feels shocking, there are a lot of reasons Americans may be in this position. Many are still reeling from job loss or other financial setbacks due to the pandemic, and with inflation surging at the fastest pace in nearly 40 years and gas prices at record highs, it’s getting harder for the average American to save for unexpected expenses, let alone invest in their future. The Federal Reserve found that less than 40% of consumers believe they are on track with their retirement savings, and 25% have no retirement savings at all.

A staggering 64% of Americans—nearly two thirds of the population—report living paycheck to paycheck in 2022. The rising cost of living is putting a strain on Americans’ finances. There is arguably a greater need for financial wellness resources now than ever before.

This paradigm underscores a challenge for today’s financial institution leaders. How can credit unions support each member on their financial wellness journey? The answer is by leveraging technology to build closer digital relationships. Technology that proactively supports the member’s financial needs is vital for both the short-and-long term success of the individual and further reinforces the benefit of banking with your credit union.

Getting Started

Those who are interested in financial wellness are usually looking to better track their monthly expenses, progress toward savings goals and gain a better understanding of the way money moves. By their very nature, credit unions are well-equipped to manage many of these areas and educate members about them. Credit unions are focused on understanding the member’s needs and guiding them toward their eventual financial goals. Credit unions are also the most informed entity when it comes to members’ finances given that they have access to a goldmine of data on how members manage their money.

According to The Ascent, only 3% of Americans are spending time on household financial management over the course of a day; the average time spent daily on managing finances is less than two minutes. This could be because finances are a stressor for many, or it could more simply be because most people are busy and do not have enough time to devote to financial management. Regardless, no one can reach their goals if they are not willing or able to put in the time and effort. That is, unless, they have someone—or something—that does it for them. 

Understanding the Data

What if a credit union alerted members proactively with actionable insights about their finances—insights that they could easily understand and put to use?

Credit unions have a treasure trove of data on members’ spending and savings habits, but this data is not always leveraged—especially for the purpose of financial health.

With the advent of artificial intelligence and machine learning technology, member behavior and personalized data can be integrated and deployed to help a credit union to share financial wellness recommendations with members, helping them track income and expenses, reach savings goals, and feel empowered in their financial management abilities. Put simply, it helps the member better manage their finances.

Take payments, for example. AI and machine learning work together to make sense of a member’s payment data: anticipating financial needs, proactively monitoring bills and expenses, and recommending new products from the credit union that will best fit their needs.

These technologies are designed to better enable credit unions to help their members work toward financial goals without having to spend the extra time or effort that they may initially be unwilling or unable to put forth. While the use of this technology may start by making sure members’ short-term finances are stable, it can also serve to help them to better manage their cashflow to build savings for emergencies, investments or future events like retirement.

Moving Forward

Developing a holistic “do it for me” approach that does all the hard work for members enables them to rely on automation to help them think ahead. According to a report from PWC, 54% of respondents say financial challenges are the leading stressor in their life. The use of AI and machine learning can help alleviate this stressor, enabling them to focus their attention on more big-picture goals.

With AI and machine learning, combined with a great digital payment experience, members do not need to consider which payment method is most effective or worry about bills. Instead, they gain the ability to deepen their trust in their credit union to simplify their lives and plan for the future. 

Especially these days, financial wellness is a priority for many, as the financial challenges facing members continue to compound. Credit unions have an important opportunity to deepen their relationships with members and not only help them manage their daily lives, but plan for the future as well. Providing services that promote financial wellness should continue to be top-of-mind for all financial institutions and, through automation and the right relationship, credit unions can play a key role in helping their members achieve financial stability for both short and long-term goals.

Mickey Goldwasser is VP/marketing/chief of staff at CUES Supplier member Payrailz, Glastonbury, Connecticut, a digital payments company offering secure, smarter, more engaging and predictive payment solutions to banks and credit unions.