The ability of banks and other financial service providers to serve and retain their customers while improving their business results will depend on how much they can integrate the concept of financial well-being into an overall strategy. The challenge, all technological, is to be able to contribute to customer well-being in an uncertain and constantly changing social and economic environment. Financial organizations can leverage the vast amounts of data from a variety of sources and the digital tools at their disposal to better understand their customers and help them adopt behaviors that can help protect their “financial health.”

Apps that engage and inform consumers through useful content, platforms for self-directed current account management, multichannel communications updated in real-time, personalized financial tools to meet needs that were once solved only by going to a branch: banks can improve the financial well-being of their customers through a wide range of technologies and best practices.


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What does financial well-being mean?

Financial well-being is the ability of people to consciously manage their finances so that they can enjoy material security while limiting worry and stress over time.

Financial well-being is an integral part of a broader concept of well-being, which refers to maintaining a state of mental health and psychological and emotional balance. To clarify what financial well-being consists of, we need to better understand the financial profile, the basis on which banks provide their advisory services and make assessments.


The financial profile affects financial well-being 

An individual’s financial profile, which includes assets (such as bank balance, investments, movable and immovable property), liabilities (such as loans, overdrafts, credit cards) and cash flows, is largely influenced by a number of factors, such as credit rating, risk profile, insurance, personal goals, lifestyle, income sources, and so on. Each person has to contend with more or less predictable needs and expenses such as insurance premium payments, vehicle maintenance costs, rent or mortgage, household bills and taxes, and so on. Other fixed or plannable expenses may include those for a child’s education or for planning a long-dreamed-of trip. 

In general, every aspect of the financial profile contributes to an individual’s financial well-being and must be framed within a system of social, cultural, and economic relationships. Managing all investments, savings, and contingencies involves, as we shall see, a far from superficial understanding of our finances.


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Financial well-being and financial inclusion: from the individual plan to the collective plan

We are in a state of well-being when we can make full use of our cognitive or emotional capacities, when we exercise our function within society, respond to the daily demands of everyday life, establish satisfying and mature relationships with others, participate constructively in changes in the environment, and adapt to external conditions and internal conflicts. Financial inclusion—the set of activities developed to facilitate access to banking services—is now a central aspect of this definition of well-being, a dimension that must be acted upon to reassure people about their future.

The Global Findex 2021 defines financial well-being as “a person’s financial resilience (and thus the ability to cope with an unexpected financial event), the level of stress generated by common financial problems, and the level of confidence in using financial resources.” The report captures a situation of steady progress that has significant room for growth, especially in states with the worst economic conditions:

  • 76% of the global population and 71% of people in developing countries have a checking account. 
  • In less advanced economies, 40% of adults who pay bills (18% of total adults) do so directly through checking accounts. 
  • The pandemic has fostered the adoption of digital financial services: about 40% of adults in developing economies, excluding China, have made a commercial digital payment using a card, phone, or the internet.

Enabling more people to improve their financial well-being is one of the goals that international institutions aim to achieve over the short to medium term. Introducing transparent modes of payment, increasing savings capacity, and access to credit can help reduce poverty rates, increase consumption and, on a more general level, enable greater spending on education, health, and income generation opportunities. In this sense, financial well-being constitutes a way to transfer wealth (understood both in a material sense and in terms of quality of life) from the individual to the collective. But how to achieve it concretely? Through what technologies? And what role do banks play? 


How can banks increase financial well-being?

We live in a moment in time where we are witnessing destructive climatic events, facing the global consequences of political events and military conflicts, and have just experienced soaring inflation, which has risen by nearly 10 percentage points in just one year (from 1.9% in 2021 to 11.8 % in 2022). Preparing for a future that may seem threatening also means keeping the level of stress that comes with managing our financial situation in check. 

Building financial well-being requires a level of financial awareness and confidence in one’s decisions that goes beyond a superficial understanding of industry technicalities. It requires not only the acquisition of skills essential for achieving full financial literacy, but also the adoption of customer empowerment tools and techniques through which to keep track of financial behaviors, delve into complex topics, understand the usefulness of different products and services, and perform a range of banking transactions independently.

Financial institutions aim to achieve these ambitious goals primarily in two ways: through the development of financial education programs and the enablement of personalized modes of interaction. 


Financial education: from literacy to knowledge 

Increasingly, banks are having to recognize and meet consumers’ need for information and knowledge. This is why financial education programs are now an integral part of financial marketing activities and support services. The benefits of using content and tools to improve financial education for their customers are many. We have summarized them in 3 points.

  • Creating a connection and establishing trust. Reaching consumers at the right time with content that is meaningful helps create a connection and establish trust. Education offered by banks through digital resources and channels concretely helps users, especially younger ones, solve problems caused by financial illiteracy (millennials and Generation Z expect self-service modes of interaction through apps, interactive kiosks, and online services). While this results in a reduced workload for human customer care workers and significant savings for banks, the individual consumer will need more help to be able to make his or her own decisions. This means that they will need to have a significantly stronger financial knowledge base. And this is a perfect opportunity for banks that can develop customized educational content, such as explanatory videos or dedicated mini-sites. Financial education programs, especially if they include self-service solutions, not only improve customer satisfaction but also enable banks to establish themselves as an authoritative and reliable interlocutor.
  • Enhance relationships with existing customers. Increasing attention to environmental and social issues is prompting more and more customers to demand that banks be actively involved in outreach initiatives aimed at the rest of the community. A good financial education program can help strengthen trusting relationships with existing customers, setting the stage for upselling and cross-selling proposals. 
  • Reduce risk of defaults and delinquencies and increase customer satisfaction. Lower levels of financial literacy correspond to a higher likelihood of bankruptcies, defaults, and foreclosures. Financial education programs help consumers understand their situation and make the best decisions based on accurate and complete information. The result is that more knowledgeable customers are more likely to succeed in paying their bills on time, take out loans and mortgages that they are actually able to meet, and purchase products or services that are within their purchasing power. More informed consumers, in turn, are a benefit to the bank because they pay on time, are less likely to default or go bankrupt, and are better able to meet their loan, mortgage, and financing commitments. Customer service charges are reduced, revenue is increased, and customer satisfaction is not affected by penalties or fines due to late payments or a missed balance. In general, customers with low levels of financial literacy tend to spend more, buy on credit, and pay unnecessary fees, resulting in a deterioration in their financial well-being. Those with higher levels of financial education, on the other hand, are better able to make shrewd decisions, save money, pay bills on time, and invest. In other words, they are well on their way to improving their financial well-being.


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Personalization: turning data into valuable experiences

Financial well-being depends on the customer, and each customer has his or her own personal story and particular financial situation. Hence, the need to build personalized pathways to improve the financial well-being of individual consumers. To achieve this goal, we can rely on a customer-centric approach that employs some of the most innovative technologies developed for banking, from data analytics systems to communications management platforms.

  • The data enrichment process. Businesses need access to more reliable data, the only data that is truly useful in driving innovation. Poor quality data is an obstacle for banks to deliver personalized experiences. The data enrichment process (and its cleansing and categorization) is the solution to this problem: Data from customers’ financial transactions are prepared so that they can be interpreted and used to extract relevant insights. The power and granularity of data are then harnessed to personalize the customer journey: data is converted into actionable information that informs customer-centric decision making, in real time, with immediate positive spillovers. For example, if consumers can count on a more articulate understanding of the financial transactions that affect them they will have less need to contact service centers.
  • Personalized, multichannel communication. Every interaction between customers and the bank produces data and information that is useful for getting to know them better, communicating more effectively, and for offering them the product they want at the right time. In this scenario, implementing a customer communication management (CCM) strategy aimed at the digital world means introducing personalization and multichannel communication into corporate communication. Customer communications management capabilities enable the creation and distribution of paginated documents, from the processing and enrichment of complex data to the administration of articulated workflows to generate documents and distribute them to recipients through digital and paper channels. CCM for financial services enables banks, insurance companies, and others to create a wide variety of communications: service emails, company policy updates, account statements, claims and renewal notices, and communications about new products and services. CCM provides a unified means for banking firms to communicate in a compliant manner with customers through the most appropriate channels, including printed documents, email, phone calls, SMS, social media, and web interfaces.

In conclusion, banks are already investing in solutions that provide real-time (or near real-time) access to multiple sources of data (with the goal of building and delivering the best offers for financial products and services, cross-selling or upselling, at the right time). And they are also trying to leverage digital tools and technologies—including artificial intelligence—to increase their customers’ engagement through personalization. 

On the consumer side, if financial education offers awareness, the technology employed by banks gives them the power to exercise real control over their resources. 

In both cases, improved financial well-being is at stake.