Financial Health and Wellbeing: A New Frontier for the Sector

People all over the world are having a tough time of it financially right now. Skyrocketing energy prices and the rising cost of living mean those without historical wealth are going to find the next few years incredibly difficult to navigate.

This is causing a shockwave throughout the financial industry as brands in the space realize they need to pivot and prioritize a new kind of financial service which places the health and wellbeing of customers’ economic status at the heart of what they do.

With research suggesting a staggering 47% of adults don’t feel confident making decisions regarding financial products and services, service providers have much to gain by employing strategies which build and stabilize their customers financial wellbeing.

Financial Health

Financial health is an umbrella term which is fed by a number of distinct factors.

People, much like financial institutions, need to have sufficient liquidity to manage day to day expenses such as paying bills and buying essential products. They also need a certain level of financial resilience, enough money in either liquidity or assets which can be called upon when unforeseen events disrupt the normal flow of cash. Financial control means having the ability to effectively balance assets and liabilities.

Finally, and perhaps the factor at the very top of the financial health hierarchy of needs, is financial freedom – the ability accumulate cash for future goals.

Each of these factors is in turn determined by several characteristics in the individual. Direct drivers of financial health include how money is used such as saving, spending, and borrowing. financial confidence and control, socio-economic variables of income and expenditure changes, and work status are also key determining factors of financial health as are money management behaviors such as the ability to budget and effectively keep track of expenditure.

As you can see, each person has a lot of plates to keep spinning in order to achieve an acceptable level of financial health. Now when we return to our figure of nearly half of adults who are not confident making financial decisions and combine that with the various socioeconomic upheavals being felt around the globe, caused by the COVID-19 crisis and various other geopolitical events, we begin to get a sense of the scale of the problem.

However, all is not lost as the need to drive financial health and wellness can provide financial brands with a new way to connect with their customers and develop fresh ideas around products and services designed to help them keep things on an even keel.

Wellness for Banks and Customers

When customers are financially healthy, they have more money to entrust with banks which translates to higher customer lifetime value and profits for those financial institutions. So, there exists a personal stake in helping customers achieve a financially healthy state.

The wellness industry as a whole is also growing exponentially. This will help drive customer engagement in all levels of their health and wellness, including those factors associated with their economic status.

"The global wellness industry grew to $4.5 trillion in 2018, with an average annual growth rate of 6.4% according to the Global Wellness Institute,” reports GlobalData Thematic Research. "COVID-19 has likely spurred growth in consumer and business interest in the overall topic. Financial wellness will be swept up on the growth in consumer interest in their own health and wellbeing, as a small subset of this larger industry. Banks, however, looking to capitalize on growth in the wider wellness space and link financial wellness with major brands in the health and wellness industry need to carefully vet their partners.”

Thankfully, we live in an era where banks and smaller fintechs are working to create innovative technologies designed from the ground up to help customers become more financially confident and gain greater control over their money. Whether it takes the form of budgeting apps, banks delivering alerts which let customers know when they’re overspending or when certain bills are due, or software which allows people to dip their toes into the world of investment, starting small before working up to larger concerns.

Final Thoughts

All these factors are going to help people achieve a greater level of financial health and wellbeing. Regulation is required to ensure all fintechs are operating in the best interests of customers, but this aside there is reason for quiet optimism.

Customers becoming more financially healthy will have benefits for the industry, individuals, and society as a whole, and will help us move towards and fairer and more equitable world for all.

Financial health and wellbeing is sure to be a hot topic at Future Digital Finance 2023, being held in March at the Hyatt Regency Austin, TX.

Download the agenda today for more information and insights.