Raddon Report

You are here

New Year’s Resolutions for Financial Institutions

January 21, 2021
rr_2021.01.21
Share this post: 

By Karen Kislin and Jan Trifts, Strategic Advisors

New Year’s Day historically has been a time to reflect on the past year and make promises or resolutions to be better in the new year. Over the past 4,000 years of this tradition, the most common resolutions have consistently focused on health, including exercising more and eating healthier, as well as saving more money to be financially healthier.

As the world continues to grapple with the economic ramifications of the coronavirus pandemic, consumers have unequivocally shifted their financial behaviors. It’s likely that one of the top resolutions for 2021 will focus on financial stability. Financial institutions have an excellent opportunity to enable the financial health resolution for their customers or members.

Consumers do business with companies they trust. Here are a few tips on how financial institutions can position yourselves as the resolution solution for accountholders while establishing trust within the communities you serve.

Resolution No. 1: Exercise More

Even though financial institutions are not in the business of physical health, there are some financial services you can offer that align with this New Year’s resolution. This is the time of year that gym memberships increase significantly, but research shows that 80 percent of people break their resolutions by the first week in February. How can your financial institution help? Offer credit and debit card monitoring services so your accountholders receive a regular alert reminding them of those monthly gym dues (or the video streaming subscription that might be keeping them from the gym).

Providing monitoring services for subscriptions and other recurring transactions helps your financial institution establish trust with accountholders, demonstrating that your institution is looking out for their financial health. These services can also offer additional revenue streams for you.  

Resolution No. 2: Save More

Due to the economic response to the pandemic, more consumers are focused on saving. Yes, financial institutions have experienced a tsunami of incoming deposits and are not particularly keen on growing them more. However, this is a great opportunity to deliver on the mission of helping your accountholders achieve financial stability. In so doing, you will be given higher consideration when they need a loan.

Figure 1

The first step to achieving financial stability is the establishment of an emergency fund, which will help accountholders reduce their financial stress and the remaining strain of 2020. To increase the likelihood of success, encourage them to make small changes in their finances. Stress that they don’t have to cut back on the things they enjoy on a daily or weekly basis, but instead encourage them to look for opportunities to reduce expenses by:  

  1. Getting rid of unused subscriptions (not just the new gym membership)
  2. Negotiating discounts on cell phone and cable bills (since more consumers are cutting the cord these days, it’s possible to lower these payments)
  3. Saving a portion of their upcoming tax refund or a raise (use this to fund their emergency savings)
  4. Saving a portion of their stimulus payment for their rainy-day account
  5. Reviewing credit reports (with your help) to find savings by refinancing higher rate mortgages, credit cards and unsecured debt

Digital Credit Union in Massachusetts is committed to helping members save money. To help members establish emergency funds, the credit union redesigned its primary share account to provide an extra incentive to increase savings. The primary share account has a 6.17 percent APY on balances up to $1,000. There are no monthly fees, no requirements to open other accounts or to complete a required number of transactions, and there’s no required direct deposit. Digital Credit Union saw the need in its communities to help members save for a rainy day and took steps to help.

FORUM Credit Union in Indiana offers products and services to help members achieve their financial goals, such as the 52 Week Money Challenge account. The account is structured to help members build an emergency fund slowly over the course of a year. In the first week, the member deposits $1 into savings, continuing weekly and increasing incrementally by $1 each week to end with a final deposit of $52 in the last week of the year. As the below chart shows, if this approach is followed for the entire year, the savings will total $1,378. FORUM Credit Union offers an additional incentive of a chance to win $1,378 if the member makes savings deposits at least 50 of the 52 weeks.

Figure 2

Resolution No. 3: Be Healthier

When people indicate they want to be healthier, they could mean any number of things. They could mean they want to eat healthier or have an overall healthier lifestyle. That may include self-improvement in the form of mental health, which often correlates with financial health.

Where financial institutions can help with this goal is in delivering financial education to the communities you serve. Raddon research has found that the more financially literate consumers are, the more financially healthy they feel. We recommend delivering financial literacy in a variety of mediums: formal instructor-led webinars, emailed newsletters, short YouTube video clips or whatever other channels your financial institution uses to connect with accountholders. The more channel or delivery variations you can provide, the more accountholders you can reach. And, of course, helping consumers build financial literacy helps solidify their trust in your institution.

Figure 3

Figure 4

New Year’s resolutions are not a new tradition, but the tumult of 2020 has led more people to put hope in a better year ahead. Financial institutions have an excellent opportunity to build trust – and perhaps even revenue – by helping their accountholders achieve financial strength and stability in 2021. The key is to make it easy and delightful. Help your customers or members achieve their goals in small, tangible steps, giving them quick wins that propel their journey into long-term success.