Financial literacy is a job for banks and credit unions

The strong growth of digital banking services during the pandemic has not been accompanied by seminars on financial literacy. It should have been, because younger people are less comfortable with personal finances than older cohorts, and a little education goes a long way to improving that.

Social media tends to be the go-to source of information for Gen Z and Millennials, and as NCR Digital Banking President Doug Brown told Karen Webster of PYMNTS, it’s not a good thing.

It is the job – indeed the ethical responsibility – of financial institutions (FIs) to stand out from the hype of social influencers with expert advice from professionals who can impart truly valuable financial knowledge to less experienced people entering for the first time. in the mainstream of finance.

“FIs need to reach and meet these customers where they are, where they want to be met,” he said. “It involves a curriculum model that they can extend, usually in digital format. We have a lot of customers doing it that way.

Illustrating the trend with a personal anecdote, Brown recounted helping her daughter get her first car loan. “It was fun. Not really,” he joked, “but it was fun doing it. What’s interesting is that we got to the funding part, and I didn’t want that ‘she relies on a car dealer to advise her on the appropriate auto loan and auto loan structures.

Yet these are the sources financially ill-informed consumers turn to, and most people don’t have a banker by their side at the dealership.

“We had a learning moment there,” he said. “She’s like, what should I do? I said I think you should go to your credit union and ask them what the appropriate loan is. That’s what we did, and that’s where where the real experts are that you want them to draw… information, education, [from] the trusted advisor.

This model of personal engagement is somewhat lost on Gen Z and Millennials who may not have been very active in bank branches before the pandemic and may believe they no longer work.

Brown acknowledged this, saying, “I happened to be there with [my child] for now, but the question is how do you reach and inform this new consumer base about what they need to know and where they should come to get it? This is where credit unions and community banks really need to reach out and connect with them.

See now: The June/July digital bank tracker

Not just a millennial thing

Looking at where to start with financial literacy efforts, Brown told Webster that FIs “really need to engage in multiple methods to educate all of these consumers. By the way, it’s not just a millennial thing. I think it’s a general consumption problem, because [PYMNTS] studies have shown.”

He talked about engaging outreach mechanisms, whether it be class formats, webinars, and ways “to engage people on new topics and segment topics as well. Is it a home loan, car loan, business books and automated accounting? »

Right now, “there are too many unqualified opinions on TikTok driving this, and millennials think they know it — until they know it. This is true for all consumers. It’s aggressive outreach and creative methods [that are needed].”

The need is acute. Returning to the example of his daughter negotiating her first car loan, Brown said, “She was intimidated by the subject,” so he prepped her with some salient questions like “Is this a simple interest loan? Is there a prepayment penalty if we pay this off early? When do payments start? I gave her enough points of reference for her to form her own opinion, to ask questions. Then she felt ownership of the interaction and the response path.

Calling it “a powerful way to learn and remember, rather than doing it for her,” he told Webster, this scenario is spreading across all areas of personal finance at a time when old signs signage have lost much of their meaning in a digital world. connected economy transformed.

“The step pattern that has traditionally been where people look for key life indicators and propensity patterns, I think right now, like with my daughter’s example, there’s a wide variety of when people hit those milestones. It might not be as time-based as it used to be.

This means that FIs need to dig deeper into the data for new signals and signals, because in 2022 “it’s harder to diagnose when someone is ready to buy the car. Buying a house is also very volatile, but you want to be prepared and let them know they are coming to you.

It touches on multiple aspects of the impact of credit use on credit scores and more, but he said “the consumer world [has a] very little awareness of how these things work mechanically, what you do with them, and what matters. It’s about being there and aware, promoting it early, even before they need it, and that’s going to vary a lot now. People don’t go into first-time home buying with predictable patterns as much as we’ve seen historically. »

See also: Zogo: How a 21-year-old Duke University graduate is reinventing financial literacy

Neobank knowledge

Giving props to neobanks for advancing financial literacy efforts, Brown believes there are some solid examples of digital-first entities helping users better understand their money.

“That’s something I applaud neobanks for, raising awareness and raising awareness and driving a higher need for these consumers, especially young children,” he said. “A good example is SoFi. They wrap it all up. It’s not just a question of refinancing a loan and a rate. It’s more about what does it mean for your financial health, well-being and stability? »

He added that some NCR customers now offer programs in partnership with companies like Zogo. “Consumers are really having fun, they’re learning something, they’re enjoying doing it, the push and awareness is great, and I think that’s something more traditional banks and credit unions need to borrow.”

Let’s go back to the issue of communicating with Gen Z and millennial consumers building on “TikTok stars who become famous as the ultimate crypto advisor or whatever,” he said. an academic or high school community engagement model. They are already connected in the community.

At this point, it’s about showing how peers are successfully navigating the increasingly complex world of digital personal finance and providing the banking tools to support those efforts.

“Nothing appeals to this segment more than one of their own. So it helps to create champions if you will. That’s what it’s really about. How do you support and show someone who has benefited, and hard work has paid off, and this is what came of it?

Saying that credit score advocates have effective models for this, he added: “It’s the same sort of thing where if the bank could let some of their customer examples speak for themselves. [it’s] louder than the bank speaking for itself” to trigger a change of mentality.

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