By Ifeoma Asika, Correspondent Campuses
The COVID-19 crisis has shown it is more important than ever for banks to be able to gauge and help improve the financial wellbeing of their customers, says GlobalData, a leading data and analytics company.
Banking Analyst at GlobalData, Katherine Long commented: “The first half of 2020 has created significant problems for UK banks and their customers to overcome. Subdued consumer confidence combined with millions facing a reduced income has left major banks facing losses this year, with billions of pounds now set aside for expected loan defaults.
“While the crisis was unexpected, banks will continue to face this problem of unexpected losses until they can assess and improve the financial wellbeing of their customers. This involves not just knowing someone’s financial position but their financial awareness in order to predict future financial behavior. This is unlikely to be an easy task however, as banks will have a hard time convincing customers that they are the place to discuss money worries.”
In early April 2020 Virgin Money launched Money on your Mind, a financial wellness service for bank and non-bank customers alike. Customers send in questions online and receive an answer via phone or email from one of 300 members of Virgin’s Red team (who were previously branch staff). Virgin has also taken advantage of alternative digital channels such as YouTube, posting answers to common financial wellness questions.
Long continues: “Virgin benefits from this approach in multiple ways. While its branches weren’t open, the bank could still offer a personalized bank channel that can accurately assess whether customers truly need payment holidays or overdraft extensions. This also helps the bank maintain and develop a relationship with customers as well as attract new consumers whose own bank hasn’t been so responsive.
“However while some banks have begun to address the financial wellness of their customers, to date none have sought to build a level of trust to the extent that customers will want to divulge their negative or embarrassing financial secrets.
“Trying to understand as well as improve the financial habits and thinking of customers will not only enable banks to offer a more personalized experience, it will help banks learn the true risk of the loans they’re making and ultimately help them prepare for the unknown.”