Health is a great metaphor for financial life in this “on your own” world. Just like medical doctors help us manage our physical health over our lifetimes and as we go through different medical challenges, people need support and guidance to help them manage their financial challenges and opportunities.
This is a role where financial co-ops should excel, and credit unions are leading the way. Eight credit unions and the Foundation qualified for CFSI’s 2018 Financial Health Leaders Program. Only three banks qualified, and none of them were among the $150 billion plus behemoths.
Credit unions are walking the walk, and that’s great. But big banks are talking the talk. And they are really loud.
Banks see financial health as a huge, profitable marketing opportunity and they want to define the space in a way that aligns with this vision. They are trying to position themselves as engaged, caring, and consumer-oriented. Case in point: Five of the eight largest banks were major sponsors of Emerge, and their message was everywhere.
That was not the case a couple of months ago at FINHEALTH18, a smaller, more intimate conference organized by the California and Nevada Credit Union Leagues and the National Credit Union Foundation. Its size and credit union focus made it more interactive, constructive, and actionable than Emerge, but the basic themes were the same:
Traditional financial literacy education does not work. Raddon released a research report last week that confirms what has long been clear: Paper and lecture-based learning doesn’t change financial behavior; actively doing things does. People learn by doing, especially when the topic is something as emotional as personal finances.
The future of financial health involves behavioral science and design. This was the subtext of every story of success and an explicit part of nearly every formal presentation at both conferences. Poor financial health is more a product of behavior than of any other contributing factor. The only way to change that on a workable, sustainable basis is through the science of behavioral economics.
Large-scale, advanced data analytics — Big Data — is critical to improving member financial health. To oversimplify, behavioral science is about how little nudges can drive big changes in behavior and outcome. Big Data helps us understand who to nudge, how, when, and in what direction to nudge them, what rewards to use, and how to follow-up. It’s key to figuring out whether nudges work, how well, and how to improve them.
Is financial health ‘a’ thing, or ‘THE’ thing? A couple presenters at FINHEALTH18 asked this question and it captured the imagination of the conference. People talked about it as they left the next day. I didn’t hear anyone ask this explicitly at Emerge, but tension between those on each side of this question was unmissable.
The ROI of financial health is tricky. Boards and executives want to see ROI before committing to financial health, and in traditional terms it can be hard to document, but it's real. Gallup research shows that financially healthier consumers are more engaged, and more engaged consumers generate more profit. At Emerge, BECU shared its finding that healthier members contribute more to the cooperative. But this is still a tough story to tell and financial health advocates need to present their case more effectively.
One thing all of this drove home for me is that credit unions are still struggling to tell their story effectively. Banks argue that credit unions are the same as banks, except credit unions don’t pay their fair share of taxes. That isn’t true of course, but the movement hasn’t been effective at showing it. And more than just the tax exemption is at risk.
Every day, financial services becomes more commoditized and economies of scale become more valuable. Our movement needs a message that makes “the credit union difference” a clear, believable, and sustainable differentiation from banks. Tweaking the business model to make member financial health ‘THE’ thing might be the answer.
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