Winston Churchill famously once said, “Never let a good crisis go to waste.” It’s an adage that encourages us to look beyond the pressing issues of today and resolve to emerge stronger. Banking is a noble profession — founded on the principle that banks exist to help protect customers’ financial well being and achieve their financial goals.The COVID pandemic has tested the industry’s resolve to deliver on this promise, and it will take a balanced approach of addressing the urgent issues of the moment while providing leadership through an uncertain post-pandemic future.

Banks and credit unions have risen to the near-term challenges. Facing an unprecedented set of operational hurdles arising from remote access and government stimulus, the industry acted swiftly to address digital and contact center operations and risk processes to support customers. In fact, a McKinsey survey shows 87% of consumers trusted their financial institution to do the right thing during the crisis and two-thirds trust their institution more now than before the pandemic.

” Inspiring resilience … requires a more creative set of solutions than simply offering a menu of traditional products.”
— Jody Bhagat, Personetics

Given the uncertainty about the economic impact of the pandemic future, however, banks and credit unions will need to consider bold actions that support customers through the recovery process while managing through their own financial pressures — credit related and operational. As an example of the latter, the COVID crisis will accelerate by three years the decline in branch interactions and shift to digital channels, expediting the need to rethink customer relationship models and cost structures.

The unfortunate reality, though, is that the crisis disproportionately impacts those that are most financially vulnerable. They lack the financial resilience to persevere from even a modest disruption in cash flows, much less one of an extended duration. Herein lies an opportunity from this crisis that can’t be squandered.

First, Establish Resilience KPIs

Customer resilience an be defined as having the ability to withstand and recover from temporary financial disruption or hardship. In banking terms that requires that consumers have three things: 1. emergency savings; 2. the power to borrow and pay down debt and 3. the ability to manage spending.

Inspiring resilience has positive outcomes for consumers and financial institutions including higher satisfaction, deeper relationships, and lower delinquencies. To deliver on this ambition, however, requires a more creative set of solutions than simply offering a menu of traditional products.

Achieving greater customer resilience requires a concerted focus on the right metrics and personalized programs. Firstly, the industry needs to define and measure resilience “KPIs” to create accountability and demonstrate progress. Examples:

• What percentage of primary customers have an emergency savings cushion of at least three month’s expenses?
• What is their savings rate as a percentage of income?
• What percentage of customers have a high enough credit score to borrow when cash flows are impacted?

Resilience metrics should be part of a bank or credit union’s balanced scorecard to bring continuous visibility and emphasis to customer wellness.

Three Goals of Personal Wellness Programs

The second and most critical component to customer resilience is personalized wellness programs. These automated programs leverage artificial intelligence and financial transaction data and engage a customer over an extended timeframe to accomplish a financial wellness goal. Personalized programs to enhance resilience should be pursued in three areas:

1. Creating a savings/investment cushion. Only 25% of retail customers have sufficient savings to cover six months of expenses, according to a 2020 Accenture study. Using digital tools, banks and credit unions can analyze how much each customer is capable of saving based on their cash flows, and offer an automated solution that saves or invests on a customer’s behalf to improve savings outcomes. Ally Bank’s Surprise Savings is an example of this proposition. One other North American bank using a similar program reports that the average savings for consumers in its automated savings program exceeds $1,800 annually.

2. Manage spending. During the post-pandemic recovery process, some consumers will need help managing spending to ensure they can meet essential expense obligations in light of their new income realities. Using AI capabilities, banks and credit unions should proactively reach out to customers that can benefit from a smart budget.

The wellness tool should propose a specific category on which to manage spending, set a target amount, and track and monitor it on the customer’s behalf. By using this approach, financial institutions can expect to see a 20% to 30% adoption rate within the target checking base as well as higher digital engagement. Royal Bank of Canada’s NOMI solution, a Celent Model Bank of the Year Award winner, offers an excellent example of a smart budget capability.

3. Create borrowing capacity. The first step towards creating borrowing power, naturally, is to pay down outstanding debt, yet many consumers that are in high-debt situations lack the wherewithal to do so. According to TransUnion, 37% of U.S. households currently revolve debt, with an average credit card balance of $5,500 per borrower. By leveraging analytics of customers’ cash inflows and outflows, a bank or credit union can set up an automated solution to direct excess funds to pay down high-interest-rate debt on behalf of a customer.

Promoting customer resilience can be the basis of a new advocacy-based relationship paradigm between customers and their financial institution. Resiliency programs engender greater trust and loyalty with consumers and reinforce the purpose-driven nature of banking. Superior business results are an outcome of these efforts. Notably, a 2020 retail banking study by Accenture shows that trust-based propositions can generate 9% revenue uplift for traditional banks.

Institutions should use this challenging period as a catalyst to build and promote personalized programs that help customers and society become more resilient. The result will be not only an enhanced reputation, but strengthened relationships and engagement between institutions and consumers.