Investments in Financial Education Empowers FIs and Their Customers
Financial institutions (FIs) that offer financial education to consumers find that it helps to build trust, Alexis Castorina, head of consumer education for Early Warning®, told PYMNTS.
“The more financial institutions can invest in education overall, the more trust they’re going to build and the more value they’re going to provide to their customers — and keep them as customers,” Castorina said.
Financial literacy has always been important, but during the pandemic, it’s become even more so. Today, the focus is on elevating underserved communities, getting people back into the financial system, promoting pandemic-related economic recovery and creating greater consumer protections against fraud.
“This past year, President Biden essentially had a proclamation on national financial capability,” Castorina said. “He’s called for the public and private sectors to really double down on the efforts to provide high-quality financial education and to do it in such a way that better understands and supports the unique needs of different communities.”
Creating Awareness and Overcoming Hurdles
With financial education, consumers can take actions to achieve their goals, make better decisions and avoid becoming a victim of abusive financial practices. An understanding of matters like basic budgeting and how to establish credit sets a good tone for the consumer’s overall financial life.
“Whenever you have that education and you understand how the system works and the positive behaviors, it really can have a significant effect on your positive outcomes and what that looks like for your financial future,” Castorina said.
While there are benefits to education, there are also challenges in delivering it. For one thing, while digital is convenient, some people learn better in person. For another, there is no standard curriculum.
Often, the first step in overcoming these hurdles involves creating awareness that financial education is important. Many FIs partner with influencers to drive a financial education campaign, then point consumers to resources such as online learning materials. Ideally, they ask consumers about their goals so the financial institution can then determine the right starting point.
“It really depends on where the consumer is on their journey, their level of financial capability knowledge and then the data that the financial institution has in order to essentially put together a learning plan and counsel that consumer on what it is specifically that they’re looking for,” Castorina said.
Reasserting a Role as the Consumer’s Source of Information
FIs can also play a more active role in the education system. For example, Zelle® has partnered with social impact company EVERFI to build a program that teaches teens how digital banking works and how to protect identities online. As of the last school year, it has reached 66,000 students in schools in 47 states.
“There are things that financial institutions can do like that, which also puts their brand front and center to say, ‘Bank X is really serious about this, and here’s how we’re backing it up to show that we’re committed,’” Castorina said.
While the financial institution has traditionally been the center of a consumer’s financial life, that’s changed with the rise of FinTechs. Today, a consumer might have an account with a traditional FI, but also have accounts with different third-party applications that field different segments of their lives or transactions they want to make.
This proliferation of services and providers has made things just that much more difficult and confusing for consumers.
“So, what’s really important right now is for the financial institution to reassert their role as the source for the consumer as it relates to a number of different areas in their financial lives and really invest in financial education, so that they can be the source of information that a consumer turns to when they do have questions about a new life moment, like buying a home,” Castorina said.