All too often, we see financial capability focused on the role of the individual and how they can improve their own financial security. However, at Commonwealth, our research has shown that a lack of tools and opportunities is a primary driver in America’s savings crisis. The Federal Reserve has found up to 46% of Americans could not cover even a $400 emergency. While common to think that greater financial literacy would change people's behaviors, our experience over almost two decades focused on increasing financial security and opportunity suggests that, when presented with the right opportunity and tools, people make thoughtful, careful financial choices about savings. Through a focus on user experience, leveraging data, and hybrid products, financial institutions have an unprecedented opportunity to advance their business by playing an active role in building financial security:

• Leveraging UX design for financial security. This includes making tools easy to access for those who are financially vulnerable, creating them in a way that is fun and engaging, and improving digital experience. One example is a gamified tool like SavingsQuest that helps people get started on the path to financial security by rewarding small acts of savings. SavingsQuest transforms the typical savings experience into something more appealing and can engage and motivate users to take action toward their goals for changing their lives in the real world.
• Use of data is key to the development of cutting-edge innovations. Stronger data analysis tools and access to consumer data can allow financial institutions to expand financial capability. One such example is utilizing data from checking and savings accounts to incorporate into a more holistic credit score. Through expanding the scope of data currently used to determine credit scores, demonstrated positive financial behaviors can potentially lead to higher credit scores and consequently increased access to credit.
• Hybridization can expand savings access and diversify product offerings. Hybrid solutions combine two or more financial functions and have the possibility to reach previously unengaged savers as well as expand the savings portfolio of individuals engaged in savings. These types of solutions have the potential to better align with and serve the realities of those who face financial uncertainty. One strategic approach for financial institutions to develop hybrid products is to target partnership with new actors – it’s crucial to think broadly about all institutions and firms that have a financial point of intersection with Americans.

Financial institutions are uniquely positioned to address financial capability due to their access to both users and data. Through leveraging user experience, utilizing data innovatively, and developing hybrid financial products, we look forward to continuing to work with financial institutions as they become a vital player in solving the savings crisis. To discuss your organization’s challenges in making savings – and ultimately, wealth – possible for all, contact Nick Maynard at info@buildcommonwealth.org.