Financial Literacy: Customers and Communities

Financial Literacy: Customers and Communities

By Deb Stewart

We’ve heard the alarming statistics. Now bear in mind that these are statistics that apply to banking industry customers.

  • 75% of Americans live paycheck to paycheck.
  • 25% have no savings.
  • Nearly half of millennials have too much debt, and many borrow from predatory lenders.

And it is becoming clear that a lack of financial literacy fundamentally changes not just individuals’ lives but the nature of our communities.

A study published by the University of Pennsylvania’s Wharton Pension Research Council concludes that “[f]ully one-third of wealth inequality can be explained more simply: by the financial-knowledge gap separating the well-to-do and the less so.”

With an issue this big, what can one bank do to have an impact?

Facing real-life constraints of limited budgets and staffing, banks are coming at the financial literacy problem in many ways—ways that match their budgets and their communities. Some are developing programs in-house, while others use paid or free off-the-shelf programs. Leveraging partnerships has become a common strategy for gaining greater impact with fewer dollars. And we commonly see a focus on one customer segment at a time.

Of the adult-focused financial literacy programs out there, some of the most proactive are taking place at Birmingham, Alabama-based Regions Bank.

Financial Fitness isn’t just for Fridays anymore.

Regions Bank has great tools available online for customers to assess their financial situation. But how do you build awareness of these great tools? And how do you best use these tools to truly make an impact on the financial wellbeing of your customers? You remind them that “fitness” goes well beyond counting calories or doing your crunches.

In January 2013 Regions decided to leverage customers’ desire to get fit in the New Year with the introduction of Financial Fitness Fridays. The idea was that January is often a time when people resolve to get more physically fit. Why not encourage financial fitness, too? One-on-one meetings with bankers in the branch was a way to deliver that—and help people understand the financial resources available to them.

Branches were encouraged to introduce this initiative in a way that captured the attention of their community.

“We provided our branches with take-ones, flyers, and posters to use in their communities,” explained Valerie Ramsbacher, senior vice president of corporate advocacy at Regions. “The approaches they used to get customers excited were really fun. One branch did a retro fitness Friday with staff dressed a la a Jane Fonda workout video. Customers could enter to win various fitness equipment. And all of these tactics worked together to prompt meaningful conversations with customers.”

Online tools are used extensively as a part of these meetings. Conversations start with everyday banking:

  • How is the customer using online, mobile, and other tools to manage their finances efficiently?
  • Could they be borrowing “smarter”?
  • Do they have the right credit cards?
  • Are they using home secured loans appropriately?
  • Are they paying for things they don’t need?

Regions talks to customers about being ready for unexpected events and more broadly aspirational goals, whether that’s a new home, vacation, or saving for their grandchildren.

“Financial Fitness Fridays aren’t just in January anymore,” Ramsbacher said. “Branches use the tool in ways that work for them. And, fundamentally, this is the core of what we do Monday through Thursday as well. These individualized, needs-based conversations are a part of our everyday training and thoroughly ingrained in our culture.”

Financial literacy brings HOPE to 100 communities.

Regions has partnered with the nonprofit Operation HOPE since 2014. Just months after the partnership started, Ferguson, Missouri was in the midst of unprecedented upheaval, which played out on the national stage. Regions and other businesses wanted to do something to help the community—and do it quickly.

At the center of that conversation was the goal of helping Ferguson and surrounding areas in North St. Louis County regain hope for the future. Regions asked community leaders what they needed. The answers included:

  • Community investment
  • Tools to access credit for housing, education and everyday needs
  • Tangible commitment to their community

As part of the bank’s response, space within two nearby Regions branches was set aside to become HOPE Inside financial empowerment centers.

Regions provided the workspace and financial support. Operation HOPE provided a trained counselor available to meet with anyone—not just Regions customers—to provide cost-free, highly customized financial education. In addition to counseling within the bank branches, HOPE Inside counselors conduct evening workshops in libraries and community centers. They work closely with branch managers to become an integral part of the community.

A key goal of the program is to help participants get to a credit score of 700 or higher. This may involve getting rid of credit card debt or rectifying other past decisions. “Lowering what someone is paying for their cell phone or TV package can really make a difference in their overall financial life. And when you help someone to improve their credit score you also drive development of the community. That person may now have the financial ability to become an entrepreneur,” said Mike Hart, Midwest market president at Regions.

This program is all about partnerships:

  • Between HOPE counselors and branch managers
  • Between HOPE Inside and other organizations like the Urban League
  • Between Regions and local government

And it’s working. Regions recently announce plans to support a total of 100 HOPE Inside locations in markets around its footprint by 2021.

This is just beginning.

“Financial education will always be of great importance,” said Jeni Pastier, ABA’s senior manager of financial education. “Even as technology continues to make our lives easier, all consumers need a basic foundation of money skills in order to lead a fiscally responsible life.”

She added: “Banks will continue to be at the forefront of bringing financial education into the community.” That includes advocating for state legislation that requires students to take a personal finance course before graduation.

Next week we’ll look at youth-focused financial education programs in the banks.

Deb Stewart is a contributing editor to ABA Bank Located in Charlotte, N.C., she is an independent consultant working for the financial services industry. Email: [email protected].