Financial Literacy Month may be coming to an end in Canada today, but the hard work of addressing the need to educate consumers about money around the world has only begun.
Just look at the results of this survey we recently conducted among more than 1,000 U.S. adults. Barely more than half, or 53 per cent, were able to correctly answer questions about diversifying their investments, the difference between interest and inflation, and compound interest. Among U.S. consumers aged 18 to 34 it was even worse: Only 41 per cent clearly understood all three concepts.
This is a gap that may get worse unless financial institutions act quickly.
With the rise of mobile apps and online services, we can’t count on helpful bank tellers to coach consumers anymore. Some people even might be using Google as their primary “financial advisor.”
Financial institutions are aware of this problem, of course, which is why they are designing web sites, apps and other digital services to help consumers at any time and in the context of their choice. As they consider the user experience (UX) that surrounds those digital services, however, there are three influences on financial literacy that should be kept top of mind:
Here’s the low-hanging fruit: stop using “legalese” and institutional terms to talk about what are already complex subjects. Here’s an example:
Phase-5 was working with a company in the insurance industry on an interactive tool for customers to learn more about certain policies. When we tested a button that said “Get a quote” versus one that said “How much will it cost?”, the latter was preferred by an order of magnitude.
Imagine the difference when you substitute other finance industry jargon with language that sounds the way people talk in everyday life. The differences may be subtle, but critical.
Ask the average banking customer when (and why) they opened their first account and they’ll probably give you a common answer: their parents suggested it and helped them understand how it worked.
This is how financial literacy has historically been passed on, whether it’s how to balance a budget or the role of loans and mortgages when buying a car or a house.
The new generation of consumers tends to prefer learning by doing, whether it’s getting a coffee using the Starbucks app or setting up a robo-advisor to manage investments.
If it’s possible to get a one-click purchase through Amazon, consumers will want the same kind of ease of use when they look up information or access a product or service from their bank or insurance company.
Expectations have changed and it’s now about offering financial literacy in the moment, not as a separate conversation before or after consumers have taken action.
Banking may be part of everyday life, but that doesn’t mean consumers want to be thinking about their banks every day — or any other financial institution, for that matter.
Imagine someone who wants to book a massage appointment. They don’t want to make calls or pore through umpteen web pages to find out if it’s covered by their health insurance policy. They want an app or other quick means to get an answer and make a decision.
As financial institutions create digital experiences to drive outcomes that are in their customers’ best interests, they need to realize that these are life experiences that “just happen” to cost money, and that money “just happens” to be associated with a financial institution.
In this age of the connected consumer, it’s a matter of going beyond offering a valuable product or service and helping customers achieve their objectives quickly and effortlessly.
At Phase 5, we bring together experts in marketing research, user and customer experience, innovation and design. This unique, collaborative approach drives business results by applying strategic insights to your product development, go-to-market and customer relationship decisions.
Improving financial literacy is not just a matter of creating digital experiences, of course. It really depends on close observation — watching and listening in the real world, which proper, customer-centric UX research and design accomplishes.
Once you see how consumers live their lives, how they’re spending and what connects the two, banks and insurance firms will be in a better position to advise, instruct and guide them. And when that happens, financial literacy becomes much more than a month on the calendar, but a movement towards better decision-making and better living.
— By Arnie Guha, Ph.D. with contribution from Adam Yuzik.
At Phase 5, we bring together experts in marketing research, user and customer experience, innovation and design. This unique, collaborative approach drives business results by applying strategic insights to your product development, go-to-market and customer relationship decisions. We’d love to speak with you!
Arnie Guha, Ph.D, is a partner at Phase 5 and the leader of the User Experience Strategy and Design practice. Widely regarded as an expert in online user groups and environments, Arnie helps his clients – financial institutions, technology companies, life sciences firms, media companies, publishers and information providers as well as government organizations – develop winning UX solutions and strategies that best respond to market needs and business objectives.