Redefining Financial Wellness for Your Members

August 14, 2023

What is the state of financial wellness in the U.S.?

Per the latest data, it’s not good.

According to research conducted by the Consumer Financial Protection Bureau (CFPB), more families had difficulty paying all their bills in 2022 than in 2021, and more than one in three households could not cover their expenses for more than one month if they lost their primary source of income.  

Co-op’s CU Growth Outlook research, done with EY and Mastercard, finds that 57% of respondents have experienced a negative impact to their lifestyle due to current economic conditions. And just 45% of Americans have access to $1,000 to cover an emergency, without taking out a loan or using their credit card. 

“Members are having trouble understanding their own personal balance sheet,” says Samantha Paxson, Co-op’s Chief Experience Officer. “They’re currently using about 80% of their paycheck for their immediate needs, and the rest for intermediate and long-term needs. But they want to reallocate their paycheck to have half go to their immediate needs, and the other half go to their intermediate and long-term needs.” 

These conditions are pushing credit union members to make difficult financial trade-offs, and they need help. Increasingly, they are looking beyond their credit union to find it. 

Your Members Need Help 

According to consumer research conducted by Ron Shevlin, Chief Research Officer of Cornerstone Advisors, only 4 out of 10 credit union members said their credit union is helping them improve their financial health and performance. This places credit unions in the middle of the pack among financial institutions, behind well-known national banks like Bank of America, Citibank and US Bank. 

When it comes to the challenge of supporting their members’ “financial wellness,” credit unions tend to view it through the lens of education. Yet, this historical emphasis on pushing financial education and literacy on members rarely leads to lasting behavior change. 

“Jennifer [Tescher, President and CEO of Financial Health Network] writes that financial literacy programs don't work,” Shevlin said in his keynote presentation at Co-op THINK 2023. “Financial education rarely leads to lasting knowledge gain, and it does nothing to change behavior. It's even more scary to think that illiteracy might actually have its advantages.” 

According to Shevlin, this traditional, educational approach to financial wellness falls short for four key reasons:  

  1. It’s not contextual
  2. It’s not behavioral
  3. It’s not holistic—meaning that it tends to ignore or discount other aspects of the member’s life
  4. It’s not measurable
To Shevlin, credit unions need to aim higher—beyond the traditional definition of “financial health.” They should champion their members’ long-term financial performance as the goal. And the path to helping members achieve outstanding, long-term financial performance begins with embedding financial wellness solutions into your members’ daily interactions

According to Co-op’s CU Growth Outlook research, fewer than half of all young adults own the financial products they need to be fully prepared for a life event. This is a key reason why consumers own an average of five banking relationships across different financial institutions. They don’t feel like they are being served by any single, primary financial relationship for all their daily and long-term financial needs. 

“Members are stressed out!” Paxson says. “Where can credit unions come in with their white hats?” 

Embed Financial Wellness Solutions into Your Members’ Daily Interactions 

Shevlin recommends that credit unions pursue a three-step path toward delivering on this new definition of financial wellness. 

The first step is to “make financial health a service, not a resource.” Shevlin refers to this concept as “embedded fintech”— or the use of innovative technology to integrate convenient, always-on financial wellness solutions within the apps and interfaces that members use every day. 

“Embedded fintech is the opposite [of embedded finance],” Shevlin argues. “It's integrating fintech products into financial institutions, websites, apps and processes.” 

Secondly, credit unions must be able to measure their members’ financial performance over time. To do this successfully, you must be present within all your members’ regular daily financial activities, including spending, budgeting, investing, earning and borrowing. 

Lastly, Shevlin urges credit unions to “take a holistic approach to financial health … [that] incorporates [members’] physical health and their mental health.” 

Giving Good Guidance to Support Financial Wellness 

To regain the trust of financial consumers and achieve long-term growth, credit unions must rethink their overwhelming reliance on rate-based solutions like lending, and embrace a new model of member centricity that begins with serving members’ daily financial transactional needs. This new model is supported by three pillars: 

  • Pillar #1: Engage Everyday 

  • Pillar #2: Give Guidance 

  • Pillar #3: Earn Member Balance Sheet 

Embedding financial wellness within digital solutions falls squarely within pillar #2. By helping members manage their daily financial needs, credit unions will be better positioned to support their long-term financial wellness goals. 

“Giving good guidance isn’t about offering a financial literacy class,” Paxson says. “It’s about providing members with the tools to help them manage their financial lives, understand their current financial position and then take action on it.” 

Today, credit unions need to think beyond financial education, and begin offering engaging digital solutions that members use every day, and then embed guidance into those interactions. This embedded guidance can include a wide range of features such as credit monitoring, subscription cancellation services, automated budgeting and savings tools, investment and asset allocation advice, and more. 

By getting members to use your digital solutions on a regular (read: daily) basis, you will increase engagement and the likelihood of forging sticky, long-lasting relationships. It will also provide your credit union with valuable data on your members’ spending, saving, earning and borrowing behaviors—information that will deliver a clearer picture of their financial priorities, wellness and performance. This in turn will create a virtuous cycle that will help you know your members better, enabling you to serve them with customized solutions to meet their individual financial needs. 

Embedding guidance and engagement throughout your members’ financial journey is critical to establishing financial relationship primacy today. Co-op’s research shows that 45% of respondents indicate engagement as the top driver of relationship primacy. Yet credit union members have, on average, three times the number of financial relationships as non-credit union members. If your credit union is not there every step of the way, you will be left behind. 

“There is a financial health and performance flywheel for credit unions, and it starts with financial health and performance products and services,” Shevlin says. “By providing financial health products and services—not just resources, but baking them into your products—you are helping to improve your members' financial lives and drive smarter spending and borrowing. Smarter spending and borrowing drives deeper engagement. As [your members] see improvements with their financial lives, they're going to come back to you for more of those tools.” 

Get Co-op’s “2023 Credit Union Growth Outlook” white paper to view our latest research and learn how your credit union can fuel financial performance through daily member interactions.  

Previous Article
AFTs Offer New Opportunity—and Risks—for Credit Unions
AFTs Offer New Opportunity—and Risks—for Credit Unions

Account funding transactions (AFTs) are growing in usage as consumers increasingly embrace digital payment ...

Next Article
Now is the Time to Adapt to Changing Member Trust
Now is the Time to Adapt to Changing Member Trust

The once-inextricable link between trust and long-term financial relationships may be fading. Co-op's VP of...


Thank you!
Error - something went wrong!