Engaging Consumers on Financial Wellness


Most people haven’t studied finance or taken a course in personal financial management. They have a basic understanding of the products they need to conduct daily life and, possibly, to save for the future. Unless they’re wealthy, it’s likely they haven’t spent time with a financial advisor. And in today’s reality, they’re not having serious conversations with a banker in a branch – if they visit one at all.

How they are doing

  • 44%
    Americans don’t have enough cash to cover a $400 emergency
  • 43%
    Student loan borrowers are not making payments
  • 38%
    U.S. households have credit card debt
  • 33%
    American adults have $0 saved for retirement

So how do people get good information on the right types of accounts to open, goals to set and habits to form? For many, it’s a combination of advertisements, suggestions from friends and ad hoc decisions made without guidance. While not everyone has the income opportunity to become wealthy, most people would be relatively better off if they had more clarity on what steps to take and when to take them.

Here we lay out the case for financial institutions to reclaim their reputations as trusted advocates for their customers’ financial well-being. If done well, this way of engaging customers yields better outcomes for both the bank and for its the customers. A customer that is growing in financial stability and wealth is ultimately one that is more profitable for the bank.

What is Financial Health?

Financial health and financial wellness are terms that have been broadly used in recent years. We define it as the strength of a person’s financial holdings and habits relative to their income and lifestyle. In other words, how stable they are today and how their habits are contributing (or detracting from) that stability. We believe that financial health should be examined like physical health: vitals (assets, debt, insurance) should be measured, and habits (saving, spending) should be taken into account.

Financial health is also relative to a person’s peer group in terms of income and lifestyle. Someone making $40,000 can be relatively healthy if they have enough savings, spend less than they make and have overall could weather an uncertain future. On the other hand, someone earning $150,000 a year but spending beyond their means and with significant debt may be relatively unhealthy.

The Role of Banks

There was a time when banks were revered as institutions that provided not only secure storage of money but also highly professional financial advice. The relationship banking model, where a banker understood each customer’s situation and needs has largely been replaced with commoditized products that are sold and serviced through a variety of channels. That personalized touch, and contextual financial advice is gone. Paired with a reputational hit from the 2008 financial crisis, banks are less often seen as a trusted source of advice and planning.

How customers feel about managing their finance?

  • 59%

    Managing money is something I have to do, not something I want to do

  • 47%

    It reminds me of my financial burden

  • 37%

    I do not like to see the money I am spending

  • 31%

    It takes too much time

New apps have started to fill the gap. Money management, budgeting, micro-savings, and robo-advisory are just a few of the trends we’ve seen as consumers increasingly trust tech companies to help them build financial security. Banks, for the most part, have lagged in rolling out engaging technology to compete with the startups. Instead, their customers spend less time in their bank’s channels, and more time becoming loyal to another brand.

Huge opportunity

  • Millennials are actively seeking financial advice and need help building credit, saving and managing finances
  • Business owners and SEGs are looking for financial education for employees
  • Boomers and seniors are concerned about income protection and many are looking for help

Thinking Across Segments

Understanding your financial health and how to optimize it is important for everyone, regardless of their current income and wealth. While the advice should be different and personalized, banks should be providing recommendations to customers in every segment.

For customers who are living paycheck to paycheck, or perhaps just starting their careers, small actions can have a huge impact. Setting a modest savings goal and uncovering opportunities to pay down high-cost debt faster can lead to a long-term shift toward financial security. Customers at the other end of the spectrum can focus on other goals, such as how the diversity of their assets can improve the likelihood of generational wealth preservation. A solid financial wellness program should anticipate the needs of customers at every level of wealth and at every step of their financial journey.

Measuring Financial Wellness

In order to improve something, you must first be able to measure it. The cornerstone of a financial wellness program is the ability to score a customer’s financial health against a range of criteria and benchmark them against their peers. Knowing that you won’t have every piece of data about your customer’s finances, KapitalWise takes an iterative approach to build a score. As the customer gives you more information, the score’s accuracy improves, and more actions can be unlocked.

We believe that to be financially healthy, a consumer should be able to weather multiple possible future scenarios. With the help of high-performance GPU computing, our algorithms are capable of scenario testing millions of different financial and life scenarios using our custom Monte Carlo simulators to predict the probability of future financial insecurity. Our algorithm includes current earnings, spending pattern, debt-to-income ratio, savings coverage of average expenses, credit score, retirement fund forecast, and insurance coverage.

The individual is then benchmarked against their peers based as it relates to income level and cost of living. The score itself can be numerical, such as a scale of 40-100, and is also used to identify the actions that could be taken that would have the most positive impact on the score.

Using the Score

The FinWell score can be provided to relationship managers, such as via a CRM, or be part of a consumer digital experience. In a high-touch environment, relationship managers may use the score to help a customer develop a plan to address any gaps and improve the score over time.

In a digital consumer experience, recommendations on how to improve the score can be displayed in a mobile or online banking experience, with the option to nudge customers toward changes that will improve their standing over time.

Long-Term Planning vs Seizing the Moment

A robust financial wellness program should help customers understand the value of long-term planning for their financial future. By providing a financial wellness score, a bank is taking the first step in a conversation to help their customers plot a long-term plan. The score can be paired with financial literacy information that is tailored to the opportunities the individual has to improve their financial well-being.

Having a plan doesn’t guarantee success, however. In our busy lives, it’s easy to forget about a goal you’ve set or when to take the next step to secure your financial future. The best way to help customers achieve goals is to nudge them – at the right time – with a friendly reminder. The KapitalWise platform continuously analyzes the customer’s checking account and notices anytime there’s surplus cash that could be contributed to a savings or investing goal, or be used to pay down a loan. By sending a customer a notification at that moment, you ensure that there’s an opportunity to make progress before a goal is forgotten and the money is spent elsewhere.

Shared Success

Customer’s success Financial Institution’s Success

This type of model is not only a win for the consumer, but it is invaluable to banks as well. With a more engaged, loyal client base, banks will see higher retention numbers and can spend less time and money battling the churn. Most importantly, by helping customers grow their financial success, the bank has more opportunities to cross-sell to a base that is also growing in affluence. This creates more profitable relationships and directly drives revenue for the institution.

Every bank and credit union should care about the financial health of their customers. The best ones will make it a pillar of their strategy.

Feature Set Description:

Sample Customer Journey

Alice is introduced to her wellness score in her banking app and wants to learn more

She enters more information to improve the score’s accuracy

Do you have an emergency saving?

Alice creates an Emergency Saving Goal.

Periodically, she receives recommendations on improving the score, and congratulations when making good decisions

You spent less than usual last month! Move $100 extra to savings?

Some recommendations are for new products that can help her save and build wealth

Earn a better rate and reach your goal faster with our new savings account

The bank builds a deeper relationship with Alice, and she is happy to have such an advocate for her financial health.

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