How to meaningfully accelerate financial inclusion is on the minds of nearly all people-centered leaders within today’s banking ecosystem. While the issues of economic inequity are complex and nuanced and require more study, recent research from EY, Mastercard and our company set out to better understand consumer behaviors, attitudes and goals most closely associated with long-term financial wellness.

The results of that research was published by Co-op and covered in industry publications Finopotamus and CUToday.info. The findings are enlightening, particularly for financial services professionals who hope to lead all consumers down the healthiest economic paths. What’s more, they are in harmony with recent studies by Cornerstone Advisors, McKinsey & Company and EY.

A primary takeaway: Focus solutions on lifestyle not just life stage. The most inclusive financial services delivery model is one that combines long-term savings programs with day-to-day money management. This is much different than the typical model found among credit unions and banks today. Costly and inefficient, today’s most common model places the emphasis on delivering single-engagement, life-stage products, such as mortgages, auto loans and investments. Instead, the focus needs to be on everyday lifestyle tools like digital banking and payments, which enable the consumer to understand and track their spending behaviors as they plan for short-term liquidity and long-term growth goals.

A second important takeaway: Design solutions for the consumers you serve. Pulling off that delivery model requires an intentional study of and respect for the various personas financial institutions hope to serve. With a stronger appreciation for the differences in underlying goals and motivations of consumers, credit unions and banks can better personalize solutions and execute strategies with relevant tools and experiences that increase the likelihood of consumer utilization.

The Psychology Of Spending Behavior

To better understand how daily micro-transactions and long-term financial wellness intersect in the minds of different people, the researchers explored participants’ behaviors and attitudes across three behavioral science dimensions: mental accounting, pain of payment and temporal focus.

• The mental accounting dimension reveals how consumers view money, either as a single pool or as a series of separate categories for spending.

• The pain of payment dimension outlines whether consumers find it enjoyable or painful to spend money.

• The temporal focus dimension details how concerned individuals are with their future versus present needs.

No surprise, we found statistically significant differences in daily spending preferences and motivations across persona groups. Nonetheless, the findings highlighted the essential need to engage today’s consumers in a contextual way: by presenting the right offer to the right consumer at the right time and, importantly, based on their daily transactional behaviors.

Using their observed behavioral attributes as a foundation, researchers categorized consumers into two types of purchasers: those with a budgeter mindset and those with a non-budgeter mindset.

Engaging Budgeters And Non-Budgeters In The Payments Channel

As it turns out, the payments-card channel is optimal for engaging with both personas in a way that is both relevant and contextual. Budgeters, who view credit as a transactional tool rather than a loan, prefer credit cards; non-budgeters, on the other hand, prefer debit cards. These individuals are anxious about using credit because they see it as a worrisome temptation.

The starkest difference between the two personas studied in our research is in the way they view money. Whereas budgeters see money as a way to enhance their lives, non-budgeters think of money as a means to take care of daily needs.

Both are concerned about the economy, yet budgeters tend to be more optimistic about the future. This may be due to the higher likelihood they will develop and stick to a spending plan. Non-budgeters have a harder time doing that, which naturally creates challenges progressing toward a financial goal, an understandable optimism dampener.

Using micro-transactional data, credit unions and banks can easily identify which of their existing customers likely falls into which mindset category. This sets them up for much more relevant offers in the payments channel and beyond.

Driving Financial Inclusion Through A New Model Of Customer-Centricity

Financial institutions can also apply budgeter versus non-budget intelligence to their new customer acquisition strategies, including outreach to marginalized groups that have largely been ignored by mainstream banks. Offering a credit-builder product to a community of people who are leery of credit, for instance, could be a non-starter that does more to alienate than to welcome.

Contextual experiences build trust, an essential ingredient for meaningfully serving the underserved.

To bloom the early-stage trust earned through contextual engagement, credit unions and banks may want to consider incorporating the following three strategies into their growth plans:

1. Engage Every Day: Deliver micro-to-macro money management through daily engagement. Convenient, digital solutions help financial institutions become reliable, go-to partners embedded in the day-to-day financial lives of their customers.

2. Give Good Guidance: Segment customers based on primary payment type. Redefine value to the customer, placing them and their preferences at the center. Rather than simply offering products, offer financial advice geared toward improving the consumer’s individual wellness goals.

3. Earn More Of The Customer Balance Sheet: Offer solutions that combine competitive rates and pricing with outstanding convenience. With this foundation, customers can turn to the financial partners they’ve trusted daily for the big financial moments in their lives.

The opportunity to affect measurable change in the pursuit of financial inclusion is sizable. Yet, as the new research indicates, it all begins with the smallest of transactions. Consumer trust in legacy financial institutions has been eroded by the loss of daily interactions. Fintech competitors are behind this shift, relying on a heavy presence at the point of sale to siphon away trust.

By turning that tide of trust back where it belongs and preparing consumers for major milestones through financially healthy daily transactions, credit unions and banks can help more people across more communities achieve the financial freedom they deserve.