Briefing Note 1: Financial Health – The Growth Engine & Imperative for Banks

UNCDF’s Centre for Financial Health is initiating a learning series on individual financial health and its relevance to public and private actors. This first briefing note is for financial service providers and talks about how aligning business strategy with customers’ financial health can help them boost their growth, profits, competitive edge, and customer trust.

Personal financial health has become more imperative in a pandemic world. Individuals who lost jobs or closed businesses still had bills to pay and families to feed. Financial insecurities were experienced across income strata due to unexpected loss of income, increased medical expenses, and or unpaid bills. Vulnerable segments such as low-income, unemployed, elderly, disabled, and microentrepreneurs were disproportionately affected.

Increasingly, regulators are looking to financial service providers to help customers to maintain sound financial behaviour and stay in control of their finances. Customer expectations from their financial providers are also shifting from merely offering financial services to providing solutions that help customers to improve their financial health.

Aligning business strategy with customers’ financial health is an untapped opportunity and imperative for banks and other financial service providers (FSPs) to boost profits and growth, improve customer engagement and trust, personalize solutions, and create competitive advantages. Financial health can also serve as an objective lens for banks to embed and drive consumer protection in all their business processes.

This article aims to create a better understanding of financial health and present the opportunities for financial service providers, particularly banks. We discuss the financial health concept, its measurement, and emerging evidence and trends that suggest there is a strong business case for banks to focus on customers’ financial health.