The demand for timely personalised advice and tailor-made products is expected to increase as consumers and businesses emphasise on financial wellbeing. Banks are partnering with fintechs and other technology providers to utilise customer transaction data to develop tailored and insightful wellness programmes.

Listed below are the key strategy trends impacting the financial wellbeing theme, as identified by GlobalData.

Neobanks/digital ‘banks

New end-to-end digital players have entered the banking and investment management market across the world. These players, operating on the latest banking software, have aimed to leverage the insight they derive from banking transaction data to draw out insights and learnings for their customers. The insight they can provide their customers on how to improve their finances is the core offering for some brands such as Douugh and Acorns. Douugh, for example, offers a subscription-based financial wellness platform, which helps customers with money management, paying off debt, savings, and building up their wealth by linking their bank/investment accounts along with their debit card(s).

Open banking

Opportunities for new revenue streams will appear as banking moves from a closed environment to an open one and previous revenue-generating services will become less valuable. The ability of a bank to provide a secure environment, manage its application programming interface (API) economy, and derive shareholder value will set brands apart from the competition.

Open banking is transforming the banking sector, initially driven in Europe by Payment Services Directive 2 but increasingly by regulators the world over. Standardised APIs are creating opportunities for new products and services to be developed, increasing customer choice and enabling greater competition. Banks will no longer have a monopoly on customers’ data through open banking but will facilitate third-party access via secure APIs. It will allow more and more providers to leverage the transaction, assets, and liabilities data of consumers to derive deeper insight and offer more products and services in the wellness space.

Salary advances/employee loans

A growing number of fintechs and banks are looking to make lending against a steady paycheque more widely available. This has moved out of the employee benefit realm and aims to disrupt the payday lending market, where consumers are charged very high rates for instant liquidity. Using transaction data from a consumer’s accounts, these firms limit their risk by advancing earned salary.

Robo-advice

Robo-advice systems analyse available data to establish user preferences and offer personalised suggestions of products and services that may be of interest for customers. Artificial intelligence (AI)-driven recommendation engines can provide faster service offers with no human bias, taking into account a broad set of risk factors at a much lower incremental cost of delivery for the financial services industry. Robo-advice platforms enable providers to offer low-cost automated investment services in the wealth space, while helping to address one of the key points of any financial wellness programme – long-term savings.

Wellness industry

The global wellness industry grew to $4.5 trillion in 2018, with an average annual growth rate of 6.4%, according to the Global Wellness Institute. Covid-19 has likely spurred growth in consumer and business interest in the overall topic. Financial wellness will be swept up on the growth in consumer interest in their own health and wellbeing, as a small subset of this larger industry. Banks, however, looking to capitalise on growth in the wider wellness space and link financial wellness with major brands in the health and wellness industry need to carefully vet their partners.

This is an edited extract from the Financial Wellbeing – Thematic Research report produced by GlobalData Thematic Research.