A Fintech's Guide to Financial Wellness
Published in The Money Outlook | March 15, 2023
Too often, I see financial literacy platforms categorized as financial wellness. In fact, these terms are quite different. According to the Cambridge Dictionary, “literacy” is defined as knowledge of a particular subject, whereas “wellness” is the state of being healthy. The goal of a Financial Wellness Platform is to impart “wisdom”: the ability to use your knowledge to make good decisions.
Financial Wellness requires both the sharing of knowledge and the ability of users to take action. Most of the fintech industry has elected to prioritize or the other. It’s not necessary; it’s not effective and in my opinion, with a well-thought-out plan, it’s not hard.
Let’s go with the assumption that your mission is wisdom and your value proposition is “to help people live their best lives by reducing unnecessary expenses and achieving their life goals.”. Here are five key principles I recommend every financial wellness fintech must include:
CYOA: Choose Your Own Adventure. People are different. Some will come to your platform looking to fine-tune their relatively healthy relationship with money, and others will be in dire straights and need to take immediate action. Ideally, you’ll help the user find the journey that applies to their current situation. At a minimum, include three potential journeys: 1) Foundational. I recommend you align this path with Maslow’s Hierarchy of Needs starting with basic budgeting and transcending to leaving a legacy; 2) Life Events. Life happens, sometimes in accordance with plans, and probably more often, people are surprised and unprepared. Allow users to learn and take actions based on both happy and sad life events such as changes in family or employment circumstances, and 3) Goal Planning. Allow users to choose goals that are important to them like paying down debt, improving credit score, or something as lofty as purchasing a home, sending a child to college, or planning for retirement.
VARK: Visual, Auditory, Read, and Most educators embrace the VARK learning system and recognize that people learn through visual, auditory, reading, and kinesthetic (touch) methods. If your content is limited to just the written form, your impact will be nominal. The cost to convert your content into video and auditory is nominal and there’s no excuse for information to be only available in written format. I admit kinesthetics is harder but the simple act of allowing users to enter information bolsters their cognitive development, enhances their capacity to retain information, and most importantly builds self-confidence. As you design your financial literacy programs, also remember most people are multimodal and will switch learning styles especially once you’ve piqued their interest.
KISS: Keep it Short & Sweet. Segment teachings into short, bite-sized lessons of typically 2-3 minutes. Yes, your teachings should include various financial terms and principles; however, your job is to uncomplicate them. As financial services experts, we are accustomed to using sophisticated language and industry jargon in our everyday conversations. It’s the job of the fintech to reframe this information into simple, easy-to-understand concepts. Otherwise, your platform will leave the users feeling intimidated, confused, and overwhelmed – the exact opposite of your financial wellness goals. One best practice is to embrace stories. Storytelling is more memorable and relatable, and most likely to increase self-confidence and thereby behavioral change.
BE: Be Empathetic. Yes, finance is based on mathematics and math is a science, but money is emotional. Money is the leading cause of stress and according to the AICPA, 73% of couples state that money causes tension in their relationships. Although psychologists debate the exact number of emotions (anywhere from 4 to unlimited), I encourage fintechs to consider the four polarities of psychologist Robert Plutchik in his Wheel of Emotions: Joy-Sadness, Fear-Anger, Anticipation-Surprise, and Disgust-Trust. Provide your content, recommended actions, and nudging sequences based on the emotional well-being of your users. People are complex, so yes use AI, big data, and analytics to measure and predict users’ emotional states and also give them an out. Your technology-based solution must also include access to experts such as financial coaches and financial therapists.
TAG: Track, act, and gamify. Enable users to track activities, emotions, and results. Let them see all their financial accounts, transfer funds between accounts (including recurring transfers), and set up simple goal-based accounting schemas. Do not require them to enter data that’s already available at another financial institution. And go beyond goal-based tracking; also reward users for progressing in their learning journey, overcoming their psychological barriers related to money, and show them how they’re doing versus their peer group. So yes, your platform needs cohort data not just theoretical best practices. Remember your primary gamified features should be reward-based and associated with activities and behaviors that are in the users’ control.
Linda Wittich, CEO/Founder, Top Line Focus, LLC
Going by the tagline #FintechsGrowingFaster, Linda usually takes on the role of fractional Chief Revenue Officer or Chief Operating Officer and acts as the CEO’s most trusted agent on their go-to-market strategy. With over three decades of experience in strategy, sales, and product management, she knows what it takes for a fintech to succeed. She’s held leadership roles at fintechs of all sizes where she released over fifteen first-of-a-kind products. Today, Linda works exclusively with fintechs who have the lofty mission of democratizing access to financial services and improving long-term financial well-being.