New data revealed that the banking sector is moving towards a focus on financial wellness as a means of gaining and retaining customers.
The study, commissioned by Backbase and conducted by Forrester Consulting, involved 450 senior business decision-makers and influencers within financial services organisations in the Asia-Pacific Region completing an online survey.
The results showed that banks are embracing the new financial wellness focus to ensure that they remain ingrained in the everyday financial decisions of their consumers.
Neobanks once held the monopoly over financial wellness apps, but the mainstream banking sector is now seeing a high demand for these tools, according to the survey.
This is leading banks to make financial wellness tools a major part of their digital offerings.
Iman Ghodosi, Regional Vice President for Backbase in Asia Pacific, said banks were caught off guard by the buy now, pay later boom and don't want to repeat their mistakes with neobanks and their helpful financial management tools.
"Digital money management and financial wellness is no longer a gimmick and we’re not far from this being the primary interface between banks and their customers across the sector," Mr Ghodosi said.
"Legacy institutions are now striving to build consumer trust, and assist with services such as spending analysis, budgeting, creating saving goals, and improving credit scores through these tools."
Neobanks and fintechs forcing traditional banks to adapt
Mr Ghodosi said he believes the next six months will be an 'inflection point' in the banking sector, calling it the Engagement Banking Era.
He said this period will stress a 'one unified platform approach for banking', with a priority of moulding the bank around the consumer, as opposed to siloed technology investments.
"In the platform era of Netflix and Spotify, people want the same high level of customer focus and flexibility for financial services they subscribe to," Mr Ghodosi said.
"They want access to their personal finances, anytime, anywhere, through any channel, and tools on how to manage it; traditional banks are getting left behind and they know it."
In the fight for market dominance, neobanks and fintechs are winning the match according to the survey, which revealed a number of key challenges faced by traditional banks to create financial wellness tools.
The obstacles standing the way of traditional banks include: a lack of understanding their customer needs and outcomes; a lack of digital-focused culture; outdated technology; and limiting organisational silos.
Do banks really care about your financial wellbeing?
An 'interesting' finding revealed that financial wellness initiatives would allow banks to offer more care and protection to their customers.
This pays dividends for the 'dwindling' trust people have for banks, and mutually benefits consumers and banks alike.
Data showed that 72% of respondents mentioned 'preventing exploitation of vulnerable and older customers' as a priority.
More than half (60%) said 'providing secure shared financial management solutions for vulnerable customers, powers of attorney, and caregivers' was a focus.
Other tools mentioned to be in the works include: helping customers improve their credit scores (80%); personalisation of financial products (74%); and advanced pay and income smoothing (64%).
The big four banks already on it
For Australia and New Zealand's retail-banking respondents, 92% said the region is 'planning to' or 'actively expanding' its financial wellness and money management tools. More than half (60%) said it was of 'critical priority'.
"CommBank, ANZ, and others are making headway in this space and have the technological capabilities to close the lead on the dynamic and nimble neobanks," Mr Ghodosi said.
"As technology continues to redefine financial services, consumer expectations and demand fuel the sense of urgency for financial service providers in Australia to capitalise on the financial wellness opportunity."
Big banks' appetite for boosting digital capability was seen in Australia when NAB acquired neobank 86 400, while Bendigo and Adelaide bank acquired fintech Ferocia earlier in August, giving the bank consolidated ownership of Up.
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