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Boost Consumer Trust and Loyalty with Credit Education

Given the competitive nature of the financial services industry, banks, credit unions and FinTech companies must find innovative strategies to attract and retain consumers. While developing a loyal customer base may be critical to the long-term success of any organization, many overlook an effective tactic: increasing the credit literacy of consumers.

Clearly, many Americans can benefit from improved credit education as a significant portion (42%) of bank customers expressed significant doubts about their financial knowledge. That’s hardly a surprise when nearly a quarter (23%) of US consumers admit they don’t know what goes into their credit scores and another 38% claim they only “somewhat” know.

Let’s look at how empowering consumers with educational information and easy-to-use tools can enable financial institutions to cultivate deeper relationships — generating greater trust and loyalty and positioning their organizations for future success.

What makes a valuable financial empowerment program?

Financial literacy and credit education starts with providing consumers access to their credit scores and reports. Educating consumers on how their financial decisions influence their credit — and subsequently, how their credit affects the financial opportunities presented to them — provides the context needed to take control of their financial well-being.

Providing access and education around their credit scores and reports has been shown to have a real impact. Overall, consumers improved their credit scores 5% just one year after beginning to monitor their credit. The improvement was even more notable for new-to-credit and underserved consumers — with their credit scores jumping 12% and 15%, respectively.

Benefits of enhancing consumers’ financial literacy

By educating consumers about credit and its impact on the financial opportunities available to them, financial institutions can build a customer base that’s better equipped for today’s economic environment. Augmenting educational programs and access to credit reports and scores with interactive, online tools empowers consumers to make smarter financial decisions. Financial calculators and credit simulators, for example, can help consumers proactively manage their credit, take steps to reduce their debt and gradually improve their financial standing overall.

Improving a consumer’s understanding of their credit often translates into tangible benefits for the financial institution as well. For example, financially healthy customers are less likely to default on a loan, typically have lower delinquency rates, and demonstrate more responsible credit use.

Foster greater trust and loyalty

When it comes to their welfare, people want organizations to put them first. A well-designed credit education program enables a financial institution to demonstrate a genuine commitment to its customers.

Research shows such displays of sincere support can earn the trust and loyalty of consumers. Nearly 40% of US consumers confirmed they’d continue banking with a lender that offered credit monitoring. Similarly, a third (32%) of consumers said that would be their preferred lender when opening new products.

By positioning themselves as trusted partners consumers can rely on, financial institutions are creating loyal customer bases for the long-term future.

Generate more cross-selling opportunities

By using credit education and financial literacy programs to deepen relationships with consumers, financial institutions can also promote more lending opportunities.

Since informed consumers tend to improve their credit scores, helping them along their journeys makes sense for lenders. After all, better credit scores often make people eligible for financial institutions’ more advanced products and services. When consumers are ready to take on a new financial product, they’re more likely to select an institution that’s been helping them improve their credit.

Providing the education and tools needed makes a real difference for the institution. Consumers who use credit monitoring tools are three times more likely to open a new account. And 48% of new-to-credit consumers who use monitoring services open a new credit card within a year.

Pairing personalized credit education with appropriate product recommendations often puts the financial institution in the right place at the right time to meet the evolving needs of their customers — boosting satisfaction while supporting the organization’s revenue goals.

Differentiate yourself from the competition

Standing out from industry peers is critical to attracting and retaining consumers. Considering one in four consumers believe financial providers don’t do enough to support their financial needs, reinforcing a genuine interest in customer welfare by providing and actively promoting personalized credit insights and educational tools is an easy way to showcase an institution’s offering.

Personalized online services have already become the norm in many consumer-facing industries. Financial institutions need to recognize that trend also sets the public’s expectations for the digital experiences they receive from their financial providers — and solutions that deliver proactive, predictive or automated insights are among the most frequently requested.

With 54% of consumers saying they’d seek a new provider if their current one couldn’t deliver their most wanted features, providing — and actively promoting — personalized credit insights and education is a smart way to set your institution apart.

Credit and financial education: The key to customer loyalty

The investment needed to acquire new customers can be significant, so earning the trust and loyalty of your existing customers is an important consideration to help stabilize your financial institution’s revenue.

One of the simplest ways for financial institutions to build an appreciative, dedicated customer base is educating them about the role their credit reports and credit scores play in their finances, helping them understand how assessment tools can impact their financial decisions and opportunities, and then empowering them to improve their credit.

Not only does this help earn their allegiance, they often evolve into more savvy, creditworthy consumers who deliver greater lifetime value. What’s more, because their financial institutions actively helped them along their financial journeys, these customers frequently become vocal advocates among friends, neighbors and communities.  

For more insights on how delivering credit education as part of a smart financial empowerment program benefits consumers and your institution, watch our webinar — Nurturing Creditworthy Consumers | How to Turn Digital Experiences Into ROI Engines.

 

Do you have questions? Our team is ready to help.