Your Customer’s Relationship with Money: How Financial Services Marketers Must Adapt

Comments like, “When I was a kid ... fifty cents went a long way,” were routinely met with eye rolls and groans of indifference when repeated to my kids, as I so often did.

What will my kids’ kids have to endure? Perhaps: When I was a kid, we actually had to carry coins and bills!

Groans notwithstanding, the passage of time, the course of events, technology and demographic trends do impact our relationship with money. For marketing strategists, these can have profound implications on how they go to market.

Here are some notable markers to consider:

The Shock and Awe of a Great Recession – Actually, more precisely, awe and shock. It started with Alan Greenspan’s proclamation of an “irrational exuberance” that pervaded the stock market and ended with the “great recession” of 2008/2009.

Though more than ten years have passed, the impact that it has had on the financial psyche of both older and younger generations persists. For instance, those who were in the prime of their careers at the time of the recession were rattled into realizing that their jobs might not be as secure as they thought they were – creating a risk aversion that persists today. For B2B marketers, it's a reminder of the importance of emphasizing trust and risk mitigation in their appeals — since individuals bring their personal biases to virtually all decisions they make on behalf of their companies.

For middle-income Boomers, the recession (as well as the dot.com crash of 2001) made a lasting impact on their investing mentality. Determined to not see 30% or more of their retirement savings go up in smoke again, they’ve become markedly more conservative in their investment decisions, according to a study by the Center for a Secure Retirement.

And the scars of recession are impacting Millennials as well. According to a study by Bankrate, they are the only age group that favors cash as their long-term investment of choice. Having seen the system implode with greed, younger generations are decidedly more skeptical and demanding of transparency – while also fueling a “do-it-myself” mentality that can be found in the growth of robo advisors and brands like Mint or The Financial Gym.

All told, this is a cautionary tale for more traditional brands in banking, lending, insurance and investments: though the economy may appear to be in a decidedly better place than it was ten years ago, the rules of the game have changed … emotions still run deep … and millions of folks are still struggling to get back to where they were before things went south.

The demystification of FICO – Once was a time when FICO scores were even more mysterious than how to shop for a mattress. Today, fueled by regulatory mandates following the recession, data breaches, and pure opportunism, the almighty FICO has been demystified. Credit cards, discount brokerage sites, and sites like Credit Karma have made it virtually effortless to see your score and understand (mostly) what is impacting it.

So why is this significant? Though, for sure, many have improved their financial standing given the economic expansion, it’s further evidence of how information and education are empowering consumers to make choices that benefit them. Today, the web site Fico.com reports that the average U.S. FICO score has reached an all-time high: 706. How will that change if there is a new recession, as some fear?

It’s hard to know. But one thing is for certain: as consumers navigate the choices that they confront, their appetite for trustworthy, educational and personalized information will only get more voracious. So, if you haven’t implemented a content marketing strategy, among other things, the time to do so Is now.

The slow but steady adoption of digital wallets – Conventional wisdom has it that you’re much more aware of what you’re spending (and pragmatic) when you pay with cash rather than a credit card. In 1998, Drazen Prelec, a neuroeconomist at MIT, famously coined this physical parting with bills and coins the “pain of paying.”

But how about when you’re paying with PayPal, Venmo, WeChat, Apple Pay, PayPass or the like … and you’ve “grown up” doing so? Beyond the conveniences of such, what is the consumer psychology as it relates to their relationship with money (or, more specifically, overspending)? The research is not there yet to know. I’m going to take the contrarian view and suggest that technology will intervene to make people even more aware of their financial standing, in real time, which will help replicate the “pain of paying.”

For a good place to find some clues into what the future will bring, look no further than China, where in 2020 – according to Raconteur – consumers will transact $45 trillion through WeChat or Alipay – rendering the country virtually cashless.

The outlook of life expectancy – Pop quiz: is life expectancy in the U.S. on the rise, or decline?

You may be surprised to learn that life expectancy in the U.S. has been on the decline for the past three years – the longest such trend since 1915-1918, according to the CDC’s National Center for Health Statistics. A baby born in 2017 can expect to live to be 78.6 years old.

That said, life expectancy had been on the rise prior to the past three-year stretch and it doesn’t change the fact that the national narrative is that “people are living longer than ever.” Yet, intuitively, studies also show that people’s attitudes toward life expectancy change as they age, adapt certain lifestyle habits, factor their family history, and/or experience health episodes (regardless of age). 

All these conflicting signals, combined with a natural tendency to bias the present over the future, make for a relationship with money roller coaster as the assessment of current vs. future needs collide. Whether you’re selling retirement planning, insurance, or a mortgage, be advised: people may not be literally calculating how long they expect to live, but as they put an emotional marker on the gap between now and then, the influence of heuristics and biases such as anchoring, temporal discounting and loss aversion will invariably change.

The impact of big data – A person’s relationship with money used to be defined strictly in terms of metrics like household income, credit utilization, purchase history, etc. Today, you can use analytics to understand how independent variables like those just described are influencing dependent variables such as attitudes toward debt, financial confidence, and emotions.

Is your customer down but not out – someone who took a hit in the past recession, but kept a healthy, positive attitude and is a contradiction to his/her FICO score … a nest egg builder – someone who can be frugal to a fault, because having a safety nest is what matters most … a hedonist – someone who is unapologetically living for the moment, and spending that way … money jolted – someone who has inherited a significant sum, and navigating just how much different their choices can now be?

At the end of the day, though cohorts such as age and its associated generational categorization provide important clues into target segments’ relationship with money, marketers should be cautioned against assuming homogeneity. Instead, take a multi-factored approach, dig into emotional/attitudinal drivers and their correlation to outcomes, and tell better, more compelling stories as a result.