Using data analytics in banking to recognize financial stress before it’s too late

Enhancing Financial Health with Data and Artificial Intelligence in Banking

Financial institutions have a duty to ensure account holders achieve their best financial health. Banks and credit unions are especially well-positioned to assist by offering complimentary practical education and services, alongside essential financial products that support savings, investing, and easier access to credit. This starts with using data analytics in banking to understand recurring spending patterns, credit transactions, and the financial stressors account holders face. Additionally, AI predictive modeling can bolster these efforts by predicting needs, enabling you to stay top of mind and empower your account holders.

All age groups reported money and the economy as significant stressors. 82% of 18–34 year olds surveyed reported money as a significant stressor, compared to 77% of 35–44 year olds, 63% of 45–64 year olds, and 47% of 65+ year olds.

– American Psychological Association’s Stress in America™ 2023 survey

Financial wellness should be a core strategy because targeted programs that provide timely and relevant advice and services can significantly help account holders, which in turn increases satisfaction and brand loyalty.

Today’s account holders expect their primary financial institution to anticipate and solve for all of their financial needs. Despite having access to colossal amounts of data, it can be challenging to interpret this information effectively to help account holders achieve their full financial potential.

Financial institutions need data analytics in banking to uncover hidden insights about their account holders through cleansed, enriched and curated transaction data. By examining incoming and outgoing funds, institutions can identify audiences based on lifestyle, needs, and preferences, often revealing signs of financial stress. Move away from the outdated “fire hose” marketing approach. Instead, focus on targeted marketing to those whose behavior indicates they need support, offering them the best product or service. When you do this right, you can be there to help before account holders even realize they need it.

Using data analytics in banking to identify account holders in financial distress

The following factors can help indicate shifts in financial status:

• Delinquency on credit card payments
• Decreased credit card payment amounts
• Reduction in payroll deposits
• Stopped receiving payroll deposits
• Started receiving unemployment benefits
• Increase in payroll deposits

Every person’s life story and financial journey is different, but with the right TechFin partner and the assistance of artificial intelligence in banking, banks and credit unions can now predict future behaviors based on current transactions, past transactions, and product utilization. Actionable data insights are crucial for timely intervention, allowing financial institutions to proactively address potential financial stressors and offer personalized support exactly when it is needed most.

How to relieve account holder stress

Armed with detailed information about your account holders’ spending and earning behavior from data analytics in banking, you can tailor outreach programs to support and empower individuals based on their unique financial situations.

Here are some suggestions for financial wellness education and opportunity offerings, all of which should be targeted to specific audience segments to maximize effectiveness and minimize overcommunication:

• Educational Email Series: Develop a series of emails to educate account holders on their financial options and strategies.
• Live Q&A Events: Host live or recorded Q&A sessions with your in-house mortgage, loan, and investment specialists.
• In-Branch Signage and Communication: Promote the availability of free financial counseling through tellers and in-branch signage. 
• Targeted Product Offerings
  • Balance Transfers: If your financial institution has its own credit card, offer balance transfer options to those paying multiple credit card providers.
  • Personal Loans and Credit Card Offers: Provide personal loan options or increased credit card balances to individuals who have stopped receiving payroll deposits or have begun receiving unemployment benefits.
  • Payment Deferrals: Allow account holders to delay personal loan, HELOC, or mortgage payments, moving them to the end of the loan term to provide immediate financial relief.
  • Investment Opportunities: Offer timely investment product promotions and events to those with recent increases in payroll deposits.

The need is urgent and if you don’t help them… someone else will.

Account holders of all ages need personalized assistance, education, and tools to help navigate the high interest rate environment. A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck. Because of the stressors account holders face, financial wellness is a hot topic, with numerous institutions offering competitive solutions to support financial health. 

Based on the 2024 Alkami Telemetry Data Report, credit card usage and Buy Now Pay Later (BNPL) adoption are up, indicating a growing reliance on credit for everyday expenses. These trends underscore the urgent need for financial wellness programs to help relieve account holder stress.

Financial wellness programs can make a big positive difference. According to a Credit Union National Association Mutual Group study, credit union members who participated in financial wellness programs saw a 28% increase in savings within just 12 months. 

By leveraging the power of data analytics and artificial intelligence in banking, financial institutions can play a pivotal role in alleviating financial stress and enhancing the overall financial well-being of their account holders.

Learn how Alkami can help you relieve account holders’ financial stress.