The Fintech Pledge strives for 10 million positive financial actions

The news: Digital challenger Zopa Bank and the credit marketplace ClearScore the collaboration to launch Fintech Pledgean initiative designed to help UK citizens with their financial lives during the cost of living crisis, per AltFi.

More about the initiative: The aim of the program is to drive 10 million positive economic actions by UK citizens by 2025.

• The actions are divided into four different categories: savings, credit building, debt consolidation and consumer marketplaces.
• Examples of positive actions include switching money from low-interest savings accounts to high-interest savings accounts, establishing savings pods dedicated to specific financial goals, and using tools to monitor and build credit scores.

The promise is industry-wide, and more partners and programs will be added over time. It aims to unite the fintech industry and has set a target of reaching around 20% of the UK population.

Many options: Savers in the UK are aligned with options for savings accounts with a higher interest rate.

• JPMorgan’s digital bank chase offers an interest rate of 1.5%. savings account.
• UK-based Enumeration offer gold-backed savings accounts with a guaranteed 2% annual return.
• Zopa offers a hybrid savings account with increasing interest based on how long customers keep their money. The savings can be spread over several savings pots.
• This week, Santander UK announced it will offer a savings account with 3.1% interest.

What consumers want: For quite some time, consumers have demanded more personalization from their banks. ONE study from Sinch, a Stockholm-based provider of telecom and cloud communications platform as a service solutions, revealed that by personalization, consumers mean relevant financial advice that fits their current situation situation.

• Situation advice is an indication that consumers are looking to their banks to tell them what to do. The Fintech Pledge provides customers with distinct actions they can take to improve their financial health.
• In addition, ours forecast shows a dramatic increase in the use of personal financial management (PFM) tools in 2022 such as inflation and cost of living wound. UK PFM user growth will reach 17% this year, up from our previous estimate of 9.6%.

What is it for the banks? As banks and fintechs send messages about their concern for customers through programs like the Fintech Pledge, it’s not hard to see how they benefit from these programs.

• Because consumers look to their financial institution to tell them what to do in these difficult times, FIs have significant influence over consumers. They will be better able to entice them to use their products. And if they already have consumers’ trust, it won’t be difficult to up-sell and cross-sell more expensive products.
• Incentivized offers, such as high interest rates, are an easy way to get new customers through the door. The simple account switching the process in the UK means that all a bank has to do is offer a better rate than the competition.

Our opinion: Programs like the Fintech Pledge give citizens a sense of community during a crisis. But for FIs, a crisis is a good time to leverage their marketing strategy for customer acquisition and retention. Consumers must not be too fooled by promises to help, and FIs must be aware that customer trust depends on promises being kept.

• Many banks offer higher interest rates as introductory promotions, and reduce interest rates after a promotion is over.
• Banks are also trying to keep their heads above water, especially as capital reserve requirements come under scrutiny.

FIs show sympathy with consumers to strengthen their reputation through the crisis, but they must maintain their efforts to lift up British citizens afterwards as well.