By Christopher P. Willis, CMO of Acrolinx
The financial industry is about to see a communications reckoning. Between ongoing diversity discussions, upcoming regulations, and the threat of recession, financial institutions are facing a lot of pressure regarding their customer-facing communications. When company content is unclear or confusing about banks’ or brokers’ products and services, consumers make poor financial decisions. This contributes to unsustainable debt, poor credit, and even bankruptcy. These issues don’t just impact the consumers; they can have lasting effects on both the economy and the finance industry.
Change is coming. There’s a growing conversation about diversity and inclusion in financial literacy and even regulation that could massively shift how companies approach customer communication. Here’s a look at a few of the upcoming trends finance companies will have to come to terms with over the next few years.
Financial institutions need to improve customer financial literacy
Financial literacy isn’t just for “Wolf of Wall Street” wannabes and tech bros intent on maximizing their 401Ks before they’re 30. It affects everyday people with real-world consequences. Unaware consumers might fall prey to misleading financial opportunities that could cause more harm than good, such as predatory lending practices or aggressive credit card marketing.
It doesn’t help that the industry is known for confusing and unclear communications. In a recent study that analyzed 28 different leading financial services websites, the finance industry was found to have the most clarity issues out of the other industries reviewed – including the manufacturing, tech, pharmaceutical, and medical device industries.
The Financial Conduct Authority (FCA) in the UK states that only one in seven adults have literacy skills that would be expected of a child aged eleven or below. According to a 2018 Financial Industry Regulatory Authority (FINRA) study, 34% of respondents in the United States correctly answered at least four out of five questions posed by the study, meaning a significant portion of Americans are financially illiterate.
Even further, most younger generations, including Millennials, have little in the way of retirement or general savings. The TIAA Institute found that 53% didn’t have access to an emergency fund to cover three months’ expenses, and 37% stated they couldn’t or wouldn’t be able to come up with $2,000 if an emergency came up within the month.
All of these statistics tell a story that should draw scrutiny. Anxious or concerned consumers may avoid the subject entirely, which can set them up for further troubling issues and can pave the path for difficult circumstances for lenders.
This puts a considerable amount of pressure on finance industries to consider streamlining and clarifying their content so that it makes sense to people at all levels of financial literacy.
The UK ripple effect
The UK’s FCA outlined a new Consumer Duty earlier this year, stating that all financial firms operating in the UK must adhere to a strict set of communications guidelines. This includes ensuring all customer-facing communications are clear and understandable, and that any written text should consider the needs and characteristics of their most vulnerable customers.
For the most part, few industries are responsible for the outcome of their product once a consumer purchases it. But financial products are different. Under the Consumer Duty, firms will be on the line for ensuring customers are getting good outcomes as well, such as better financial literacy or more fiscally secure customers. Firms will be asked how they’re supporting customers, how they’re keeping their communications comprehensible, and whether they can prove it.
Financial industries in the UK must be fully compliant with the new Consumer Duty by July 2023. As with previous UK regulations, other regions will likely follow suit, especially global institutions that don’t have the workforce or time to craft separate communication channels. We’ve seen this happen with previous regulations, and if this Consumer Duty is successful, we’ll likely see other countries adopting similar approaches.
Clarity will be key
Enterprise content creation — everything from brochures, support articles, marketing materials, adverts, customer letters, and beyond — will have to meet high clarity and readability requirements under the above-mentioned new rules.
How will financial firms do this? By taking a good, hard look at all their customer-facing content. AI tools that flag the obvious grammar and spelling edits are simply not enough. Banks and other fiscal institutions will need to ask if their content makes sense to the average customer, who may not have the industry knowledge employees do. This might look like a credit card company explaining clearly how the annual percentage rate affects a customer’s card balance. Or it could mean drafting brokers’ contracts in jargon-free terms so all readers can comprehend it. Firms may need to look into more advanced tools that will let them quickly review their content for readability, clarity, and inclusive language.
Financial enterprises that start looking at their content and implementing fixes now will have an advantage when these trends begin to impact the entire industry.
This can only benefit the industry
Informed consumers are the backbone of a healthy and robust economy. If they’re no longer afraid of making financial decisions or considering detailed investments, they’re more likely to act with confidence, meaning repeat business and a better brand image for those businesses.
Financial firms that start looking at their customer-facing content now have a lot to gain from making it clear, concise, and inclusive. It’s not just about paying lip service to diversity either. Firms that use inclusive language won’t only communicate respect to their customers but also establish trust. When customers trust their financial institutions, they’re more likely to communicate what’s going on in their lives. This can prevent tricky situations like debt collections or overdrawn accounts. At the very least, firms can be aware of these situations earlier and provide solutions, creating a working relationship that benefits both parties.
Anne Godbold, a non-financial risk specialist at Accenture, shared her thoughts on a recent WordBirds podcast about how establishing trust with consumers now can pay off in the long run. “More widely, we all think that the more customer-centric you can be, the more loyal your customers will be with you. The more willing they will be to trust you and tell you what’s going on, the more they will give you the information to help you, and the more products potentially they’ll be able to use if they understand why they benefit from them,” she said.
Clear content helps your audience understand what they need to know, or do, to fulfill their needs. Greater clarity tends to lead to higher customer satisfaction and a better customer experience. It can also boost conversion rates, and save your business time and money during translation and localization.
Without a content plan in place now, unprepared financial firms may be put through the wringer over the next few years. Taking the time now to closely examine and fix problems with client-facing communications will most definitely pay dividends in the future.
About Christopher
Christopher P. Willis is Acrolinx’s Chief Marketing & Pipeline Officer, responsible for all aspects of the company’s marketing strategy. He brings over 20 years of experience growing companies in the technology sector. Before joining Acrolinx, Chris held leadership roles in marketing, creative, technical, and business development at companies including Perfecto, Pyxis Mobile, KPMG-CT, ModelGolf, and Cambridge Technology Group. He’s a recognized thought leader and has been featured on RockStar CMO, the Sales Dojo, CMSWire, Symphonic Digital, Renegade Marketers, and more.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.