This weekend I found myself reflecting as I listened to news about the rising cost of living. With interest rates at their highest in 13 years and inflation predicted to hit double figures this year, the fear is almost palpable. I reflected on how this is impacting people and the stress that it must be causing as I read a recent BBC-commissioned survey. It reported that eight out of 10 UK consumers are worried about the rising cost of living. Two-thirds (66%) said it was having a negative effect on their mental health and nearly half (45%) said their physical health had been affected.

That led me to think about my time at Egg, one of the world’s first internet-only banks. One of the things we looked at back in the early 2000s was delivering the ability to allow customers to analyse spend and to understand their finances better. Unfortunately, this never progressed beyond the concept phase for a few reasons, the biggest being that we did not “own” the customer’s complete portfolio and therefore could not analyse their overall position.

Since then, many organisations have improved on this concept. Neobanks and established banks have both implemented virtual savings pots to allow customers to segment money for future events, such as holidays or car repairs. Adding spend analysis inside their apps delivers even more insight and a more complete view of customers’ money and how they use it. All great news for consumers.

Deliver deeper insight and support
That said, the unexpected very quickly becomes the expected. Banks have a habit of being fast followers, so they need to look beyond simple analysis to deliver deeper insight and empathy. As the cost-of-living crisis bites, banks need to embed tools and services to not only visualise spend, but to help customers make more informed decisions. Examples include the ability to categorise direct debits, identifying potential for savings. Additionally, banks need to look at how they improve the appropriateness and personalisation of product offers. For example, loans that increase consumer debt, e.g., Buy Now Pay Later loans are not suitable for all. They need to be more tailored to the individual and consider the wider context.

Banks need to focus on how they can support the customer to save more and maximise investment. This has the potential to increase trust and loyalty as the customer’s perception of banks shifts from one of a money maker to customer advocate.

I’m still surprised that many customers don’t really understand that paying off debt, especially credit card debt, is often more effective than holding a balance and “saving” more. It’s a misconception that many still cling to, and it’s costing customers real money. Money that will be increasingly difficult to come by yet necessary to stay afloat.

Provide more human engagement
Clearly, the individual needs to “own” their situation and make the best decision individually. However, I believe banks need to do more to support customers to make the right decisions, by providing the right tools and services. For example, by embedding budgeting tools and access to basic financial guidance, using technology (such as AI) to tailor the service. In addition, banks need to provide more human engagement, such as the use of embedded video to connect the customer directly to the bank through its apps and websites.

Fortunately, much of the technology to deliver these experiences exists today. It’s been democratised by the likes of Microsoft, Amazon and Google. Access and ability to build these capabilities has never been easier, but the window to differentiate will close fast. Now is the time to act – to build the unexpected and provide genuine empathy at a time when it’s needed the most.

For more information on how banks can renew and grow, download our guide: ‘Where do you want to grow next?’