Americans Remain Financially Uncertain

While it may be tough to interpret all of today’s mixed economic signals, Americans’ feelings about their finances are more straightforward. Many still worry about inflation and its impact on their financial picture. In TransUnion’s Consumer Pulse study from Q2 2023, nearly half said their incomes weren’t keeping up with inflation, and the vast majority (79%) said inflation was still among their top concerns.

Compounding matters, American consumers recognize that they lack financial literacy: 42% of those surveyed said they had significant doubts about their own levels of financial knowledge. The majority of Americans — about two-thirds — don’t work with financial advisors to manage their money. Their banking relationships are often their most trusted source of financial information and guidance, creating an opportunity for credit unions to fill the gap.

Credit unions are in a unique position to support their members’ overall financial wellness. Beyond the basics of saving, spending, investing and protection, there are other factors that can significantly accelerate, or undermine, members’ progress on their financial journey.

In reviewing successful financial institution wellness programs across the country, we’ve identified three subjects that are included in those programs — but are often overlooked by others.

Credit Literacy

A member’s credit score can have a significant and far-reaching impact on their financial life. As an indication of creditworthiness, it can influence how much a member will pay when borrowing money. That alone can have a direct and meaningful impact on a members’ financial wellness. But credit scores can be taken into consideration elsewhere, too. Sometimes landlords, insurance companies and potential employers refer to credit scores when making decisions.

Though many consumers recognize the importance of credit scores, far fewer understand how they are derived. In a survey by FICO, for example, a third of Gen Z respondents said they didn’t have a credit score, or didn’t know if they had one. An effective credit union financial wellness program will recognize that many consumers lack a sufficient understanding of credit and work to educate members on how to improve that understanding.

A number of credit unions already offer access to a credit score, helping to raise awareness among members and underscore its importance. To build upon this foundation, a combination of credit literacy education and interactive tools — such as credit calculators that show how a consumer’s decisions can either help or hinder their credit score — can inspire members to become more personally involved in improving or maintaining a good credit score.

Identity Safety Education

It’s a sobering reality, but a single identity crime — where a cybercriminal uses stolen identity details to open new credit cards, take out loans or even gain direct access to financial accounts – can dismantle a consumer’s ability to secure their financial well-being. Unfortunately, the historic levels of data breaches in recent years have made vast amounts of leaked personal information available to bad actors for widespread identity theft.

More than half of American adults say they would be unable to cover a $1,000 emergency expense — yet resolving a single instance of identity theft can easily surpass this. The average cost of remediating an identity fraud incident in 2022 was $1,300, meaning half of incidents cost victims more. And that’s in the short-term. Sadly, the effects of identity crime can follow a victim for years as they uncover and untangle the impact of unauthorized accounts, unpaid loans, fraudulent tax filings and more.

A common misperception is that consumers don’t take enough cybersecurity action because they are lazy. In reality, that inaction stems from confusion. Among those surveyed by TransUnion who were concerned about identity safety but did not take any recent action to improve it, 50% said they didn’t act because they were unsure of what to do.

When members fall victim to identity theft that affects their financial accounts, credit unions often share the pain of fraud losses. When members adopt stronger cybersecurity habits, it benefits everyone. By incorporating identity security education and tools that point to clear, constructive action into their financial wellness strategies, credit unions protect both their members and organization.

The improved protection alone is a win. Yet many credit unions may be surprised that by embedding an interactive identity protection solution into their online banking platform — one that provides personalized insights to members — they can also encourage greater digital engagement across all the security tools the credit union has invested in.

Financial Inclusion

For a variety of reasons, approximately 1 in 5 U.S. adults — 60 million people — sit outside the credit ecosystem. This underrepresentation in traditional financial services limits their opportunities to access financial resources, undermines their overall stability and diminishes their ability to seize opportunities that could improve their situations.

Several studies have shown barriers to achieving financial health disproportionally impact women and people of color. Yet the nation’s changing demographics mean these populations will continue to increase in number and economic power. Credit unions that cultivate relationships and build trust with these consumers will live up to their mission of member-driven service and be well-positioned for the future.

As part of a financial wellness program, financial inclusion can have a transformative impact. Individuals who feel a sense of belonging with their financial institution are 160% more likely to have stronger financial health. When combined with financial education, credit literacy, identity protection tools and financial products and services, it can improve the lot for all members, building brand equity, improve member loyalty and increase the lifetime value of members.

In a landscape of cookie-cutter financial wellness programs, today’s consumers are looking for education, products and services designed to help make their financial well-being more resilient. Thinking more holistically about their financial wellness strategies can not only help credit unions deliver programs that reflect the concerns of today’s members, but it also can build strong foundations for greater engagement, trust and loyalty.

Lindsey Downing is a senior vice president at TransUnion, leading the company’s Consumer Interactive division.