Trusted Advisor to Banks and Credit Unions

Strengthen Commercial Relationships Through Financial Education

Financial education has always been thought of as a community service by financial institutions. Sort of a “must-have” done as volunteer time by your staff.  However, during times of financial crisis, how likely is a pure community-service program to remain a priority? As financial institutions look for ways to solidify business, education programs could be prioritized higher if you consider their other advantages, such as cementing commercial relationships while growing the account base.

Data from the Federal Reserve shows that 40% of American households cannot withstand a financial emergency of $400 or more.  And this was before the COVID crisis.

Clearly, there is a need for financial literacy programs to bolster communities. As we move through uncertain times, providing financial education to service these needs may make your FI a good community participant, but it typically does not produce high dollar loans or account openings.  Sound familiar?

What Does a Comprehensive Financial Education Program Look Like?

In our experience, the most successful financial education programs should include 3 elements:

  • Value added service for your commercial and retail customers
  • Community service associated with financial literacy
  • A comprehensive set of products targeted towards the underbanked

This type of comprehensive program would be well-positioned to sustain and grow a financial institution’s business.

How Can You Benefit Your Commercial Customers?

If you want to solidify a commercial relationship, what better way than offering free classes to your manufacturing customer’s employees, along with some one-on-one financial advice?  Expand that thought a bit. Offer it to your farmers, retail shop owners, and the local John Deere dealership.  How many of their employees, who are not current customers of your bank, would be interested in learning about the things that many of our youth were never taught in school?

Most are afraid to walk into a branch and admit that they know very little about their finances. This has led to a growing segment of the community which is underbanked.

By offering an employee-based service like this, you have the ability to solidify the employee’s relationship with their employer and strengthen your commercial customer relationships.

Which Products Best Compliment Education Programs?

Based on our experience with local community organizations, there are roughly half a dozen products that benefit individuals who are new to financial literacy:

  1. “Saver” account tied to direct deposit – helps hide money that they might not normally save
  2. Credit-building card (possibly secured with a savings account with a minimum balance)
  3. Small unsecured loans – for when the car breaks down, can also improve credit
  4. Balance round-up card program- again for helping them save money
  5. Competitive loan rates – to help refinance existing loans into lower payments

If your FI can line up these products before starting a financial education program, then your chance of growing cross-sales greatly increases.

Where to Start?

Large financial institutions do not have comprehensive financial education programs.  This leaves a niche for the community bank to firm up commercial relationships and sell into the underbanked community. This is a true value-added service that can be completed by a few loan officers or new accounts personnel at any community bank or credit union. 

Why not have your financial education specialist introduce the program to your corporate customer over lunch with their favorite commercial account manager at the table?  Speaking as a business owner, this is a meeting I would not refuse.

If you can build a program focused on education and have the right products available to help these individuals, you will get new customers who prior to this were weary of banks and credit unions. We have seen it happen. Now more than ever, it may be time to start considering financial education as a value-add for your financial institution.

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