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Driving Financial Wellness with Data

From choosing a restaurant to finding that next vacation destination, data plays a significant role in everyday decision making. The same should hold true when it comes to daily finances. To better understand whether data is being used to improve financial wellbeing, we surveyed 1,500 consumers on their various financial habits. Respondents were evenly distributed across age groups, gender, education and income.

Just 38% of participants with a graduate degree and 21% of those with a high school degree use their financial data. Meanwhile, less than half of all consumers making more than $150,000 use most of their financial data to make better decisions. For those making less than $15,000, that number drops to 17%.

It’s time for consumers across all education and income levels to harness the power of their financial data. FinTechs and financial services organizations need to explore what’s keeping consumers from making the most of their financial data, as well as the benefits they stand to gain from using such data to inform financial decisions.

What’s standing in the way?

Consumers aren’t shy about opening new financial accounts. In fact, one-third have more than six different accounts. Although that paves the way for plenty of financial flexibility, it also tends to complicate things for consumers interested in monitoring their financial data. Less than 40% of consumers feel they always have sufficient knowledge of their credit history and financial information.

Financial services leaders can look for opportunities to ease the burden associated with leveraging data across several different accounts. Consumers who have greater insight into their financial information — regardless of where it may live — will be better positioned to take advantage of such data moving forward.

In addition to the trouble of tracking financial data stored in multiple accounts, yet another issue that could potentially prevent consumers from capitalizing on their information is a lack of transparency that builds trust. For the most part, consumers aren’t opposed to sharing their data with apps and services outside of their core banking institution. In fact, nearly 60% of those making between $50,000 and $75,000 — which encompasses the U.S. median income — rank themselves at a five or above on a 10-point “trust” scale of third-party apps or services. And as income rises, so does trust: Among those making more than $150,000, 77% rank themselves a five or above. 

FinTechs and financial services companies can provide further assurances to consumers by being upfront about how data is protected while also ensuring consumers retain control over how their data is shared. The more transparency there is about how data is being protected and ultimately used, the better chance consumers will continue to share their financial information.

Opening up opportunities

Regardless of their age or level of education, consumers dedicate a higher percentage of their income toward loans than credit cards, investments, emergency funds or big purchases. The reason? Loans serve as the lifeblood of modern society. Capable of opening up opportunities that might not otherwise exist, loans help move consumers one step closer toward achieving their financial dreams.

While most consumers can qualify for loans without issue, those with lower income and/or education levels are more likely to be bogged down by an insufficient or nonexistent credit history. Around half of all consumers making less than $30,000 have been unwilling or hesitant to apply for a loan or undergo a credit check due to concerns about an unfavorable credit score or poor credit history. The same applies to more than half of all consumers with less than a high school degree.

In cases such as these, expanded financial data can make a difference. Instead of missing out on loans that can turn a dream of buying a home or car into reality, consumers should be able to share data as a part of their credit score — such as cell phone or utility bills. 

The idea of distributing expanded financial data to make up for a less lengthy credit history isn’t all that foreign to millennials. In fact, 25 to 34 year olds are twice as likely as 55 to 64 year olds to share financial information. Providing consumers with the opportunity to shed light on their financial well being through expanded financial data ensures those on the cusp of qualifying for a loan aren’t left on the outside looking in.

Far too many consumers aren’t accustomed to leveraging their financial data. FinTechs and financial services organizations have an incredible opportunity to empower consumers with increased control over and utilization of their data to improve financial decisioning and understanding. 

One great example is the partnership of Experian, FICO and Finicity. Together with the two leaders in analytics-based credit decisioning, Finicity is working to ensure consumers maximize the potential of their financial information with opt-in programs including Experian Boost® and the UltraFICO® Score to shed light on their financial health.

The value of data-driven decisioning has never been a debate. How to unleash that data and deliver unrealized promise is the challenge for the industry. Doing so will usher in an era of increased inclusion and improved financial well being.