Five Steps to Prepare for Shared Finances Boom


Editors Note: In this blog we discuss the growing opportunity that financial institutions have to provide their users with options for shared finances. In the Forrester report titled "Why Digital Teams at Financial Providers should Invest in Shared Finances", Peter Wannemacher goes over five steps that financial institutions can do to prepare their bank or credit union for success. We take a closer look at those five steps.

Close to 60% of adults share at least one type of financial account with another person. As the millennial generation continues to gain financial freedom and power, that number is only going to rise. Whether it be joint accounts in a marriage, sharing finances with retiring parents, or other family and friends, the opportunity to financial institutions to provide solutions for shared finances is too large to ignore.

In addition, a Forrester report, Why Digital Teams at Financial Providers should Invest in Shared Financesfound that consumers surveyed that among those who shared finances through their institution trust their bank or credit union more than those who do not share accounts. However, a person's ability to act as an observer of, partner in, or proxy for another person's financial life is not just a largely untapped market; it is, in many ways, an unrecognized opportunity in retail financial services. Digital teams within banks and credit unions are uniquely positioned to take the lead in preparing their organizations for leveraging the opportunity soon to emerge in shared finances by taking five initial steps. 

  1. Assemble a cross-functional team to gauge your shared finances opportunity. As noted above, personnel working within the digital side of a bank or credit union should take the lead in exploring the shared finances opportunity and building services that help customers manage their interpersonal financial relationships. However, several functions should be included within a cross-functional team working on this area such as internal security-and-risk peers who can look closely at the potential security and privacy challenges that might arise.
  2. Size the shared finances opportunity in your specific market. As shared finances are a little-understood and less-than-prominent area of financial services, a crucial step is to measure and assess the opportunity itself. Take an in-depth look at your customers' and prospects' current behaviors and attitudes around their interpersonal financial relationships. Work with internal and external partner in analytics and customer insights to estimate the size of the opportunity for your organization.
  3. Assess your digital capabilities around shared finances. Digital teams routinely evaluate their online, mobile, and other digital functionality. These teams should add an audit of their ability to meet customers' shared financial needs: Can a customer let another person view their accounts without giving away their own login ID and password? Can two customers easily co-manage their products and accounts? Can the child of an elderly customer set up alerts to monitor their parent's financial actions?  A view of what is and isn't possible via digital touch points will let you plan future shared finances initiatives more accurately.
  4. Identify existing digital initiatives that could enable shared finances. While shared finances are an important opportunity in digital financial services, executives have limited resources and an abundance of other ways to use those resources. Tapping the shared finances opportunity will often mean piggybacking on other digital initiatives. For this reason, working with collaborators, digital teams should look at the financial institutions' digital road map and label those initiatives and projects that could help the firm better meet customers' shared financial needs.
  5. Look to private banks for inspiration and ideas. One area of financial services has a long history of managing complex, multi-user finances: private banking. Private banks survive and thrive, in part, by helping high-net-worth people manage their complicated financial lives. For example, a billionaire might need his private bank to allow access to different funds and accounts for various attorneys, family members, accountants, or other people from his family office or other firms; at the same time, he might need to limit the transactional capabilities for some of these proxies and partners.

Today, financial institutions are the logical choice to meet consumers' shared financial needs. And customers who already share their finances trust financial providers more than the average customer. As referenced above, the Forrester survey shows that 40% of people who share a financial product or account with someone else say they trust financial firms in general compared with just 29% of those who don't have any shared finances. But this trust equity will not last forever, especially as other companies and new disruptors recognize and target the shared finances opportunity. To quote the head of digital at one institution: "right now, our customers have a strong connection to our brand, so we have a chance to expand that relationship and stay relevant - but we know that this opportunity is, as they say 'only available for a limited time'."