Three New Year’s resolutions for Financial Services brands

It’s a new year and I’m already failing in my resolutions. I genuinely want to eat better, get fitter and read more but somehow it never happens. I think it’s because habit loops are strong and change is hard, especially when motivation is lacking.

Reflecting on my own failures makes it hard to write a blog that gives advice to others, but I’m going to try anyway.

We live in a time of widespread money anxiety. Most people have had their quality of life eroded as the price of necessities, utilities and niceties has gone up and up. For most people mortgage or rent payments have ballooned. In recent client work we’ve seen a large majority of people concerned about their financial stability. Even more are concerned they are not financially prepared for the future.

So as we enter 2025 be in no doubt, people are stressed about money, and their finances are under significant pressure, which creates an opportunity for financial services brands to step up.

Here are three focus areas which could make a real difference for customers in 2025.

1. Help customers with budgeting

We know that the rising cost of living has eaten into people’s spare cash – the money left over at the end of the month when everything else is paid. This means more effort is needed to control spending and the need for budgeting is more acute. But sadly, most people are not very good at budgeting. Some of us keep a spreadsheet and some of us use digital tools, but neither solution is perfect. Spreadsheets require regular engagement, and digital tools are rarely holistic, looking across the totality of a person’s spending and bills.

But better budgeting matters because it unlocks all sorts of positive, downstream financial behaviours. For instance, you can’t save or reduce debt with any discipline unless your spending is under control. That is why budgeting is such a rich innovation space, because the current solutions are inadequate and it leads to positive, and profitable, future outcomes for brands and customers.

2. Encourage long-term decision-making.

If you go to a focus group about money it’s not long before someone admits they should be doing more to save for the future. They might say they feel guilty but fail to act for lots of reasons that can usually be boiled down to a lack of knowledge, time and/ or motivation.

The pensions industry often warns people are not saving enough for retirement so it’s a genuine problem. The rising cost of living makes it harder to save but that’s not the cause. The real, underlying, problem is that the UK has low levels of financial literacy. Or to put it another way, when it comes to long-term planning and saving, too many of us fail to accept that making smarter choices today leads to better outcomes tomorrow.

So how can the financial services industry help? Well, lots of effort has been invested in trying to build up customer financial literacy. Those efforts are laudable and should continue but helping people understand the real-world consequences of their choices might be more beneficial. For instance, painting a picture of future living standards might spur action, or explaining the future trade-offs they may be forced to make.

We know people become more engaged with money when their finances are stretched – now might be the moment to catch their attention.

3. Become more focused when tackling financial vulnerability

Most financial services brands have been striving to do better for vulnerable customers for some time now but the definition of who is and isn’t vulnerable seems to be growing. It’s not uncommon to see stats which suggest that half of the population is, to a greater or lesser extent, financially vulnerable. And to make things more confusing, people’s circumstances change, moving them in and out of a vulnerable position.

This is not to minimise people’s financial difficulties. Our own data suggests most people are worried about money but it’s difficult to innovate effectively when the target is so broad. Furthermore, the needs of the most vulnerable inevitably become diluted leading to missed opportunities to make a difference where it matters most.

Segmentation, based on needs and potential to come to harm can help brands prioritise and design effectively. This will allow organisations to push resources to the most vulnerable at a time when the rising cost of living is putting them under additional strain. If you’re struggling to make progress on financial vulnerability, segmentation should be your first step.