Managing Debt Wisely: An Untapped Opportunity for Digital Banking Engagement

Although most consumers carry some form of debt, Javelin’s examination of digital banking at large U.S. banks shows that traditional financial institutions generally do not treat debt management as an opportunity to engage customers and build trust through digital advice. The industry’s approach typically consists of generic education, collection efforts when payments are late, debt modifications and refinancing to ease debt burdens, credit card balance transfers, and HELOC-based debt consolidations. 

In contrast, fintechs such as Budge, Ditch, and Payitoff provide one-stop oversight of debt, coach borrowers how to distinguish between “good” and “bad” debt, prioritize payments to save borrowing costs and dig out of debt, and simplify the process of comparing loans. Nonetheless, banks and credit unions remain in a better position than fintechs to turn trepidation about debt into positive digital experiences with predictive modeling, unintrusive personalization, timely engagement, and help-me-do-it engagement.

Key questions discussed in this report: 

• How can traditional FIs use digital banking more effectively to help customers manage debt?
• What are the key shortcomings of FIs’ current approach to the topic of debt?
• What are leading fintechs doing to serve the needs of consumers seeking debt advice?
• Can FIs compete effectively against debt-focused apps?

Companies Mentioned: 

Acorns, Budge, ChangEd, Chase, Creditcards.com, Credible, Credit Karma, Debbie, Ditch, NerdWallet, Payitoff, Pillar, PocketGuard, Quicken, Qoins, Tally, TD, U.S. Bank