The Financial Brand Insights - Spring 2022

Unfortunately, the majority of U.S. citizens do not receive formal financial education. Banks and credit unions have an opportunity to help and fill this gap. Ushered in by the “Great Resignation,” the obsolescence of aging industries, pressures of the pandemic and technology and social media advancements, many people have found themselves self-employed for the first time. A good number of these newly self-employed are using a retail account to run their business. The benefits of converting a retail account being utilized for business purposes, to the right type of account are numerous: Advantages for the financial institution: • Increased income through business account fees • Opportunity for new credit card openings and income • Opportunity to sell new business loans • Secure more share-of-wallet • Build loyalty with account holders, leading to long term relationships and trust • Increase household products Advantages for the account holder: • Eliminate limited personal liability. Should a business come into legal or taxation trouble, personal accounts could be frozen, unless they properly separate their accounts between personal and business. • Tax benefits. As a properly established business owner there are several available tax deductions, provided they are paid to a traditional lender: loan interest, retirement plan savings, vehicle loans, business property loan interest and inventory expenses. • Financial wellness. Overall financial well being can be achieved if an account holder is placed in the right products and services for their goals. • Status at the institution. Enjoy benefits such as personalized service, access to loans and credit, better rates and more. Banks and credit unions must take a proactive approach to communicating these advantages

to their account holders. It is likely that many gig economy workers are new to small business operations. Educating account holders by discussing the benefits and the risks can yield positive results for both parties. How to Gain Trust with Existing Business Customers Tried and true ways of building trust and sales still apply today: be reliable, nurture relationships, be transparent, show your organization’s values, have great customer service, be better than the competition — the list goes on. It’s easy to say, “personalize your message” or “be relevant”, but what exactly does that mean? A bank or credit union’s account holder transaction data holds the intelligence that can provide a holistic view of that person’s product portfolio, financial needs, trends in lifestyle activities and interests, spend patterns with merchants, usage of held-away accounts, life events and more. Accessing these specific insights undoubtedly provides a marketplace advantage and enables a customer-centric strategy of knowing the target audience. First- party data is financial institutions’ fuel for relevant engagements with account holders. Historically, banks and credit unions have been risk averse to working with consumers whose income is gig or freelance-based. However, Business Insider states in their Gig Economy Report, “As advances in fields like AI and open banking make alternative creditworthiness assessments viable and detecting default risks more precise, cautious financial institutions now have an opportunity

Figure 2

Current and expected use of remote freelancers

number of account holders participating in the gig economy to supplement their income or to replace a traditional paycheck entirely is growing. Gig economy jobs are often short-term and task- based and workers are independent contractors versus full-time employees. However, if the trend continues as predicted, this form of employment could become just as common as a steady 9 to 5. Account holders at one financial institution we work with saw a 93% increase in payment volume received from gig economy work in 2021 over 2020. To build an audience of these consumers, financial institutions should analyze their account holder transaction data and research payments that frequently appear from Lyft, Uber, Doordash, Grubhub and other gig economy players. There are other non-traditional income sources that should be considered, like inflows from payment processors, or marketplaces like Etsy or Shopify, that could indicate an account holder is using a consumer account to run a small business. How to Tap the Revenue Potential of the Gig Economy Once you have identified gig economy employees, those who make payroll payments from their personal accounts, and those making additional payments to commercial service providers, it’s time to start the outreach campaigns. Target this audience with offers to assist them in setting up business accounts. This can maximize your institution’s revenue while also building loyalty and trust with a growing group of entrepreneurs in the community. Newbehavior pattern: Most people still receive a conventional paycheck, but more consumers are supplementing this income with a “side hustle.” This trend is only expected to grow.

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THE FINANCIAL BRAND ©January 2022 SOURCE: Upwork 2021

to harness some of the revenue offered by this booming market” (figure 2). The ways that financial institutions are interacting with account holders and prospects have required a shift over the last 24 months. With face-to-face interactions at a minimum and communications mounting from the competition, how can banks and credit unions build trust and find hidden revenue opportunities with their business clients? Simply this: Know your audience better. About Segmint: Segmint’s mission to make sense of unstructured transaction data in order to turn those results into actionable intel for financial institutions. By strengthening relationships with account holders, financial institutions are able to increase loyalty and trust, the key to retention, growth, and share of wallet. Learn more at Segmint.com. ▪

Where to start: To identify the gig workers among your customers and create the most relevant engagements with them, make use of the first-party data you have.

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THE FINANCIAL BRAND INSIGHTS SPRING 2022

THE FINANCIAL BRAND INSIGHTS SPRING 2022

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