Digital Wallets, Platforms Pave Financial Wellness Path as 2023 Dawns

January is financial wellness month, spurring consumers to scrutinize their budgets and where their money’s going.

And the surging popularity of digital wallets and platforms can transform transaction-by-transaction data to help younger consumers gain better insight into spending, and automate the actions needed to reach their financial goals.

Call it a virtuous cycle. But the tech-driven help seems sorely needed. As recent PYMNTS research done in collaboration with LendingClub has shown, 57%  percent of paycheck-to-paycheck consumers have stated that stubbornly high inflation has diminished their capacity to reach their long-term financial goals. Since 63% of us live paycheck to paycheck, that means a significant percentage of us are encountering headwinds in getting where we want to go over the long term, financially speaking.

One key component lies with building up savings. Earmarking at least some funds to be taken out of the bi-weekly or monthly paycheck and allocated to savings accounts or to investment accounts can 1) pad cash cushions and 2) earn returns through various investment products and/or 3) pay down debt.

Savings, of course, have been pressured. PYMNTS has found that 32% of all consumers reported a decrease in the portion of their paycheck they are able to save, while 42% of struggling paycheck-to-paycheck consumers have cited such pressures. Separately, J.P. Morgan has noted in its own research that “excess savings" in the aggregate here in the U.S. are $900 billion, down markedly from $2.1 trillion in the midst of the pandemic.

Willing to Try Something New

Consumers, then, can use a leg up, a bit of guidance, in making the leap from ambition to reality as they seek to improve their financial wellness. Digital wallets, among the most popular new payment methods headed into the new year, can be the springboard for platforms and providers to help them get there. Our data finds 59% of consumers who tried a new payment method in the past year opted to embrace digital wallets, and 42% of U.S. consumers surveyed are curious about the payment method but have not yet tried it, indicating a greenfield opportunity that lies ahead. Drill down a bit and 66% of Gen Z consumers and 67% of millennials have tried digital wallets in the past year.

It is the digital wallet, we note, that houses all manner of cards and spending options in one place and which harnesses data in real time that in turn can be funneled across platforms, on offer from FinTechs and traditional financial institutions(FIs). The financial wellness offerings tied to a “digital front door” of a super app/platform are especially of interest to younger consumers, at 48% of Gen Z individuals and 33% of millennials.

The platform model, too, has enabled a series of cross-pollination opportunities that span spending, lending and savings. LendingClub, for one example, has recently detailed that members earn  3.25% APY on high-yield savings accounts balances along with 1% cash back on checking-based transactions.

And as noted in a recent interview with PYMNTS, Yvonne Stelpflug, senior vice president of Advisors Plus Consulting at PSCU, said that same data can help credit unions (CUs) stay engaged with members across digital and brick-and-mortar settings. “You’ve got to be able to feed into what’s happening with members — so that the digital solutions, the contact centers, the tellers and lenders all have access to the same information,” she said. The cross-channel data flow can take insight from daily financial activities and craft proactive approaches that keep financial goals in sight.

The stage is set to use transaction level data to help consumers analyze, and perhaps tweak, their financial habits. PYMNTS and Banyan found that nearly half of financial service providers are highly interested in using receipt data to improve consumers’ understanding of their spending behavior — which in turn helps banks and providers to more accurately recommend relevant products and services.