The Next Evolution in Banking: why personal finance needs holistic solutions

Future banks should evolve to offer holistic financial solutions, moving beyond fragmented services and limited offerings. In this article, we’ll discuss how, by focusing on integrated solutions that help customers achieve their financial goals, banks can transform personal finance and enhance overall financial wellbeing for all.

The financial landscape is in the midst of a seismic shift. As technology evolves, the role of banks is being redefined. Future banks should evolve to focus on solving personal finance holistically, recognising that it is a multi-problem space that demands comprehensive solutions. Currently, only the wealthiest individuals receive the type of all-encompassing financial planning necessary for optimal financial health. For everyone else, managing finances involves either piecing together services from various providers or making do with a limited selection from their primary bank. This fragmented approach is insufficient for the financial wellbeing of the majority.

THE PROBLEM WITH THE CURRENT SYSTEM

Today, financial services are often siloed, with different aspects of personal finance—savings, investments, loans, insurance—being handled by separate entities. This fragmentation forces consumers to become their own financial planners, a task for which many are ill-prepared. Only the very wealthiest can afford the luxury of a dedicated financial advisor who can provide a holistic approach to managing wealth. These advisors offer tailored strategies that encompass every aspect of personal finance, from tax optimisation to investment planning, ensuring their clients’ financial goals are met seamlessly.

For the average person, however, the reality is starkly different. They must navigate a labyrinth of point-solution providers, each addressing a single aspect of their financial needs. This piecemeal approach can lead to inefficiencies, missed opportunities, and ultimately, suboptimal financial outcomes. It’s not surprising that the majority therefore rely on the offerings of their main bank, which are less rewarding and with little personalisation. The result is a value and advice gap.

CUSTOMERS NEED HOLISTIC, NOT POINT SOLUTIONS 

To better serve their customers, banks need to shift their focus from selling products to offering solutions that help achieve multiple financial goals. This requires a fundamental change in perspective. It is perhaps not new to recognise that consumers seek solutions not products (eg they don’t want a mortgage; they want to buy a home) but that same customer will need to balance this with saving for their future, managing their expenses and achieving financial stability.

By understanding and addressing the underlying holistic needs and goals of their customers, banks can provide more a meaningful and effective service. This entails looking beyond individual products and creating integrated solutions that cover the entire spectrum of personal finance. It means providing tools and guidance that help customers budget, save, invest, and plan for both short-term and long-term goals in a coordinated manner.

THE PROMISE OF SELF-DRIVING MONEY

The ultimate solution to the fragmented financial planning landscape is likely to be some form of "self-driving money." This concept envisions an automated, intelligent system that manages all aspects of a person’s finances, optimising their financial wellbeing with minimal input required from the individual. Just as self-driving cars aim to navigate the complexities of driving to ensure safety and efficiency, self-driving money would navigate the complexities of personal finance to ensure financial health and resilience.

Self-driving money would continuously analyse a person’s financial situation, making real-time adjustments to their savings, investments, and expenditures. It would provide personalised guidance, alerting individuals to potential financial pitfalls and opportunities. By leveraging advanced algorithms and machine learning, this system could tailor its strategies to the unique needs and goals of each user, offering a level of customisation previously reserved for the wealthiest clients.

TRANSFORMING FINANCIAL WELLBEING

The adoption of holistic, automated financial management systems has the potential to transform financial wellbeing on a broad scale. By reducing the burden of financial planning and decision-making, self-driving money would empower individuals to achieve their financial goals more effectively. It would democratise access to sophisticated financial strategies, closing the gap between the services available to the wealthy and those accessible to the average consumer.

In conclusion, the future of banking lies in recognising and addressing the multi-problem nature of personal finance. By shifting from product-centric to customer-centric approaches and embracing the potential of self-driving money, banks can provide the comprehensive financial planning that all customers need. This holistic focus will not only improve individual financial outcomes but also enhance overall financial wellbeing, creating a more prosperous society.