The evolution of digital has also enabled areas like proxy payment. Take, for example, an employer who authorizes an employee to make a one-time trip to a specific store to buy a specific product for a specific amount. Rather than fronting the cash, cutting a check, or dealing with expense accounts, many businesses now use reloadable gift cards. In fact, the term ‘gift card’ no longer applies to how the cards are really used—another reason names for new services are so important in this area. This model has given some retailers more ‘gift card’ or stored value on hand than some medium-size banks.
Proxy payment services are an opportunity for banks and retailers to create more flexibility for customers. Allowing the account holder to define the place and amount for a proxy spender provides a significant improvement over cash transactions. Banks can even create ‘proxy payment dashboards’ where account holders can see and manage their payment credentials—a simple way to increase engagement while aligning with consumer use.
Looking at this payment distribution model, we also see interesting extended spending models for families, college students, and other groups, each person spending on the account, but only at predefined locations.
Savings to spend later
The traditional role of a savings account was to set aside cash for a future purchase, but some research suggests that consumers who know exactly what they are saving for are more likely to have discipline in setting funds aside. The fact that 40% of US adults cannot cover an unexpected expense of $4003 says a lot about our ability to save, and perhaps specifying very specific buckets or goals (e.g., emergency, weekly meal out, annual vacation) within a broader savings product repositions how consumers will in fact save.
A defined time until the purchase is made can also indicate to the consumer how that money should be invested. For example, some 529 college savings plans simplify the “spend later” decision-making process. Instead of describing the complicated investment process with an array of mutual fund offerings, they offer simple, age-based options with a more aggressive allocation for younger children that transitions to a more conservative allocation as the child approaches college age.
A good consumer-aligned way to think about savings is through a specific target and timeline while mitigating the angst of the investment process. This consumer-centric mindset can be used in all areas of financial services by positioning solutions to address particular concerns rather than offering a confusing list of products.
Invest in what you know
Putting off investing can cost individuals financial security. How can the market feel more familiar and fit in with existing areas of knowledge and interest? Perhaps by looking at companies or industries consumers like or know something about.
For individuals who are starting an investment journey, can a bank look at purchase history or product ownership to help suggest investments in companies that the consumer recognizes? Perhaps this more tangible approach of investing with spending patterns can help remove the fear of the investment process and empower first-time investors to think about being shareholders as well as consumers. If the stock goes down, they become interested in why it went down, providing an entry point for understanding the market a bit better. What influenced the downturn? Are other companies involved?