By Amanda Morrall
Non-profit financial literacy group Workbase says banks and other financial services sector players are not doing enough to improve outcomes for average New Zealanders, more than a third of whom lack the skills necessary to manage their personal finances successfully.
CEO Katherine Percy says whilst banks have thrown their support behind financial literacy initiatives, few, if any, have taken any concrete measurable steps to make sophisticated banking concepts and constructs fairly understood by the end user.
"I think there is virtually no financial institutions who aren't supporting financial literacy skills but we see almost none focusing on improving skills. There's quite a significant focus on improving knowledge and understanding of financial products and services but we know people need skills in order to engage with those products and services and skills to build the knowledge in order to make financial choices that are appropriate.''
Percy said the complexity and volume of products available on the market today required literacy and numeracy skills that many consumers simply did not have.
"Quite often every day services are riddled with financial jargon and there are so many options and qualifiers that the average person struggles to pick their way through and choose what's best.
By some estimates, half the adult population of New Zealand is lacking in numeracy and/or literacy skills.
"Although most can read, write and use numbers, many lack the skills to understand unfamiliar and technical information contained in banking and insurance documentation and product brochures.
To address the skill gap, Percy said financial institutions needed to: Improve financial literacy skills rather than simply focusing on increasing their knowledge; Identify and remove the literacy barriers that complicated services and systems place on individuals; Place a stronger emphasis on supporting and building customer's financial literacy skills.
Percy said financial sector organisations had an opportunity to "lead the market" by reviewing and improving their own systems, processes and all aspects of customer communication.
"I think there's a lot of benefit for the financial institute that takes the lead here. There is scope to differentiate in the market place as really caring about your customers' understanding. When you are talking about 30% of customers, it's not a small minority. We would all benefit from being able to more easily follow and choose information about financial services.''
To that end, Workbase has come up with a list of five questions that it believes behooves banks to ask of themselves.
1) How confident are you that most of your customers understand the differences between your various accounts or investment funds?
2) Are you as confident that customers with English as a second language and those with low literacy and numeracy understand frequently used terms such as: 'manual transactions', ' contribution holiday' and 'duty of disclosure'?
3) How easy do your brochures and website make it for customers to find out what happens if there is not enough money in their account to cover an automatic payment, or what happens if they are late in making a payment to you?
4) How confident are you that every customer will get a clear, simple and consistent explanation to the above questions from your staff?
5) How confident are you that your staff know how to ask questions to check customer understanding beyond "Do you understand?'
On the flip side of the equation, Workbase came up with the following five questions customers could ask of their banks when doing something as simple as opening a bank account:
1) Is there an account minimum?
2) What are all the fees that apply to this account?
3) Is there a fee for using ATM machines?
4) What happens if there is not enough money in my account to cover the payments?
5) What's in the fine print that I need to know?
(See also interest.co.nz's bank account fees section here).