As commerce becomes increasingly digital, and as subscription payment models grow, it’s more important than ever to be able to understand and manage digital financial footprints.
But does that claim remain true for both consumers and financial institutions? Or does one party benefit more than the other?
What Is a Financial Footprint?
First, let’s explain what a financial footprint is not. It is not a person’s credit score. A credit score is a measure of a consumer’s creditworthiness, and it is based on a variety of financial variables, including income, assets, credit history, and so on.
It is also not a measure of a consumer’s financial accounts, eg how many institutions do they bank with, and what is the makeup of those account types across checking, savings, loan, investments etc…
A financial footprint is very different. Instead of measuring what a person could reasonably borrow, or how much they will pay over time for a certain service or product, it measures all the places a person is obligated to spend.
At WalletFi, we think of the digital financial footprint as anywhere payment information is stored digitally – any subscription, recurring service, e-commerce merchant, or app that has a person’s payment information is part of their digital financial footprint. Managing one’s financial footprint means tracking, altering, updating, reducing, or otherwise changing how and what they pay for online. (For example, this often means canceling a subscription or changing a payment method.)
How Does Managing Financial Footprints Help Consumers?
Most Americans spend a staggering ~$850 per month on subscriptions and recurring payments. While that may sound like a lot, consider what some of those payments include:
- Cell phone plans
- Utilities (electricity, water, gas, waste)
- Even cars
For many people, those alone can easily total several hundreds of dollars per month. Then, add in a few more modern conveniences like Netflix and Amazon Prime, and you’ve got a recipe for a large financial footprint.
Although some subscriptions are cheap, others are not, and they all add up. Consequently, any subscription management tool should show people what they actually spend—and it should give them an idea of where they can trim some fat.
Here’s how a transparent financial footprint helps consumers:
- Gives them a better idea of what they’re spending each month
- Offers insight about which subscriptions may be unnecessary
- Helps people to more easily achieve their savings goals
- Indirectly raises creditworthiness with improved financial hygiene
- Increases likelihood of borrowing for big-ticket items like cars and houses
- Offers answers and reassurance during card reissuances – especially due to fraud
In many ways, recurring spend holds people back from realizing their financial goals. Adding a little transparency to the mix can empower people to make better long-term financial decisions.
How Does Managing Financial Footprints Help Institutions?
Banks and credit unions may initially balk at the idea of providing a clear financial footprint to their cardholders. After all, if their card is top of wallet, they may see reduced interchange income if users cancel some subscriptions to improve their persona bottom line.
However, the potential benefits are huge—and profitable.
Financial institutions that provide such a service would get many benefits as well:
- Increased loyalty from cardholders
- Improves borrowing capacity of cardholders
- Opens opportunities to incentivize moving your card top of wallet
Especially now, when Wells Fargo’s Control Tower is the only FI-powered competitor in the arena, the visibility and control allowed by financial footprint management is a major key differentiator between institutions.
Customer satisfaction and loyalty are increasingly driven by convenience and streamlined digital experiences. Offering people more control over their financial footprint is a step in the right direction.
Ultimately, both consumers and institutions benefit from financial footprint management. Few things beat a true win-win scenario.
There are numerous other institutional benefits to providing financial footprint management. You can read more about them here: