H.M. Queen Máxima, United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), Remarks at the UNSGSA Financial Health Working Group’s Private Sector Webinar | 26 March 2021 | 8:30 – 10:00am EST
Ladies and Gentlemen,
It’s a pleasure to join this webinar. I welcome this initiative of our Financial Health Working Group that we launched last year to prioritize and place financial health on the global policy agenda. Financial health impacts the quality of lives of individuals, families, communities, and the broader economy. This topic has become more important with the COVID-19 crisis exposing financial vulnerabilities across developed and developing economies.
The World Bank Findex reports that, in the developing world, only half of adults can access a lump sum of funds in the face of an economic shock or emergency. The 2020 OECD financial literacy survey included elements of financial resilience and financial health. They found out that almost half of respondents including those from OECD countries, agreed with the statement: “I have no money left at the end of the month”. Furthermore, the limited range of scores across the sample may suggest that financial stress and worry is a concern globally, including in high-income economies. People everywhere lack resilience.
It is estimated that the pandemic could potentially push 163 million people into extreme poverty. Devastatingly, since the start of the crisis, UN Women estimates that 47 million more women and girls have already fallen into poverty. Now, this unprecedented increase underscores the importance of financial health in the context of promoting financial inclusion, and the urgency for all stakeholders to act.
Policymakers are increasingly taking steps to measure, assess, and address financial health. However, these efforts are insufficient without action from the private sector—primarily, but not exclusively, financial service providers.
The financial health of employees and customers should be central to your business. And, therefore, an important component to your business strategy. There is research that supports this. One study examined nine companies that incorporated financial health into their corporate strategy, vis-à-vis S&P 500 companies. The group outperformed the S&P 500s with shareholder returns of 150% compared to 14% in the same period. They also saw a 134% average increase in sales growth compared to 53%.
Financially healthy customers are more profitable. They can pay their obligations; present more cross-selling opportunities; and cost less to serve. Customers that feel their financial providers care about their financial health are five times more likely to purchase additional products beyond the basic offerings. Long-term value is driven by responding to customer needs in a manner that supports resilience, ensures customer loyalty, and increases shared value. This will lead to expanded markets, institutional relevance and resilience in an increasingly dynamic and competitive environment.
Like with customers, ensuring financial health for employees is an investment in your most valuable resource. Financial stress heavily taxes productivity. It hampers cognitive capacity—for example, some studies approximate its impact to losing 13 IQ points. And it impairs decision making, with 1-in-3 employees reporting that financial issues distract them at work.
There is also a strong correlation between financial health and physical health. Employees with high financial stress are twice as likely to report poor health overall. And more than four times as likely to suffer from fatigue, headache, depression, or other ailments. Investing in employee financial health can therefore boost productivity, enhance employee engagement and loyalty, as well as improve company reputation.
The journey toward proper financial health starts with measurement. But it’s key to ask the right questions: What does success look like? How will you measure progress from where you are now? And, how will you use these insights to make decisions and design products better? With the right questions in place, technology and access to data make it easier to analyze information.
Addressing financial health requires long-term commitment and serious buy-in at all levels of a company. The good news is we are not starting from scratch. There are many examples, evidence, and even tools that can be used.
For example, the Commonwealth Bank of Australia built a multidisciplinary data team to collect and analyze transaction data and information from a five-question customer survey. It helped the bank better understand their customers and develop solutions to scale. One such solution is a digital goal tracker the bank developed that drove 20% of non-savers to start saving consistently.
Another good example is PayPal, which surveyed the financial situation of its workers and used the results to design a program to improve employee financial health. The program included lower health premiums, wage increases, equity options, and financial wellness education. The results showed employees were four times more engaged, and three times less likely to leave the company.
Moving forward, it’s critical to elevate the discussion around financial health as an issue of vital importance—especially in light of the pandemic. While the discussion has started with large companies, we also need to consider making financial health a priority among SMEs, both for their employees and customers. We really need to share our experience and knowledge, and learn from one another.
I think this is a very good group to start with and am happy you are all able to join today. My biggest wish is to really start a movement in which financial health becomes an obvious item in all your daily endeavors. Thank you so much and I look forward to all the discussion.