In "Assuring Member Financial Capability: A Shared Credit Union Approach," a 2016 Filene report, "financial capability" is defined as the capacity – using skills, knowledge and practices – to manage financial resources effectively and improve one's well-being.

Subsequently, financial well-being possesses the following characteristics:

• The ability to fully meet current and ongoing financial obligations;
• Feeling secure in one's financial future;
• The ability to make choices that allow one to enjoy life; and
• The stability underlying a good life, assuring material needs are comfortably met and prioritizing personal fulfillment.

As people move through different life stages, their need to form relevant financial skills and behaviors will evolve, and so will their need for a new set of resources (whether explicit or not). How well people match these resources with their changing needs would either widen the gap or get them closer to their ultimate goal of increasing their financial well-being.

Within this process, it is no wonder why many participants in this study reported pre-existing feelings of frustration and stress with their money. Interacting with these fintech apps gave users a greater sense of transparency and control, but these solutions also created an emotional echo chamber by reinforcing their frustration and stress.

Financial App Frustrations and Failures

A promising finding came from observed behavior in the group. Once the experiment was over, users reported seeking additional information outside what the app offered. Thus, it signaled that their increased awareness of or attention to personal finance can act as gateways or stepping stones to other sources of personal financial information and advice.

For some users, the apps they used led them to explore online – YouTube was commonly cited – or to look into other apps. Several subjects reported starting with one app and then adding Mint or – and here's the part to really pay attention to – seeking face-to-face advice from banks and credit unions.

Participants were initially eager to see what these apps could do for them. They all entered the study excited to try a new way to manage their money. In the end they were, for the most part, disappointed.

Users reported the following failures and frustrations:

1. Operational Limits: Users expect seamless functionality and interoperability failures threaten user retention.

2. Over-Simplification: PFM apps have difficulty with the complexity of people's real financial lives, including irregular income, the use of cash and P2P payments.

3. Lack of Focus: In-app promotions, rewards and advertising send mixed messages that confuse users and undermine trust.

4. Ineffective Tools: In-app financial education is often poorly designed and ineffective.

5. Out of Touch: Users have no desire to use social media features of PFM apps.

6. Short Sighted: The timescales of PFM apps do not match people's future-focused aspirations.

Lastly, for the most part, users in the study reported already maintaining a hodgepodge of existing accounting systems: Digital and physical spreadsheets, paper notebooks, bank statements and cash. The apps systematically failed to recognize and accommodate these existing practices adequately.

Call to Action for Credit Unions

As credit unions develop and refine apps of their own, or work to identify suitable fintech partners to meet their members' financial needs, design matters because it signals competency and promotes trust. Users reflected on the experience when dealing with the technology available through their current financial institutions. They offered the following advice: If the credit union or bank's solution did not appear to be high-quality, it would lead to an erosion of trust.

From a design perspective, credit unions will position their solution well if they adhere to the following nine design principles.

1. Design for trust. Savvy users look to the aesthetics of an interface to discern whether it is trustworthy, but also whether it is worth their time.

2. Design for financial instability and uncertainty. A significant group of your members experience irregular income and unpredictable expenses, rely on independent work to supplement their income and are affected by economic uncertainty factors.

3. Design tools that are adaptive, not prescriptive. Apps often made inaccurate assumptions about people's income and spending, which led to frustration when the process of correcting the system was not intuitive.

4. Make room for people's existing financial practices. Honor the many ways and systems people already have in place by allowing flexibility to import/export existing budgets.

5. Make room for cash. Users reported relying on cash savings that otherwise would not be accounted for if systems don't allow that flexibility.

6. Align time horizons. Apps must be designed to account for the way users' sense of time impacts how they relate emotionally to their money.

7. Beware of mixed messages. Personalized ads promoting loans undermined perceptions of an app's legitimacy as a trusted provider of financial information and services. Credit unions should use these practices sparingly.

8. Ditch social – or make it authentic. Users were not keen on connecting through social media elements available through the app. There is still an opportunity for credit unions to encourage ways to provide reviews from user experiences geared at helping other members.

9. Treat apps as gateways. The use of these fintech apps generated awareness about personal financing that generated interest in seeking expert advice.

Not only is your member's goal to achieve financial well-being, it should be the goal of your credit union as well. These findings and calls to action highlight the complex relationships people form between financial resources, such as these fintech apps, and their ongoing journey toward improved financial skills and behaviors. The careful attention to design elements uncovered through this study provides a blueprint to better understand our human condition and elevate the efficacy of current or new solutions offered by your credit union.

Elry Armaza

Elry Armaza is Custom Research Director for Filene Research Institute. He can be reached at 608-661-3750.