Measuring What Matters: Banks and Consumer Financial Health

Today, most banks don’t measure their customers’ financial health in a comprehensive way. Credit scores and account balances might offer a glimpse into a person’s financial life, but they fail to capture the whole picture. Customers’ financial health is not just about meeting minimum payments or having a high credit score – it’s about being able to manage daily expenses, handle emergencies, and pursue opportunities over time.

Our FinHealth Score® provides a well-rounded view of a household’s financial health. Using the Spend, Save, Borrow, and Plan framework, the Score looks at how households manage both day-to-day and long-term finances, including their ability to pay bills on time, accumulate savings, manage debt, and set financial goals. This aligns with the Treasury’s call for more holistic, outcome-focused measures, further emphasizing that financial institutions should adopt metrics that support long-term consumer success.

The OCC’s Vital Signs adds a crucial layer of depth to this framework by offering real-time insights that institutions can monitor continuously. Together, these two tools create a powerful combination, providing banks with both a broad view of financial health through our FinHealth Score framework and immediate, actionable insights from the OCC’s Vital Signs. Here’s how they can work together:

• • Spend and Positive Cash Flow: The Spend pillar assesses whether income and expenses are aligned over time, enabling consumers to pay bills on time. On the other hand, the OCC’s Positive Cash Flow metric provides real-time visibility into whether a customer consistently earns more than they spend. Using both metrics together allows financial institutions to capture a fuller picture of financial health – Spend reflects stability over time, while Positive Cash Flow highlights immediate cash trends. These complementary insights help institutions identify customers at risk of falling behind before it becomes a significant issue, enabling timely support.
  • Save, Plan and Liquidity Buffers: The Save and Plan pillars assess how much buffer customers have to deal with emergencies and how effectively they plan and save for future financial goals, providing a view of their short– and long-term financial preparedness. The OCC’s Liquidity Buffers metric complements this data, offering real- time insight into whether customers have a liquidity buffer. Together, these metrics give banks a more accurate assessment of financial vulnerability, enabling them to spot potential issues early and offer timely interventions to strengthen customers’ financial resilience.
  • Borrow and On-Time Payments: The Borrow pillar evaluates how customers perceive their credit score and their ability to manage debt, offering insights into their borrowing experience. In contrast, the OCC’s On-Time Payments Vital Sign offers a more focused, real-time look at credit health, showing whether customers have either no debt over 30 days past due or a prime credit score if they don’t currently have debt. Combined, these indicators provide a more complete picture of credit behavior and risk, equipping financial institutions to identify potential challenges and support customers before issues escalate.

These two approaches form a powerful toolkit for financial institutions to understand not just where customers stand today, but how they are likely to fare in the future.

The OCC’s Vital Signs release should be a wake-up call for banks. While large institutions, like JPMorgan Chase (JPMC), have taken steps toward monitoring consumer financial health –  for example, by incorporating financial health metrics into their 2024 Consumer and Community Banking Investor Day materials – this is only scratching the surface. Many banks remain hesitant to dive into financial health measurement and monitoring in a meaningful way.

The industry needs to make a concerted effort to go beyond collecting financial health data to begin taking standardized actions based on these insights. JPMC’s use of financial health data, while a positive move, is just an initial step. To fully leverage this data, we need to establish clear, industry-wide best practices to ensure that these metrics lead to meaningful change for consumers.

Without a framework to guide banks in their response when Vital Signs indicate financial challenges —whether it’s providing early intervention for those with negative cash flow or savings products tailored for those with low liquidity—the data risks becoming just another set of metrics. We need actionable standards to ensure banks don’t just monitor financial health, but actively work to improve it.