We live in a world of extremes. While billions live in abject poverty, a small portion of civilisation lives on a daily income that could feed a small country. Minimalism as a growing trend is contrasted by the insatiable urge to own more than ever before. With consumer debt in South Africa at an eye-watering R1,7 trillion, financial institutions cannot turn a blind eye to their responsibility to guide the people behind the numbers – you and me – on how to manage our debt.
Between 2007 and 2010, the subprime debt crisis caught US banks with their pants down and shined the spotlight on widespread dubious lending practices. It emerged that, in addition to increasingly considering higher-risk borrowers, lenders had offered progressively riskier mortgage loan options and borrowing incentives. What followed was a period of recession and global distrust which serves as a reminder to South African financial institutions of what happens when you abandon good conscience for better profits.
The big four SA banks in order of brand value are FNB (R19,4bn); ABSA (R18,8bn); Standard Bank (R18,5bn) and Nedbank (14,3bn). Newcomer, Capitec Bank is not only the nation’s fastest-growing bank brand but the fastest-growing brand overall according to Brand Finance. They all share the pressure to retain their share of the ever-changing market and attract new bankable customers through incentives such as credit and delayed repayment terms.
But banks are not the only guilty parties. Mashonisas (loan sharks) are burdening the poorest sector with empty promises through the scourge of high-interest payday loans. Even retailers are setting the debt trap with Pick ‘n Pay and Checkers now offering personal loans.
The reasons for our debt burden are complex. We’re using credit cards to buy essentials, or worse, to pay off other credit. It’s a vicious cycle.
And it doesn’t only happen to the poor. Often it is those who have grown accustomed to a more lavish lifestyle who can no longer keep up and then supplement with debt. Lobola and the pressure to impress are other real reasons people borrow more than they can repay.
Unpaid student loans are another reason the youth are struggling to rise above their liabilities even once they are earning a salary. Parliament reported in February that it was owed a whopping R9bn in student fees. Other factors are out of our control, like a job loss or a sudden illness in the family which brings on an extra financial burden.
Yaw Dwomoh, MD of local specialist brand storytellers IdeaHive, says, “Shortly after my daughter’s birth we found out that she had been born with a severe illness. Fast-forward only a few months and we’d exhausted every line of credit imaginable. We’d borrowed from employers, banks, family and friends. You would do anything for your child. It can happen so fast. We were fortunate to survive that period.”
Debt rescue firms report record numbers of consumers coming through their doors, desperate for relief. However, few understand exactly how debt rescue works and what it will mean for them and only find out that it’s not a shortcut once it’s too late.
What if the financial industry helped clients before it got to this stage?
The new customer to disrupt the financial industry is Generation Z (Gen Z). In the US alone, they are estimated to be spending between $29 and $143 billion already. Research by Gen Z Reckoning shows that Gen Z doesn’t trust big brands. However, brands can earn their trust by proving they are operating in the best interests of society through business strategy and intentional goals. Gen Z is more likely to trust brands when they take ownership of and accountability for the challenges they have helped create.
And there is an opportunity here for financial institutions to be accountable and authentic.
One of the big four banks was rapped over the knuckles recently in a court case brought by the NCR to stop them from automatically setting off consumer bank debt, from their current accounts without prior consent. The judgement handed out was that it could be a human rights violation even though it complied with common law principles. Cases like these could initiate a major breach in customer trust.
So how can financial institutions use storytelling to intrinsically (internally) motivate their customers not to get into more debt, with summer holidays and Christmas around the corner? By being better and telling better stories.
- Be better at showing the long-term cost vs the short-term gain
FNB says that its middle-income clients are spending on average a quarter of their salary just on repaying interest. This is shocking. And trends show that those who are borrowing the most money, are at the highest risk of being over-indebted and show a greater tendency towards raising more debt.
There are innovative ways to make sure your clients know how much they will be paying back on their loan before they sign a loan contract. If they’re paying off a small vehicle, for example, show them that their repayments will equate to the same value as a luxury car (or ten cattle even) over the loan period. Be daringly transparent.
- Be better at showing them where it could go wrong
Young people, especially, get caught in the trap of comparison and instant gratification. Often the youth see how their idols spend and live the high life and want to replicate it.
Find people they look up to (like influencers) and tell their (true) stories of their own battles with owning more than they can reasonably repay. Show the long and short-term effects of insurmountable debt on their careers, relationships and health.
- Be better at using the stories your data tells
Get smarter about leveraging your digital processes to flag the first signs of payment default. The opportunities to connect with clients on an emotional level at touchpoints along the way are endless. Think of mailers, or better, phone calls offering mini-courses; short videos on social media or other interventions that deal with the warning signs of getting deeper into debt.
- Be better at being better
Invest in and change the stories of children growing into this debt culture to transform the narrative to one of savings vs. debt. This is a tough one in a Google generation where you get what you want now, and saving is not popular. But if financial institutions continue to foster the story of how we attain wealth and material possessions responsibly, the market will verify their positive intent and respond positively.
Even a small step like making sure clients understand their rights beyond just ticking the NCR boxes, could go a long way towards avoiding future trouble.
In a society where greed and corruption are being exposed daily, it will be refreshing to see financial institutions step up to the plate and take responsibility to change consumer attitudes towards debt in creative ways.
“Let’s change the story for our children,” Yaw concludes.
About Idea Hive
At Idea Hive we create and execute pioneering Brand Storytelling Solutions to illuminate your brand’s power. We apply a strategic framework which extracts and aligns all the key components of your brand’s story.
Our team of curious, creative, driven and critical thinkers mould all the elements into a cohesive Brand Storytelling Solution that will change how the market sees and experiences your brand.
We craft and execute heartfelt and character-driven Brand Storytelling campaigns that position your brand/and or organisation to achieve its full market potential.
We offer an array of tailormade solutions around our services which includes branding, design, influencer marketing, visual content and communications. All solutions are anchored in ensuring that each Brand Story is told exceptionally, uniquely and to the right audience.
Imagine a world where brands defeat normal and ideas inspire change.
When we change, we change the world around us.
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