This is a self-archived – parallel published version of this article in the 
publication archive of the University of Vaasa. It might differ from the original. 
Banks and credit unions as providers of 
financial literacy: A complex relationship 
Author(s): Kalmi, Panu; Ruuskanen, Olli-Pekka 
Title: Banks and credit unions as providers of financial literacy: A complex 
relationship 
Year: 2022 
Version: Accepted manuscript 
Copyright ©2022 Routledge. This is an Accepted Manuscript of a book chapter 
published by Routledge in Responsible Finance and Digitalization: 
Implications and Developments on 30 September 2022, available 
online: https://doi.org/10.4324/9781003144427  
Please cite the original version: 
 Kalmi, P. & Ruuskanen, O.-P. (2022). Banks and credit unions as 
providers of financial literacy: A complex relationship. In: Kalmi, P., 
Auvinen, T. & Järvenpää, M. (eds.) Responsible Finance and 
Digitalization: Implications and Developments, 239-254. Routledge 
International Studies in Money and Banking. London: Routledge. 
https://doi.org/10.4324/9781003144427-19 
 
 
1Banks and Credit Unions as Providers of Financial Literacy: Acomplex relationship
Panu Kalmi and Olli-Pekka Ruuskanen
Abstract
Banks and credit unions have become very active in the provision of financial educationinitiatives. There has been some skepticism regarding how genuine these initiatives are, giventhat financial institutions may benefit from customer misperceptions. However, financialinstitutions can also signal their trustworthiness with these campaigns, which may also be animportant part of their social responsibility programs. Financial education also has implicationsfor relationship banking. A bank’s mission might also be a significant determinant of the typeof financial education initiatives in which it engages. In this article, we review the various prosand cons of the involvement of financial institutions in financial education and try tounderstand why financial institutions engage in financial education. We also provide examplesof financial education initiatives from Europe and the US.
Keywords: banks, credit unions, financial literacy, financial education, corporate socialresponsibility
1. Introduction
Consumers face various financial decisions in which they might have difficulty determiningthe optimal action (Campbell et al., 2011). Examples include what kind of mortgage to choose,what type of investment assets to purchase, whether to take out a high-interest rate loan, orwhether to put money into various retirement savings instruments. These are all examples ofimperfect information: consumers are uncertain about what choice they should make.
Many of these financial decisions are made together with a bank or a credit union. Thisrelationship is characterized by asymmetric information and unequal bargaining positions. Thecomplicated nature of financial products makes informed decisions difficult even in the caseof knowledgeable consumers. This situation makes it possible for financial institutions toexploit the consumer to their own advantage. The number of scandals, especially during and inthe aftermath of the 2008 financial crisis, eroded trust in banks (Fungacova et al., 2019).
This situation has led to an increase in financial education initiatives by individual banks,financial sector trade associations and government bodies. What is their motivation to engagein these activities? Do they benefit banks’ business strategies, or are they examples of corporatesocial responsibility? Do financial institutions truly benefit from correcting customermisperceptions? This article investigates the role of banks and credit unions in promotingfinancial literacy in today’s developed countries.1 The purpose of the article is to investigate
1 This paper concentrates on the relationship between banks and customers in developed countries. However,banks and microfinance institutions have an important role in promoting financial literacy in developingcountries. (For discussion about financial literacy and access to finance see Karakurum-Ozdemir et al., 2019;
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different reasons why banks and credit unions engage in financial literacy promotion. We alsodraw on interview evidence with various experts to analyze the reasons for these actions andprovide some prominent examples from the banking industry.
The paper starts with a discussion of the conflicting interests that may arise between customersand financial institutions and how financial literacy can provide one solution, alongsideregulation and consumer protection, to mitigate the problem. Then, different components offinancial education by banks and banks’ incentives to engage in that type of activity arediscussed. The role of education provision and its connection to relationship banking andownership forms are also investigated. Financial education may also be seen as part of thecorporate social responsibility activities in which banks are engaged.
Next, some examples of bank involvement in financial education in the US, Europe and theparticular case of Finland are discussed. The paper ends with a discussion of the future role ofbanks in financial education. In addition to internet searches, we also conducted severalinterviews with specialists that shed light on the relationship between financial education andfinancial literacy.
2. Financial education by banks and credit unions
The role of financial literacy in consumer protection
Consumer behavior is likely to be determined partly by the level of financial literacy of theconsumers and by the trust they have in financial institutions. There is now a large body ofliterature on financial literacy that shows that consumers have problems even dealing withrelatively simple questions related to interest rates, inflation and risk diversification (see thesurvey by Lusardi and Mitchell, 2014). In real-life situations, where this knowledge needs tobe applied, the problems are likely to be even more pronounced.
Given these challenges, consumers might easily follow the default option and do whatever thebank salesperson recommends. However, how can a consumer be sure that the employee is nottaking advantage of consumer ignorance? This possible reluctance to take the seller’s advice isoften observed in financial literacy surveys. For example, in a nationwide survey conducted inFinland, 58 percent of respondents indicated that they ask for outside advice, most often froma friend or relative. Only 13 percent sought expert advice. However, 44 percent stated that theydo not compare different products before decision-making, which would indicate that almosthalf of consumers settle for the first offered product (Kalmi & Ruuskanen, 2016).
One solution to limit the possible exploitation of consumer ignorance has been financial andconsumer regulation. Examples include stipulating information sharing between parties andputting some contractual limitations in place (e.g., interest rate ceilings in consumer loans).However, regulation can only limit the degree of unfair contracting into which the parties enter;it does not abolish unfairness altogether.
Cull et al. 2013) However, the unequal bargaining position between parties can be even more pronounced incountries with low financial inclusion and weak or nonexistent consumer protection laws. The research hashighlighted more often the positive sides of increasing financial access in developing countries and there hasbeen less emphasis on the possible exploitation of the banked population.
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Heavy regulation also clashes with the contractual freedom of parties and should not beoverused. One problem is also that, in financial contracts, it is easier to observe ex post that acontract leads to an unequal outcome than to observe ex ante that an unequal outcome willlikely be the case. In any case, consumers cannot be absolved of all responsibility incontracting.
The limits to regulation and the special nature of financial services as contracts have led to anincrease in the number of financial sector ombudsmen in different jurisdictions. In manycountries, they are part of the consumer ombudsman’s office, but in others they are independentor part of the financial regulatory authority.  They act as complaint offices and offer arbitrationservices between customers and banks.
According to Elina Antila from the Finnish Financial Ombudsman Bureau (FOB), the largestamount of dissatisfaction is not caused by the advice given or products sold but by the push touse digital channels and the unavailability of personal services. Additionally, fraud andphishing in digital channels are issues that raise concern among customers.
The legal framework, on the one end, and the conflict resolution mechanism provided by theconsumer ombudsman, on the other, leave room for various activities by market participantsthat facilitate transactions by building trust and educating customers.
The role of banks and credit unions
The solution that combines the elements of financial education and trust in banks is financialeducation by banks and credit unions. In this article, we define financial education by banks asall measures taken, individually or collectively, by banks and credit unions to enhance theability of their customers or general audience to conduct their personal financial management.
In turn, financial literacy is defined by the OECD as “[a] combination of awareness,knowledge, skills, attitude, and behaviors necessary to make sound financial decisions andultimately achieve individual financial wellbeing” (OECD/INFE, 2011).
This definition implies a number of issues that relate to the financial education offered bybanks. First, banks can concentrate on a specific area of financial literacy in their educationalactivities, in which they attempt to influence the attitudes that people have about money,consumption and savings. They can try to increase knowledge of general concepts and differentfeatures, or they can encourage people to engage in sound behaviors. Table 1 describes thetaxonomy of different levels of activity in relation to different components of financial literacy.
The choice of the group at which financial education is targeted also has implications. A bankcan direct educational activities to its currently existing or potential customers. It can also targetactivities at groups that include possible future customers, such as young people. A financialinstitution may also target disadvantaged groups in their financial education efforts, even ifthey were not the most preferred group of customers. The conflict-of-interest problem mainlyarises from the first group, while the latter groups have implications for corporate socialresponsibility.
An important distinction when educating existing customers is whether the education targetsproduct-level literacy or general financial literacy. Both empower the customer vis-à-vis thebank, but product-level literacy can be more problematic from the viewpoint of the bank
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because better awareness of the product terms and offerings of other providers may ultimatelyharm bank profits.
It is also important to observe whether the topic of financial education is such that the bank cansuffer from an incorrect decision made by the customer or whether the bank will suffer noconsequences from that decision. An example of the former is a loan, where the default of thecustomer will mean the loss of capital and credit impairment to the lending bank. Goodexamples of the latter are all fee-generating services, such as investment advice and the sale ofrelated products.
A number of criteria could be used to evaluate whether a financial decision made by thecustomer can be considered sound. For example: Does the financial decision properly solve thecustomer’s problem? Does the financial decision’s risk profile correspond to the risk appetiteof the customer? Can a customer be expected, in normal circumstances, to be able to honor thecommitments entailed by the financial decision without harming the customer unreasonably?In the worst case, will the negative consequences of making the financial decision bedisproportionate to the utility received from the decision during normal economic conditions?
According to Campbell et al. (2011), banks are perhaps the most efficient providers of financialeducation. This is because banks closely observe the financial behavior of their customers.Therefore, they also obtain information about the possible challenges the customers may facein their financial decisions, and they can use their knowledge to identify common challengesof financial literacy. While banks obviously need to respect customer autonomy in decision-making, they can organize their financial education sessions to highlight the topics with whichtheir customers struggle. This result requires, however, a longer relationship between thecustomer and the bank. This situation is called relationship banking.
However, an apparent challenge to and critique of the banks’ role comes to mind. If banks havean informational advantage over the customers from whom they can profit, why would theyvoluntarily dilute that advantage by helping their customers become more informed? Apowerful criticism of financial education efforts in general, including programs initiated bybanks, has been put forward by Willis (2008; 2011). According to her, financial education bybanks is mostly a marketing gimmick to attract new customers. As she reasons, banks have anincentive to keep financial education ineffective. For instance, banks benefit if customers donot compare loan or deposit prices. Careless financial management may also yield bankrevenues in the form of overdraft fees or other types of late payments.
At this stage, it is important to note that one of the arguments by Willis (2011) was that financialeducation in general cannot be effective. Some early literature suggested that financialeducation did not have an effect on any relevant outcomes, such as financial behavior or evenfinancial knowledge (Mandell and Klein, 2009, Cole et al., 2011; Fernandes et al., 2014).However, more recently, there has been an influx of new literature and experimentalinterventions concerning financial education, which shows that this is not the case and financialeducation indeed has effects both on knowledge and behavior (see the meta-analyses by Kaiserand Menkhoff, 2017; 2020; Kaiser et al. 2020).
Financial education and relationship banking
To analyze this conflict of interest, one can turn to the relationship banking literature. Indeed,the results derived from the relationship banking literature give rise to a number of interesting
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viewpoints when reviewed from the perspective of financial literacy.  Boot (2000) definesrelationship banking from the banks’ perspective as investments aimed at obtaining customer-specific information and evaluating the profitability of these investments through multipleinteractions with the same customer. When there are costs to monitoring and screening acustomer, banks are willing to incur these costs if they can recoup them during a longerrelationship.
If asymmetric information is prevalent and the risk profile of the customer is costly to verifyby a third party or difficult for the customer to demonstrate, then this situation leads to a lock-in, where a bank is able to collect rents from the relationship (Freixas, 2005). The scope ofthese rents rests on both the ignorance of the customer about the true costs of various productsand the costs that have to be incurred by a competitor to assess the customer type. Financialliteracy can reduce the former by raising customers’ awareness of the costs of various products,their suitability and ways of comparing different offerings.
If banks have an opportunity to lock-in customers and derive rents from this relationship, whatis their motivation to educate customers, if doing so would lead to the threat of the terminationof those relationships? From the viewpoint of competition, it is the least efficient firm that hasmost to lose from more literate customers. Therefore, financial literacy can be seen, not onlyas a corporate social responsibility issue, but also as a competitive offering. If the increase infinancial literacy directs customers to the most efficient providers, then it is in the interest ofthose providers to promote financial literacy. Moreover, if financially literate customers choosethe most cost-efficient banks, then the bank that engages in financial literacy activities cansignal that it is cost-efficient and does not have to be afraid of losing customers.
The rise of transactional banking, the move from originate-to-hold business models tooriginate-to-distribute business models, advancement in analytics and artificial intelligence,and the emergence of credit bureaus have diminished the barriers created by relationshipbanking and made it easier for competitors to lure customers from existing relationships. Thischange might have increased the benefits of financial literacy to all market players.
New entrants in the form of nonbank competitors to banks have also emerged. While theconsumer financial services industry used to be dominated by banks and credit unions, nowthey are facing increased external competition, ranging from small start-ups to technologygiants such as Apple or Google. On the other hand, the situation also encourages banks to findtheir competitive advantage in a broader set of operations, of which financial education maybe one part.
The mission of the financial institution might also have an impact on the financial educationactivity that it provides. In the banking sector, not all organizations are profit-maximizing.Savings banks are operated for the benefit of their customers, especially depositors. Perhapsunsurprisingly, therefore, many public and private savings banks have historically been at theforefront of customer campaigns that have aimed to inform customers concerning the benefitsof savings and prudence and the vice of uncontrolled spending (Garon, 2011). Likewise,cooperative banks and credit unions are customer-owned institutions that aim to maximize thesurplus of customers. For such institutions, profiting from customer ignorance would appearperverse or at least contrary to their mission. Cooperative and savings banks and credit unionsare also prime examples of relationship banks with close ties to their customers. Education ofmembers is also one of the cooperative principles. Gigi Hyland from the National Credit Union
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Foundation noticed that financial education had already been practiced by credit unions fordecades, long before financial literacy became fashionable.1
From the standpoint of a single bank, the existence of nonbank competitors and the possibilityof multibanking pose a threat. When, previously, the customer conducted his or her financialaffairs with just one bank, the bank could be certain that the customer could not becomeoverindebted or take excessively large investment risks without the bank knowing it. However,now the risk profile of the customer is not known to the full extent, and financially recklessbehavior with a third-party financial service provider can have harmful effects on a bank.Therefore, when customers have ties to a number of different providers, the benefits ofproviding the customer with financial education are higher.
Freixas (2005) notes that some features of the labor economics literature can be applied toinformation concerning financial education. In the employment relationship, the employee andthe firm can invest in two types of knowledge, general and firm-specific. An analog could alsobe applied to financial literacy. In labor markets, the firm has interest in funding the acquisitionof firm-specific knowledge by the employee. However, in a banking relationship, it might bethe case that banks gain more from funding the acquisition of general financial marketknowledge than firm-specific knowledge.
This fact is also noticed by Ms. Antila from FOB, who pointed out that one of the best ways toincrease the financial understanding of banks’ customers would be to make the products moretransparent and to increase customers’ understanding of inherent cost components and pricingpolicies. These changes would make it easier for consumers to compare different offerings andto find the optimal provider. However, this type of financial education by banks is rare.
Financial literacy as corporate social responsibility
Even if educating customers does not bode well for the business strategies of banks due to thepossible conflicting interests of parties, providing financial education could be regarded as anexample of corporate social responsibility (CSR). According to Benabou and Tirole (2010),firms must go beyond their contractual obligations to fulfill their CSR. For instance, banks areunder contractual obligations to provide information about the contracts they sign withcustomers, but, ultimately, it is not their responsibility to ensure that customers truly grasp themeaning of those contracts. Any efforts to improve the understanding of the content ofcontracts (e.g., by means of visualizations or clarifications) can be regarded as voluntary. Asdiscussed above, the business consequences of this voluntary information disclosure can beambiguous: to the extent that the financial problems of the clients may spill over to theinstitutions or damage the reputations of the institutions, firms would have a business rationalefor providing this information. On the other hand, to the extent that institutions can profit fromthe suboptimal behavior of clients, providing information may harm institutions financially.
To a large extent, the provision of financial education goes beyond this type of “just-in-time”financial education in the form of clarifying contractual terms. Indeed, the most common typeof financial education that financial institutions provide is for the youth and especially childrenin school. They may have little immediate business with banks, even though they willultimately become customers of some financial institution. Moreover, banks provide thisinformation to all children, irrespective of whether they or their parents are customers of theparticular bank.
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What might be the motivations of banks to engage in such non-transactional CSR? Onemotivation is what Benabou and Tirole (2010) call “delegated philanthropy”. In that model,customers or other stakeholders would like to contribute to the common good but find itefficient to delegate their decisions on this subject to an organization that acts on their behalf.As we noted earlier, banks may produce financial education efficiently as a byproduct of theirmain activities. This fact is certainly one argument in favor of banks’ engagement. However,whether customers have an explicit and articulated demand for such activities is another issue.
Baron (2001) coined the term “strategic corporate social responsibility” to mean situations inwhich the firm undertakes CSR investments to strengthen its market position and gain profitsin the longer term. This depiction is also a good potential explanation of the financial educationefforts of banks. Banks can signal their trustworthiness in general vis-à-vis other banks,especially in relation to their nonbank competitors.
A more negative view concerning CSR is “greenwashing”. This term means that companiesengage in a particular benign but potentially ineffective action to divert attention from otheractivities that have harmful societal consequences. Willis (2008; 2011) has argued thatfinancial education may serve banks’ interest to lobby against financial regulations. Theargument says that, if banks can claim to have educated their clientele and that those customersare capable of understanding the consequences of their choices, there may be fewer reasons toregulate contractual terms and information provision in transactions, as asymmetricalinformation is reduced and customers are able to look after their own interests.
Empirical studies in banks’ role in financial education
Despite the fact that banks have been very active in financial education, there has beenrelatively little empirical evidence concerning these issues. This deficiency is probably due toa lack of empirical databases for analyzing these issues.
However, there are some innovative approaches. Henderson et al. (2020), using textual analysisfrom Canadian financial literacy programs, find that, contentwise, the programs run by banksdo not differ from those of other providers in terms of topics covered, but programs run bybanks do tend to express more moralistic tones than others.
Kuchciak and Wiktorowicz (2021) look at the financial education initiatives of Polish bankson social media. First, they find that mentions of financial education initiatives on social mediahave increased quite strongly throughout the 2010s. They also find that these initiatives aremore common from commercial banks than cooperative banks, although the trajectory ofincrease is similar for both types of banks. This difference can likely be explained by the largermarket presence and greater resources of commercial banks. This medium is an interestingsource of analysis, but it should be noted that differential results can be driven, not only bydifferences in financial education initiatives, but also by differences in social media use: it ispossible that the resources allocated to social media use have increased during the last decade,which may artificially inflate the measures. It may also be the case that the social mediaresources of large commercial banks are greater than those of much smaller cooperative banks.In any case, Kuchciak and Wiktorowicz’s (2021) research should be complemented by takinginto account the differences between organizations.
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3. Practical examples of bank and credit union involvement in financial education
United States
In the United States, all large banks have financial literacy resources available on theirwebsites.2 These resources are regarded as part of their work in the area of corporate socialresponsibility. Similar to banks, credit unions, although they are much smaller financialinstitutions, are heavily engaged in financial education. Their network, for instance through theNational Credit Union Foundation, spreads best practices to local credit unions. These practicesinclude sponsoring financial education provided by others, giving standard financial advice,and educating children at school.
These sites have somewhat different aims. One of the goals is giving financial advice tocustomers in various situations (e.g., retirement savings, investments, college savings,emergency funds): one example is Citibank’s Financial Education Center. This type of advicecan be regarded as a substitute for the financial counseling services that banks have given inthe past when interacting with their customers in bank branches. Sometimes these sites arequite sophisticated: for instance, Bank of America has an interactive Better Money Habitswebsite, where advice is adjusted according to the information provided. Website visitors areguided to various texts or infographics based on their responses. Visitors can also opt to contacta bank employee – so the financial literacy site works as a marketing point of entry tool orserves to enhance already existing customer relationships. Similar types of services are alsoprovided by credit unions, and they are a rapidly increasing form of financial counseling.3
Another way large US banks are engaged in financial literacy includes sponsoring work donein this field by others. For instance, JP Morgan Chase supports the development of the financialwellbeing of girls and young women by sponsoring Girls Inc.. Credit unions also supportnumerous programs,  with Biz Kid$ being a well-known example. Biz Kid$ started as a TVshow hosted by public broadcasting networks. The TV series has ended, but the financialeducation program is still maintained as an interactive website with many financial educationvignettes. Other examples include partnering with the Junior Achievement programs.
One of the best known financial literacy programs arranged by a US bank is the Hands onBanking educational program by Wells Fargo. It includes free financial literacy tools, such ascourses, instructor resources, and study plans for various age groups. It also includes materialfor families that can be discussed at home. The material is free to use by everyone and does notinclude any commercial advertisement.
One additional method that banks and credit unions have pursued is providing branches inschools  where students may make deposits and withdrawals. This practice can be a usefulcomplement to other financial education programs, as described in Batty et al. (2015).
An innovative method of financial education in which credit unions have been involved isexperiential learning methods, especially reality fairs, such as the CU 4 Reality developed bythe New Hampshire Credit Union League and the American Credit Union Museum (Sebastianet al., 2012). These events allow students to adopt imagined identities and consider how to act
2 The reviewed websites included JPMorgan Chase, Wells Fargo, Bank of America, and Citibank.
3 Interview with Gigi Hyland, National Credit Union Foundation, April 28.
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in these situations. These events are examples of how roleplaying makes it possible to exploredifficult choices in a safe environment.
The pandemic has shifted financial education from branches to virtual environments. In thisregard, credit unions have had a disadvantage, as they have traditionally emphasized on-sitemeetings with clients. The pandemic has affected the demand for financial education, and morecustomers are now expecting counseling in online environments. Larger banks have been ableto devote more resources to this field in the past. New players within this market also includevarious fintech companies that partner with banks and credit unions. In particular, smallerbanks and credit unions can often provide services more efficiently, not by producingeverything in-house, but by working with external partners.4
Europe
In Europe, the banking sector is involved in a number of initiatives individually, throughvarious national European-level trade associations, and through nongovernmentalorganizations. There is more emphasis in Europe for banks to delegate financial literacyactivities to their respective trade associations and to government bodies. After 2008, in theaftermath of financial crises, the European Central Bank and national supervisory authoritiesbecame more active in this field.
Anu Raijas, an advisor to Bank of Finland on financial literacy, emphasized in our interviewthat the trend toward public-private partnerships in financial education has shifted financialeducation activities closer to CSR. In many cases, participating financial service companies arenot allowed to promote their own brands or products. Previously, individual- and tradeassociation-level financial educational initiatives usually highlighted the participatingorganizations. In that sense, the previous activities were more aligned toward marketing effortsand increasing brand awareness.
In 2020, the European Banking Federation, which represents the various national tradeassociations, surveyed the various financial literacy projects conducted in member countries(EBF, 2020). Additionally, the European Banking Authority (2020) yearbook describes anumber of activities done in cooperation with various authorities.
One of the main supranational initiatives of the European Banking Federation is The EuropeanMoney Quiz, which was launched in 2017 as an initiative to promote financial education bynational banking associations in Europe. The number of participating national associations hasincreased, and in 2020, it attracted nearly 50 000 students from 28 countries. The quiz is helddigitally on the Kahoot platform.  The questions have been aligned with OECD/INFEguidelines on financial literacy for youth, and they measure knowledge concerning personalfinance in relation to money and transactions, to planning and managing finances, to risk andreward, and to the financial environment. The competition is held at the classroom level, andnational winners send two representatives to the finals.
The ING Bank, which has its headquarters in the Netherland, can provide an example of a pan-European banking group’s financial educational activities. The bank states that it is “committedto enhancing consumer financial capability and making financial products and services moreaccessible and inclusive to a wider section of society.”  The tools used are, however, primary
4 Interview with Gigi Hyland, April 28, 2021.
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targeted at their customers and include insights, tools and programs that are distributed throughdigital and traditional channels. Of the 11 programs described, nine were targeted at childrenand young adults, one at social entrepreneurs and one at women in developing countries.
An example of an innovative financial education program supported by a European bank is theErste Financial Life Park (FLIP) in Vienna, which is a physical museum including manyinteractive and gamified materials. A similar museum has been founded in Turin, Italy, byIntesa Sanpaolo (Museo di Risparmio) and a number of central banks, e.g., the Cite del’économie in Paris. These museums are open to all visitors but are especially oriented towardvisitors from schools. The pandemic has affected their operations, but it has also served as acatalyst to develop more virtual materials. After the pandemic is over, it is likely that they willcontinue in their physical locations but also include more online activities.
Finland
The largest banks in Finland are also very active in developing financial literacy programs.Nordea, which is a bank operating in all Nordic countries and the largest bank in Finland asmeasured by assets, views financial education as an important aspect of its corporate socialresponsibility work.5 Nordea has been especially active in supporting the financialdevelopment of young people. Before the pandemic, they organized workshops for youngpeople on-site at Nordea head office and branches, and during the pandemic these workshopshave continued online. For senior people, Nordea organized training workshops to improvedigital skills, which are currently necessary for personal financial management.
An important reason for Nordea to organize these sessions is to provide volunteeringopportunities for its employees. However, an equally important part of financial education isto support the work of others, such as the Yrityskylä (Me & My City) program of the TAT, areality fairs program widespread among schoolchildren, and the Taloustaitohanke (economicskills project), which is coordinated by the DIAK University of Applied Sciences and targetsespecially disadvantaged youth. According to Pirjo Kuusela (2021), their partners already havewell-developed programs and contacts through which they are able to reach target groups.Therefore, it is often more efficient to sponsor external programs than to build their ownprograms.6
Pirjo Kuusela also sees an important role in collaborations between banks and other actors thatare active in the field. Banks have industry-specific knowledge concerning, e.g., financialregulations that other partners do not usually possess. Another example is that banks knowabout recent developments in, for instance, sustainable investment, that should be included asa core curriculum for financial literacy.
Other Finnish banks have similar initiatives. For instance, the cooperative OP Group, which isthe largest banking group as measured by deposits, supports many of the same initiatives asNordea. In Finland they have also pioneered the use of escape rooms in financial education.
Oma Säästöpankki, a smaller, publicly traded bank, has sponsored an interesting programcalled Oma Onni (Kalmi, 2018). In this program, vocational secondary school studentsdesigned, in collaboration with their teachers, an online learning environment for 9th grade in
5 Interview with Pirjo Kuusela, Nordea, April 19, 2021.6 Interview with Pirjo Kuusela, April 19, 2021.
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secondary schools. As these students are only a few years older than the target students, thisprogram can be viewed as an example of peer-to-peer financial education.
It is interesting to note that Peura-Kapanen et al. (2012) characterized the youth financialeducation programs offered by banks in Finland as “minimal”. In less than ten years, thesituation has changed dramatically, and virtually all banks, perhaps especially the largest banks,have become heavily involved in financial education.
Financial education provided by central banks
Another interesting point is the increasing role of central banks. Central banks worldwide havetaken a rather active role in promoting financial literacy. Early evidence of national financialliteracy strategies (Grifoni and Messy, 2012) pointed out that central banks were often involvedin implementing national financial literacy strategies. Central banks have been active inspreading financial literacy through a number of methods. Fluch (2007) reported that manycentral banks had been active in spreading financial literacy through online educationalmaterials, digital games, and finance museums. The use of such methods has likely increasedduring the previous decade and after the financial crisis of 2008.
Of course, the role of central banks is likely to differ from that of commercial banks. Centralbanks do not face the conflicts of interest that commercial banks face, as they cannot profitfrom consumer ignorance. Instead, their mission is public service, and promoting financialeducation is well aligned with that goal. The role of promoting financial stability is alsoconsistent with investing in financial education. A challenge for central banks is that they donot meet the consumer in their everyday activities in the same way as do commercial banksand therefore need to take extra efforts to reach them.
4. Conclusions
Banks and credit unions have been involved in financial education for a long time (Garon,2011). However, there are signs that, recently, this involvement has intensified. For example,in Finland, engagement by banks was modest ten years ago and is now much more visible. Atthe same time, the presence of financial education in schools and the involvement of both otherpublic organizations (such as central banks) and third sector organizations has increased. Thischange has happened partly as the result of financial crisis. The relationship between financialliteracy and macrostability has been recognized, and it has served as a catalyst for theinvolvement of central banks. National strategies of financial literacy have becomeincreasingly common.
The participation of financial institutions in financial education has not pleased everyone. Inparticular, it has been argued that banks use financial education activities as a smokescreen foranti-regulatory lobbying. However, there is not much empirical evidence for this statement.
While banks may, in some cases, benefit from customer ignorance, the idea that they wouldprofit from it in the long term seems far-fetched.  First, the risks taken by customers may alsospill over to financial institutions. A case in which customers invest in assets whose risks theyhave poorly understood might bring bad publicity to banks. Reputational concerns give banksa powerful incentive to avoid abusing customer ignorance. Second, banks can also use financialeducation as a signaling device. A bank investing in financial education programs might signalits trustworthiness and efficiency vis-à-vis its competitors.
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There is an important distinction to be made between general and bank-specific financialeducation. On the basis of the material discussed in the article, it can be argued that commercialbanks are especially interested in providing product-specific information, whereas centralbanks and trade associations are more focused on general features. Additionally, the focus ofeducation on knowledge or on attitude and behaviors might change to some degree betweenthe actors, with trade associations and central banks emphasizing the former and commercialbanks focusing on attitudes and behaviors. These observations are summarized in Table 1.
********* TABLE 1 AROUND HERE ********
In the future, the new competition coming from nonbank financial organizations may alsoinfluence the actions of banks. Even though banks collectively may have lost some of theirreputation as a result of financial crises and scandals, they still have a relatively good reputationin comparison to other actors, for instance, payday lenders. Financial education may be oneway to maintain the advantage of banks against the new type of competition.
Virtual counseling and the use of artificial intelligence have become increasingly common infinancial literacy provision, and the pandemic period has further heightened this shift.Nevertheless, many customers prefer to have personal contact with advisors, and there are stillmany advantages to education in real-life settings. It will be interesting to see the resultingbalance between virtual vs. on-site financial education and AI vs. in-person counseling.
The preceding discussion has suggested a number of interesting issues that could be addressedin empirical analysis. What is the role of banks in financial education? Is financial educationprovided by banks different in content than that of other education providers? Does it make adifference whether the provider is for-profit or not-for-profit? The lack of comparable andquantified data makes it difficult to evaluate these issues at the moment.
Acknowledgements
This research has been supported by the Academy of Finland Grant #327241. We thank ElinaAntila, Gigi Hyland, Pirjo Kuusela and Anu Raijas for the interviews.
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INTERVIEWS
Pirjo Kuusela, Nordea PLC, 19.4.2021
Anu Raijas, Bank of Finland, 23.4.2021
Gigi Hyland, National Credit Union Foundation, 28.4.2021
Elina Antila, Finnish Financial Ombudsman, 4.5.2021
Websites of mentioned financial literacy programs:
Better Money Habits, Bank of America:
https://bettermoneyhabits.bankofamerica.com/en
Biz Kid$, National Credit Union Foundation: https://bizkids.com/
Cité de l’économie, Banque de France: https://www.citeco.fr/
Citibank: https://online.citi.com/US/JRS/pands/detail.do?ID=financial-guidance
The European Money Quiz (European Banking Federation):https://www.ebf.eu/europeanmoneyquiz/
Financial Life Park, Erste Bank: https://www.financiallifepark.at/en/flip-tour
Hands on Banking, Wells Fargo: https://handsonbanking.org/
ING:https://www.ing.com/Newsroom/News/Sustainability-news/Snws-1/Enhancing-financial-literacy-for-future-and-present-generations.htm
Museo di Risparmio, Intesa Sanpaolo: https://www.museodelrisparmio.it/home-en/
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TABLE 1
Table 1. A taxonomy of financial education by financial institutions
Entity/Financialliteracy area Knowledge Attitude Behavior Generalfeatures ProductIndividual bank X X XFinancial servicesindustry association X X X XPublic institutions(Central bank,supervisor, consumeraffairs body)
X X X