As April 18 Looms, Banks Turn to Technology to Help Clients Deal with their Tax Requirements: Report

As April 18 looms,  banks are turning to tech to help customers ease their tax anxiety, according to an update from J.D. Power.

It’s been an “arduous” year for banking customers in the United States, the report noted.

Between historically high inflation and wading through the fear of a recession, one would assume tax season “would seem tame in comparison.” Unfortunately, that’s not the case.

According to the latest J.D. Power data, “more than three-fourths (76%) of bank customers in the United States have some sort of worries about their taxes, and 21% say they have more fears about this tax season than normal.”

That’s noteworthy, because many customers “use their tax returns to inject some much-needed capital into their finances.”

And with just 33% of respondents financially healthy, customers may “need some help in navigating this tax season to avoid further financial worries.”

As the end of Q1 approaches, there has been “no noteworthy change in overall financial health. One-third (33%) of respondents are financially healthy, while 41% are vulnerable.”

The overall level of inflation recognition also “remains unchanged at 66%.”

The percentage of customers “that said the price of goods are increasing faster than their income is virtually identical to the February 2023 report, as well.”

With the financial landscape relatively unchanged, customers enter “a tax season filled with new filing requirements and thresholds with some consternation.”

Nearly half (48%) of bank customers “say they complete their taxes themselves (38% using software, 10% without software), while 35% say they use a service or a preparer.”

The stressed (45%) and overextended (43%) are most likely “to use a software to complete their taxes themselves, while financially healthy customers (41%) are most likely to use a preparer.”

As noted in the update:

“Bank customers’ worries center on the fear of sticker shock, as 20% worry that they’ll end up owing more than planned, and 16% fear they may not get any refund. Both of those scenarios would mean a huge financial setback to customers, many of whom rely on the liquidity to help them pay down debt or keep up with existing expenses.”

As mentioned in the blog post:

“What’s more, half of bank customers (50%) say it is somewhat of a burden to make their tax payment, and 17% say it is an extreme burden. Of banking customers that have tax repayment, 21% are creating new debt by either borrowing from a friend or family member (11%) or taking out a loan (10%) to make that payment. Another 9% said they don’t know where they will get the money for tax repayment.”

As customers contend with this anxiety, banks are “hoping to step up and help guide their customers through it.”

Some fintech firms “are rising to meet this challenge, helping banks install solutions that help their customers make tax-savvy decisions all year long.”

Yet just 38% say “they have received any messaging about tax assistance at all.”

The report added:

“While it is encouraging that even a small percentage (12%) of customers indicate having received three or more types of messaging on tax assistance, the market for that help is far more robust. Nearly half (46%) of the vulnerable population and 61% of the stressed population don’t know if they received tax advice from their banks, which clearly shows banks need to find a way to be more proactive and clear in their messaging, particularly to the customers that need it the most.”

Data consistently show that as customers use more bank services successfully, they “become further engaged and, therefore, less likely to leave the branch and less likely to move deposits elsewhere.”

If banks can bolster their services with tax solutions that can have a meaningful effect for their customers, they’ll likely “see a significant return on their investment.”

For more details, check here.


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