Why the future of financial technology is all about empowering consumers

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Janine Hirt is Chief Operating Officer of Innovate Finance, the industry body for UK fintech. Here, she discusses the role of fintechs—and the wider financial services ecosystem—in supporting and developing the growth of financial literacy.

For me, financial literacy is a very personal and subjective concept. It’s the ability to understand how your money works, and knowing how to make, save and grow it.

An important question is: what is the duty of businesses to support their customers to have a lifetime of financial wellbeing?

From my perspective, their responsibilities are great and wide ranging.

Multi-generational financial literacy

Our efforts to increase financial literacy shouldn’t just be focused on the young. Brands need to think about how to engage with those of all ages.

In recent years, fintech brands have risen to the challenge of creating technology that appeals to younger audiences and helps them to improve their financial literacy.

However, middle and older generations need resources to help them learn, too—especially as financial decisions become increasingly complex and impactful throughout life.

For example, the average customer of investment management company Scalable Capital is aged 48, and nearly half of its customers are over the age of 50.

We need to make sure we look at fintech as a solution for educating all segments of the population, not just the youngest.

Maximising the potential of technology

The essential and positive role that technology is playing in improving financial literacy can’t be ignored. Technology helps people to learn quickly, at a time and place of their choosing, while having fun!

To drive education and knowledge, we also need to challenge the stigma of talking about money, which technology is helping to do.

Brands have a responsibility to invest in technology in this space, but it’s also a missed opportunity if they don’t.

Both here in the UK and around the world, we’re seeing interesting trends emerging which reflect this.

In Brazil, we’re seeing challenger banks providing rounded offerings to improve the financial literacy of their customers.

Similarly, UK challenger brands like Monzo, Starling, Revolut, and even large incumbents like NatWest, are finding ways to simplify—or even in some cases, gamify—financial understanding and education.

Including young people in financial literacy now is crucial to the future wellbeing of the industry.

Creating future customers

Some fintechs play an intermediary role turning younger and less financially literate customers into the types of sophisticated financial consumers incumbents want.

They upskill them, teach them essential financial skills and help them to build their credit scores, paving the way for them to be interested in and open to wider financial products and services.

But fintechs aren’t the only answer. It’s going to take the whole industry, globally, working together and collaborating to create change and progress with financial literacy.

Greater impact through collaboration

We’re already seeing a surge in the number of partnerships taking place between newer fintechs and longer-established financial services businesses, such as financial software company Bud and HSBC, who have signed a three year deal to give HSBC access to Bud’s open banking, API and data.

During the recent COVID-19 pandemic, we’ve seen real appetite for more such partnerships, and a desire to use combined resources to deliver on financial literacy objectives.

It has underlined how important the combination of tech and financial services is to create change, especially as the positive impact created will be essential for those who have been negatively impacted by COVID-19 and will need financial skills more than ever before.

Don’t wait for regulation

Regulation is never far away in the world of financial services—and rightly so. But when it comes to financial literacy, the industry, government, educators and regulators should be working together as a community; this ecosystem-wide partnership is key in tackling financial education.

The industry should be initiating conversations and taking a leading role in this.

What does success look like?

When it comes to having a real vision for the future of financial literacy, I’d love to see the UK move up the ranking in the based on adult financial literacy.

Through collaboration and with the support of regulators there’s an opportunity for financial services to be more integral to our everyday lives; fintechs are already driving this shift, and motivating the incumbents to change, too.

In an ideal world, every generation would have a general level of financial knowledge which means they can make their money work for them, rather than the other way round.

Now is the time for fintechs, incumbents, regulators and the wider industry to come together and make change happen.

about Innovate Finance.

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