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Few businesses are more old-school than organisations that have historically operated in the financial services sector, although many today are making moves to prove otherwise.
That conservatism doesn’t just apply to established banks, but also to many of their customers, particularly the over-55s, who are often distrustful of the new-fangled. The demographic challenges around fintech adoption are part of a new report into the fintech and insuretech sectors produced by The AI Journal.
Limited appeal among older investors
Fintech companies still largely target millennials and generation X, for whom (according to Ernst & Young) take up of fintech is at 48% (for 25-35-year-olds) and 41% (for 41-56-year-olds) respectively. Among the 55-64 age bracket, just 22% are now using fintech.
But there are signs things are changing. A recently published Financial Times report revealed the pandemic (and the resulting cessation of physical interaction) has led previously technology-averse clients to turn to their smartphones to seek advice from robo-advisors.
As greater numbers of older investors embrace fintech to meet their investment and pension planning needs, the algorithms used to inform robo-advisors will improve as more people from across the age spectrum use them.
As fintechs’ saturation in the younger end of the market grows, providers will need to seek out older consumers. It’s a realisation that has led to the creation of apps aimed specifically at baby boomers.
For example, in the US, Atticus is a mobile app that handles probate and estate settlement, while more generally, there is a plethora of fintech products and services suited to older investors.
Nutmeg is an online wealth manager that can be used with as little an outlay as £100 for a variety of vehicles, from ISAs to pensions. When a user registers, they are asked what they are saving for and how much risk they are willing to take. They are then presented with a portfolio that they can check whenever they want.
Given that many older consumers are suspicious of fully automated, faceless algorithms, Nutmeg’s use of actual people is something of an antidote to their concerns. Coupled with this, Nutmeg’s user-friendly interface and the ease by which money can be withdrawn whenever required with no exit penalty fee makes it compelling for the more tentative user.
Fintechs must evolve their appeal if they are going to appeal more to older users, not necessarily just through the services they offer, but also the way they reach out to customers.
As well as more over 50s being involved at the design stage, prospective users should be able to test out products, information should be shared around fraud protection and data security and navigation signposts should be standard to help users navigate apps and - perhaps most importantly - human support should be on offer.
If these digital disruptors are going to successfully overcome the technological reluctance of the over 50s, they must design and market their products and services, while addressing concerns over privacy and security, so they resonate with the older investor.
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