• Fraser Stewart, co-founder and CCO at Lyfeguard


• 04.05.2023 11:00 am
#fintech

In today's world, financial literacy is more important than ever before. The complexity of the modern financial landscape has left many consumers overwhelmed and uninformed, leading to poor financial decisions and increased financial stress. 

The rise of digital financial products and services has only added to the challenge, necessitating higher levels of financial knowledge and technical proficiency. Thankfully, FinTech companies have emerged as a powerful force in promoting financial literacy and enabling consumers to take control of their financial well-being.

Managing money

Managing money has become difficult, with one-fifth of adults reporting borrowing more money compared with a year ago and more than four in ten adults admitting that they are not expecting to save any money in the following 12 months. 

It is extremely difficult to get out of debt, and as borrowing money or using more credit decreases one’s happiness due to the additional financial stress, more must be done to support the public’s financial literacy,

A survey found that nearly half of UK adults lack basic financial literacy and were stumped by savings, ISAs and retirement funds. Poor financial literacy leads to poor financial decisions and low knowledge leads to low confidence, affecting one’s financial wellbeing. 

A recent poll has revealed that the rising cost-of-living has increased pressures on many, with one in ten UK adults reporting feeling hopeless about financial circumstances, and almost three in ten feeling stressed. Educating and informing consumers on financial decision will help alleviate these negative impacts.  

With growing financial pressures, data revealed that 44 per cent of adults felt that they would be more financially successful if they were taught basic money management skills, such as budgeting. As higher financial education is beneficial for both consumers and the FinTech industry, FinTech must now offer their solutions to the public. 

FinTech solutions 

One of the most significant contributions that FinTech has made to financial literacy is through the development of personalised financial education platforms. By leveraging artificial intelligence and machine learning algorithms, FinTech businesses can analyse a customer's financial information and offer tailored recommendations based on individual circumstances and goals. 

These personalised insights and actionable advice empower consumers to understand their financial situations better and make more informed decisions. In turn, this can lead to better financial outcomes and a greater sense of financial security.

In addition to personalised financial education platforms, FinTech companies have also introduced game-like elements to make financial learning more engaging and accessible. These gamification techniques, such as quizzes, challenges, and rewards, teach users about personal finance and investment strategies in an interactive and enjoyable way. The result is that users are more likely to retain the information and apply their newfound knowledge in real-life situations.

FinTech is also democratising access to investment tools and services, enabling consumers to make informed decisions about their investment portfolios regardless of their financial background. 

Through robo-advisory platforms, consumers can receive automated, algorithm-driven financial planning and portfolio management services. These platforms not only provide access to investment opportunities but also help consumers learn about investment concepts and strategies, fostering financial literacy.

One of the most critical ways that FinTech is promoting financial literacy is through its role in enhancing financial inclusion. By leveraging technologies such as mobile banking and digital wallets, FinTech companies enable individuals who have traditionally been excluded from the formal financial system to access essential financial services. This fosters economic growth, reduces poverty, and presents opportunities for these individuals to develop financial literacy through hands-on experience.

The role of FinTech

As fintech continues to revolutionise the financial services industry, its role in promoting financial literacy will only grow. Technologies like blockchain and decentralised finance (DeFi) will further broaden the scope of financial education, requiring consumers to adapt and learn new skills. 

As the financial ecosystem continues to evolve, collaboration among industry stakeholders will be crucial in fostering financial literacy, creating a more financially literate and secure society. 

To maximise FinTech's potential in enhancing financial literacy, collaboration among FinTech companies, traditional financial institutions, and government is essential. By working together, these stakeholders can develop innovative solutions and educational initiatives that target specific gaps in financial knowledge, catering to the unique needs of diverse consumer segments.

FinTech's role in promoting financial literacy for consumers is critical in driving progress and prosperity. By equipping individuals with the knowledge and tools necessary to navigate the increasingly complex financial landscape, FinTech companies empower consumers to take control of their financial futures and make better decisions. 

Ultimately, FinTech's role in promoting financial literacy is about empowering individuals with the knowledge, confidence, and resources they need to make informed decisions that will positively impact their lives, the financial sector, as well as the wider economy.