Guest editorial by Nicky Senyard, chief executive officer at Fintel Connect

Unlocking financial literacy through fintech

Fintech plays a crucial role in promoting financial literacy. To explore the connection between them, we must first acknowledge the state of financial education worldwide. The S&P Global FinLit Survey shows that 43% of adults lack financial literacy. Many people lack even a basic grasp of concepts such as interest rates, investments, and savings.

Traditional education, while valuable in many aspects, often falls short in offering individuals the financial knowledge needed to navigate our economic landscape. Focusing on complex theory over practical advice about finance, combined with the lack of access to banking services and financial education for many people worldwide, creates a barrier to financial literacy.

This is where fintech steps in to bridge the gap in promoting financial literacy; here’s how they’re doing it:

  • Improving access to financial information

Fintech aims to make financial services more accessible, affordable, and convenient. It leverages technology to improve financial processes like payments, lending, and investment. With mobile apps being more available than ever, these fintech solutions are now within reach of a larger audience, even in remote areas, making financial education more accessible.

  • Emerging as an innovative form of education

Fintech platforms typically incorporate gamification and offer interactive tools that make learning about finances more interesting. They also aim to make financial concepts easier to understand by using simple language to explain complex topics. Some even include technology that analyses user behaviour and provides tailored content according to their financial goals. With this personalised approach, users receive information relevant to their specific financial needs.

  • Providing unique financial solutions

Fintech companies bring solutions to people who are either not using banks or have limited access to banking services. By offering innovative solutions, such as mobile wallets, peer to peer payment and microfinance platforms, fintech firms democratise financial literacy and foster financial inclusion.

Empowerment through fintech

Fintech has the potential to empower individuals beyond financial literacy; it allows them to take action. Budget-tracking apps, investment simulators, and digital learning platforms all serve a double purpose: to educate and facilitate better personal financial management. Fintech offers people the chance to become their own financial planners, regardless of their level of knowledge or resources.

Many fintech companies are moving the financial education needle in the right direction worldwide. In North America, we have worked with some financial technologies that take financial literacy to the next level while empowering users. One of them is the Canadian-based company Borrowell, a platform that offers free weekly credit score and report monitoring, personalised financial product recommendations, and credit education. They have an AI-powered credit coach that helps users understand their credit and provides personalised tips to improve it.

Another great example is Ramp. This fintech startup based in the US offers spend management solutions, corporate cards, and accounts payable services to small to medium-sized businesses (SMB). The platform is helping companies manage their expenses, control their spending, and optimise their finance operation with the power of automation. Ramp is proof of a fintech developing a product for a specific market with a particular point of pain.

Embark is doing an incredible job when it comes to tailored financial content. The Canadian not-for-profit company specialises in education savings and planning. Its primary focus is helping families save for their children’s post-secondary education. Embark provides a Registered Education Savings Plan (RESP), which is a tax-advantaged savings account designed to help parents save for their children’s education. To prepare parents and kids for this goal, they have created a learning centre on their website that contains tools, guides and financial literacy articles explaining the concepts around this topic in simply.

Challenges and the way forward

To encourage financial education through fintech, it is important to establish trust, ensure accessibility, and enforce proper regulation. Fintech creates a balance between innovation and protection and helps to make financial products and services widely available for all. In these changes, the true potential of fintech in empowering individuals financially can be fully realised.

The potential of fintech in promoting financial literacy is enormous. As we move towards an age where financial transactions and investments are carried out with a simple tap of a screen, it is our responsibility as a society, entrepreneurs, and regulators to ensure that this convenience is accompanied by the knowledge required to use it effectively. The true power of finance as a tool for personal and collective growth lies in combining technology with education.

Image: Fintel Connect

Guest Editorial
This article was produced specially for Fintech Intel by an expert guest contributor.