How money works (or the need to increase financial literacy in a post-pandemic world)

Before the pandemic, fintech adoption was doubling every two years according to the EY Global Fintech Adoption Index 2019, growing from 16% in 2015 to 64% in 2019. The growth in the digitalization of banking and financial services was turbocharged by the pandemic.

According to the World Retail Banking Report 2021, published by Capgemini and Efma, the disruption caused by the covid-19 pandemic ignited a new era of value-based customer-centric banking, which the report refers to as Banking 4.X. According to the authors in this report, to succeed in this Banking 4.X era, “banks must embrace digital transformation and implement cloud-based Banking-as-a-Service (BaaS) platform models, which utilize APIs to embed banking in everyday life, making it more accessible and inclusive for banking customers”.

A recent article published in the Financial Times reminds us that “in a 2020 OECD survey across 26 countries from Asia, Europe and Latin America, only 26 per cent of adults answered questions on simple and compound interest correctly. In the same survey, in a series of questions where full marks indicated a basic knowledge of financial skills, behaviours and attitudes, respondents scored less than 61 per cent on average”.

It is pretty obvious that the ongoing digital transformation will accelerate the need for qualified financial information for consumers and businesses. Yes, small and medium-sized enterprises (SMEs) are increasingly using FinTech services and it is evident that these businesses represent a distinct customer segment, with needs that are different both from those of consumers and those of large corporations.

As the economic recovery takes place, and many businesses are seeking funding and capitalization opportunities, around 700 billion euros ($852.8 billion) of excess savings are waiting to be deployed across Europe and the U.K. As financial services are getting more digital, technological and sophisticated, the OECD released a formal Recommendation on Financial Literacy, to “assist governments, other public authorities, and relevant stakeholders . . . to design, implement and evaluate financial literacy policies”.

As consumers and companies have an increasingly easier access to banking and financial solutions, their financial education gains relevance and importance. As the quoted OECD survey stated, many customers have a knowledge gap concerning the way money works regarding personal finances.

This needs to be tackled through increased financial literacy. Of course, governments and public authorities play a relevant role in raising the financial literacy profile of citizens, but in the end of the day it’s in the own interest of financial services companies to build an informed and qualified client-base.

PR companies that have a particular focus on financial communication can add value to fintechs and banks in this effort, through traditional media and PR campaigns, but also through digital marketing and social media engagement. Financial literacy programmes should be seen, in this post-pandemic world, not as part of a social responsibility programme but as a relevant part of the business.

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