Today’s morose Millennials, criticised for potentially killing the NFL and the napkin industry, are tomorrow’s financiers. Worse than killing the NFL and napkin industry, Millennials broadly feel indifferent towards finance. This sets a poor precedent for the future. However, there is light in the darkness as FinTech offers the opportunity for today’s youth, across the world, to get properly involved in finance.
Younger Attitudes towards Finance
Younger people, broadly speaking, are financially apathetic. One study suggests that only 38% of US teenagers are saving money, while nearly 50% of Millennials do not invest because the risk is too great. This should not be surprising. Few schools teach financial education, and many youths are still disillusioned after the FX, LIBOR and 2007-08 financial disasters.
Despair not: there is hope! Younger people have some interest in finance. In fact, Bloomberg suggests that 84% of Millennials are interested in sustainable investing (promoting responsible capitalism). Yet, one feels that respondents answered affirmatively because the question contained the “sustainable” buzzword, not because they were confident in how to manage their money and invest.
Audrey Choi, CEO of Morgan Stanley’s Institute for Sustainable Investing, hints towards this when she warns Millennial investors that they “have to apply the same critical eye to sustainable investing as you would to any deployment of capital”. Research by the National Endowment for Financial Education, suggests that only 8% of Millennials polled had a high level of financial knowledge, answering all questions correctly.
Worldwide, 2.5bn are unbanked. In his ‘My Heat Leaps Up’, William Wordsworth wrote that “The Child is the Father of Man”, and indeed social procedures “play a major role in developing children into capable producers, consumers, and agents of financial socialisation in adulthood”. If parents do not demonstrate best financial practices, the chances are that their children will not develop the necessary skills to manage money later in life.
Equally as important, and part of financial socialisation, is education that teaches the youth skills that they need to be responsible financial agents. Adults with tertiary education are more than two times as likely to have a formal account that those with primary education or less. In Africa, 144m are enrolled into primary school each year whilst only 12m are enrolled into tertiary education. Here, one can see how a vicious circle emerges as parents with low-levels of financial literacy raise children with sub-par financial literacy and so on.
Where Has FinTech Successfully Engaged Younger People in Finance?
Lack of education and inadequate financial socialisation means tomorrows financiers are melancholy, morose and miserable about their future. Yet, FinTech could prove to be a well-needed catharsis for the previous decades financial tragedy. FinTech provides a near seamless route into finance. This means that now, more so than ever, young persons can become successful financial agents.
Ospers has designed child-friendly Fintech. Kids over 8 can use a pre-paid debit card and, with parental permission, make purchases.It is not only those in primary education who are benefiting from FinTech’s developments. In China, managing finances is difficult, especially for those moving away from rural to attend university. 007fenqi is a “one-stop-shop” for basic financial needs. This Chinese start-up allows students to take out loans, earn, invest and spend on its app. This innovative model has attracted over 300 000 users. In the United States, the offering of a debit-based principle of money transfer through a mobile interface has proved irresistible to Millennials, of whom nearly 70% use mobile banking. Moreover, many millennials are being drawn towards highly customisable FinTech services such as Atom Bank, Monzo Bank or, in the case of InsurTech, Cuvva. It is worth noting that the founders of some of these start-ups are themselves Millennials.
The uptake of FinTech in developing countries is more patchy: in Latin America 52% adults are using mobile banking, yet in sub-Saharan Africa, only 12% adults use. The Ghanian government have a financial literacy week, road shows in rural areas, and educational materials on finance. In Arabia, there have been significant steps forward with 77% of the region’s financial education initiatives benefitting children and young persons. Saudi Arabia have conceded that FinTech is a key part of their ‘Kingdom Vision 2030’ economic plan, so one should see more youth getting involved in FinTech, and the same goes for Africa who, benefitting from investments in infrastructure, have established mobile payments systems such as M-Pesa.
Taking into account the above information, one can draw the conclusion FinTech will be important in helping today’s youth further there financial knowledge so that they might be competent savers, investors and spenders. Whilst different world regions vary in their progress, there appears to have been a sea change in favour of finance.
The Bottom Line
Young people are failing to engage in finance thanks to lack of education and inadequate financial socialisation. However, there are other hurdles to clear such legal and regulatory barriers, digital and telecommunications infrastructure and mobile ownership. But, this can be turned around. If we are going to make finance appeal to the youth again, we are must tailor approaches to each county. But, there are some general sure-fire principles we can focus on that will boost youth interest in finance using FinTech. Governments and institutions must make clear that FinTech is viable alternative to traditional financing methods; encourage financial socialisation; increase financial literacy through education; lower regulatory barriers and develop quality infrastructure.
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