More Choices, But Are We Really Better Off?

In my last blog post, I explored the fascinating concept of programmable money or Smart Money as Chris Skinner would call it, and how the future of finance might look when money starts thinking for us, as discussed in our latest podcast episode with Chris. We dove into the potential for money to become intelligent and intuitive, helping us manage our finances without the stress and complexity we face today. But there’s a darker side to this brave new world of finance — one that I have spoken about frequently in the past and revolves around a growing crisis of digital literacy mixed with financial literacy.

While technology is rapidly advancing, the average person’s understanding of financial systems seems to be falling behind. In a world with endless options—crypto, fiat currencies, decentralized finance, programmable money, retail investment, gamification—how do we make sense of it all? More importantly, how do we navigate a financial landscape that’s changing faster than ever, at a time when the cost of living is skyrocketing, and for many, just securing a roof over their heads is an uphill battle?

The Decline of Financial Literacy in a World of Infinite Choices

Let’s start with an undeniable fact: Financial literacy is on the decline. In our discussion on the podcast with Chris, we touched on how the complexity of today’s financial systems is outpacing the average person’s ability to understand them. There was a time when the basics of personal finance—saving, budgeting, and perhaps investing in a pension—were enough to get by. Today, however, we’re bombarded with choices: Should I invest in cryptocurrencies? Is my money safer in traditional banks or decentralized systems? How do I balance my savings with inflation, rising costs, and an uncertain economic future?

As Chris pointed out in the last episode, money has always been a tool, but now it's becoming a complex puzzle, one that many people are simply not equipped to solve. Several surveys have shown that a shocking number of adults struggle with basic financial concepts, such as understanding compounding interest, interest rates and inflation. This lack of understanding is even more concerning when you consider that people are now expected to make more complex financial decisions than ever before, often with far-reaching unknown consequences.

Back in the day, you went to school, got a job, saved for retirement, and eventually cashed in your pension. Today, those days are long gone. The cost of living has surged while wages have stagnated for many, making homeownership and long-term financial stability out of reach for millions of people. For younger generations, the dream of owning a home or retiring comfortably seems almost laughable. In this new world, understanding how to navigate the financial maze has become crucial—but that’s exactly where we’re falling short, and I think there is a big opportunity here for banks.

The Explosion of Choice, Is It Really a Good Thing?

Another major point is how the explosion of choice in the financial world has only made things more confusing. In the past, your choices were relatively simple: bank accounts, stocks, bonds, and maybe some savings in a pension. Today, the options are endless—decentralized finance (DeFi), non-fungible tokens (NFTs), cryptocurrencies, peer-to-peer lending, digital assets, and now, programmable money. These options can be empowering for those who understand them, but for the vast majority, they add an overwhelming layer of complexity.

So the question arises: Is more choice really a good thing? Or does it just create a greater risk of making the wrong decision?

In theory, having a variety of financial products to choose from should allow us to tailor our financial strategies to our unique needs. But in practice, too much choice can lead to decision paralysis—where you’re so overwhelmed by options that you make no decision at all, or worse, the wrong one. Or in the more general case of these days with social media and social influences, turn to TikTok and follow the ill advice of someone who sounds like they know what they are talking about, but in truth have no idea or a hidden agenda. This paralysis is only compounded by the fact that most people don’t fully understand the risks associated with each option, whether it’s investing in a volatile cryptocurrency or participating in an unregulated DeFi platform.

Moreover, let’s not forget the risks of misinformation. As already mentioned, social media has become a breeding ground for so-called “financial influencers” who often tout dubious investment schemes. Throw in the rise of deepfakes and misleading information, and you’ve got a recipe for disaster. Today, people are bombarded with voices telling them to buy Bitcoin, sell stocks, or invest in NFTs—all without any real understanding of the long-term consequences.

Is this not a perfect opportunity for banks to use the strength of their brand and trust to step in and drive a positive change?

The Impact of Rising Costs and Economic Uncertainty

Adding to this complexity is the reality of living in a time of unprecedented economic uncertainty. The traditional financial milestones of getting a steady job, buying a home, saving for retirement, are increasingly out of reach for a large portion of the population. In many parts of the world, the cost of living has risen so sharply that young people are finding it nearly impossible to secure stable housing, let alone save for a future they can barely envision.

It’s not just the younger generation feeling the squeeze. Middle-aged adults are also facing an uncertain retirement as pensions disappear, wages stagnate, and the cost of essential goods continues to climb. As we discussed with Chris on the podcast, the days of relying on a pension for a comfortable retirement are long gone. In this environment, managing your financial future is not just about making the right investments—it’s about surviving an increasingly harsh economic landscape.

So what does this all mean for the average person? It means that financial literacy is more important than ever, yet at the same time, we’re seeing a steep decline in people’s ability to grasp even the basics. More choice, it turns out, can be a double-edged sword. When combined with rising costs and economic uncertainty, the result is a population that’s more confused and vulnerable than ever, and they want and need a trusted advisor to turn to…

The Path Forward: Simplifying Finance and Empowering People

So where do we go from here? How do we combat this decline in financial literacy while navigating the complexities of today’s financial world, and how can the banks engage? One solution lies in education. We need to focus on improving financial literacy at all levels—from schools teaching basic money management to adults learning how to make smart, informed decisions about their financial futures. It’s crucial that people understand not just how to earn and spend money, but how to make it work for them in the long run.

At the same time, financial institutions and tech companies must do their part to simplify the landscape. As Chris Skinner discussed in the podcast episode, the rise of intelligent money could help manage some of this complexity, allowing algorithms to handle the more mundane aspects of financial management. But even as we look to technology to make things easier, we must ensure that individuals are educated enough to understand what’s happening behind the scenes. No algorithm, no matter how smart, can replace the importance of knowing how to manage your own financial future, and trusted advisors to guide you.

Financial Literacy in the Age of Complexity

In an era of infinite choices and growing uncertainty, financial literacy is not just a skill—it’s a necessity. The traditional paths to financial stability are disappearing, leaving us with a complex web of options, many of which we don’t fully understand. As we face an increasingly uncertain economic future, we need to equip ourselves with the knowledge and tools to navigate this new landscape. More choices don’t necessarily mean better outcomes—especially when those choices come with risks that we aren’t fully prepared to manage.

The solution isn’t simple, but it starts with education and awareness. The future of money may involve intelligent systems that can take some of the burdens off our shoulders. But until then, we must be proactive in improving our financial literacy, so we can make informed decisions in a world that’s becoming more complex by the day. And here I think the banks can step in and make a difference, and at the same time ensure they get the next generation of customers.