??? What financial literacy looks like today

From understanding its historical roots to acknowledging the complexities of the present and envisioning the future, let’s explore how financial literacy is evolving.

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?? What financial literacy looks like today

The Background

• There's a noted decline in financial literacy. This comes to light as more people need to take charge of their financial futures due to shifts from employer or government-backed pensions.

• In 1980, around 40% of all pension plans were defined contribution plans, where the value depends on the worker's contributions over their career. By the turn of the millennium, this increased to 90%.

• Near-zero interest rates and inflation make traditional savings strategies less effective, leading to increased involvement in higher-risk investments like the stock market.

• Annamaria Lusardi, a prominent economist, started studying financial literacy when financial certainties began to fade. She found that financial literacy was not taken seriously in mainstream economics.

• Lusardi discovered that there was minimal data available to measure the financial literacy of Americans. Using the 2004 US Health and Retirement Study, she mapped out the basic level of financial education among the older US population.

• The results showed discouraging levels of financial literacy. Only half of the baby-boomer respondents were able to answer basic numeracy and financial literacy questions, and less than 20% could calculate compound interest over two years.

Today's State of Affairs

• Lusardi's research shows that young people generally lack financial knowledge compared to other age groups.

• Being wealthier or making a lot of money in a short period doesn't necessarily correlate with good financial decisions.

• Interestingly, even individuals with postgraduate qualifications can lack basic financial knowledge and make disastrous decisions with their money.

• Lusardi's research also reveals a significant divide in financial literacy between men and women globally.

• The COVID-19 pandemic has amplified the need for more savings, as well as the allure of high-return investments. There's concern that individuals may not fully understand the risks associated with these investments.

• The surge in online day trading and crypto speculation, especially among young people, has made them more susceptible to losses or even debt.

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What's Next?

• Given the widespread lack of financial literacy, there's a growing demand for financial education to be incorporated into school curriculums globally.

• Practical approaches to financial education are gaining traction. This can range from students discussing business ideas and creating financial plans, to actual experiences of running a small project.

• The culture of discussing finances, particularly within families, needs to change.

• Many parents may not be financially literate themselves, leading to a generational cycle of financial illiteracy.

• Encouraging open conversations about money management from an early age can help break this cycle.

• Similar to the concept of needing a driving license, people need basic financial knowledge to navigate the complex financial landscape responsibly.

• The coming years will likely witness an increased focus on understanding the basics of finance.

• Basic financial literacy doesn't guarantee perfect decision-making, but it does provide people with the essential tools needed to make informed decisions and mitigate potential financial risks.

Do you think financial literacy should be the responsibility of schools or parents?

Today’s in-depth was inspired by a Financial Times article by Miles Johnson.

?? Fintech & Payments

? In a move to expand into the Spanish market, Turkish neobank Papara has acquired Rebellion from Beka Finance, making it the newest unicorn in the financial industry.

? Monzo, Revolut, and Monese believe that a CBDC would bring transformative changes to payments and banking.

? Augmentum Fintech anticipates potential losses in the fintech sector in 2023 and 2024, stating that previous hype surrounding fintech had caused an inflated valuation.

? The use of fintech apps in Latin America has increased by 54% according to a Mobile App Trends 2023 report published by Adjust

? First National Bank, based in South Africa, has transitioned to a new agreement with MTN South Africa to leverage its network infrastructure for FNB Connect, their mobile virtual network operator.

? Maza aims to assist undocumented immigrants who typically struggle to access traditional banking services with an individual tax identification number.

? APAC emerges as a frontrunner in real-time digital payments, driving growth in A2A transactions and facilitating seamless cross-border commerce.

? DBS, a Singaporean bank, has introduced a new payment collection and settlement service exclusively for Chinese merchants, enabling seamless transactions using E-CNY.

? Global payments service provider FIS has reached a definitive agreement with private equity firm GTCR to sell a majority stake in its Worldpay Merchant Solutions business.

? The Reserve Bank of India announced that the central bank is currently formulating regulations aimed at fostering development within the fintech sector.

? The fintech software market is projected to grow by $24,277.91 million between 2023 and 2027, with an expected CAGR of 8.82%.

?? Open Banking & Open Finance

?? NatWest is pushing for collaboration among banks, fintechs, and regulators to address economic barriers slowing down the implementation of open banking.

? Brazil, Chile, Colombia, Ecuador, and Mexico are implementing open finance regulations, following successful open banking initiatives in Europe and the UK.

? Only 9% of Canadians are aware of open banking, according to a 2022 survey by the Financial Consumer Agency of Canada.

? Moneyhub and MX Technologies are partnering to advance open finance in Europe and North America.

?? Embedded Finance

?? Divido, a finance provider, launched an upgrade to its UK direct-to-merchant platform, enabling merchants to access retail finance throughout Europe.

? The global embedded finance market, valued at $65.46 billion in 2022, is expected to reach $588.49 billion by 2030 at a 32.2% CAGR.

?? The World of Web3

?? Amid US regulatory uncertainty over cryptocurrencies, Hong Kong is leveraging this opportunity to advance its Web3 ecosystem, attracting potential businesses with blockchain and cryptocurrency development initiatives.

? Global Millennial Capital is launching a Web 3.0 Investment Program, specifically designed to support pre-seed to series A startups.

? South Korean blockchain firm Neoply is establishing its Abu Dhabi headquarters, receiving support from the Abu Dhabi Investment Office.

?? Crypto & Defi

?? Binance's top executives resigned amid concerns over CEO Changpeng Zhao's response to regulatory probes.

? UAE is establishing itself as the go-to destination for Bitcoin mining in the Middle East.

?? The Future is AI

? Lightning Labs has developed innovative tools enabling AI to transfer Bitcoin.

?? The State of Investment

? Embedded insurance scale up Qover has secured $30 million in a Series C funding round.

? Notion Capital, an investor backed by GoCardless and Griffin VC, has successfully closed an "oversubscribed" fund of €300 million.

?? In Other News…

? Super apps: Zambian fintech startup Union54 is partnering with Mastercard to launch a super app called ChitChat that offers money transfers, access to a USD debit card, and online shopping.

?? Report of the Week

The Global Payments Report: Understanding customer preferences and industry trends is no longer a choice. The Global Payments Report, with its expert insights across global, regional, and country levels, is your guide to navigate this change. Discover key trends such as the rise of digital wallets, the resilience of credit card use, and the future of cryptocurrencies in commerce, and equip your business with the insights you need for future growth. Check out the full report here.

?? The Podcast for Fintech Enthusiasts

In the latest Couchonomics episode, we explore the complex world of blockchain, metaverse, and web 3.0 with renowned Financial Economist, Amna Usman Chaudhry. Offering unique insights from her vast experience, the discussion touches on topics such as generative AI, DAOs, smart contract auditing, and the future of the digital landscape. Don't miss this engaging conversation. Tune in here.

?? This Week’s Payments News

??? Thank you for reading

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