Why fintech needs fundamental fixes instead of fancy band-aid solutions

Money plays one of the biggest roles in our lives. It’s not because we are exclusively money-focused beings, but simply because money is unavoidably at the core of everything we do. It shapes our lived experiences; determines how easily we can find a place to call home and it enables us to build a secure future. It affects all areas of our lives, impacts our worldview and shapes our beliefs.

Understanding the role that money plays in the life of consumers, acknowledging that role and creating products accordingly is essential for any fintech company. Over the years,? financial institutions have promoted specific products such as savings, investments and insurances and have been influencing financial decisions by curating how information is presented to clients, for example.?

There is inherently nothing wrong with guiding your clients when they may lack insight, but there was one thing fundamentally off about this approach: the direction they were guided into. Why would banks draw clients’ attention toward traditional savings accounts with little to no interest? If the client isn’t at the heart of the business model, you will never guide them in the right direction.?

We should enable people to improve their financial decision-making by building products that make sense for their economic reality and by encouraging long-term behaviours through guidance, innovation and regulation. And the only way we’re going to achieve that is by truly understanding people’s relationship with money.?

Our approach to money

Every person, every generation, and every culture has its own unique approach to saving money. Even though money is a common necessity for everyone, providing security, freedom and the possibility to chase your dreams, our attitudes towards spending, saving and investing differ for each person and change throughout time.

A changing economic atmosphere, behavioural factors, and jeopardised job prospects: all examples of social factors that drive our financial behaviours. Where money for some means stability, it might see them saving from an early age and fixing their pension. For others, it might provoke feelings of stress and encourage them to make decisions that aren’t beneficial in the long term.

And, overall, our approach to not only building wealth and how we make long term financial decisions is changing. Every day we have access to more sophisticated tools to help us simplify and manage our finances all thanks to tech. At the same time, we are seeing increased economic uncertainty that has forced us to explore beyond the traditional methods of wealth building. On a higher level we even see innovative power shifts introducing new systems of currencies.?

Our attitude towards money is changing and when we look at the new ways in which future generations approach building wealth, we see an increasing need for the fintech sector to adapt to this generation and create more valuable experiences.

Dealt a bad hand

Let’s take a closer look at these new generations. When it comes to economic prospects, millennials and Gen Z have been dealt a debilitating hand. Dealing with stagnating incomes, the low likelihood of homeownership, higher cost of living, student loan debt, interest rates on savings dropping to all-time lows, weakening pension systems, and global crises: the odds are stacked.

The pandemic even elevated concerns about millennials’ and Gen Zs’ personal financial situations. Research has shown that two-thirds of them often get stressed about their long-term financial future. And we’re not even close to seeing what the future has in store for Gen Z. If anything, we know it’s precarious: few in this generation are confident in the future of their finances and are facing a financial literacy challenge.?

Long story short, millennials and Gen Z are significantly less financially secure than their parents, the baby boomers. Where money served baby boomers to achieve material goals, like buying a house, newer generations are more focused on experience and more inclined to join the sharing economy, paying subscriptions for literally anything, even bikes.?

Digital version of outdated concepts

New generations grew up in a world with technology and the internet, the world was supposed to have been their oyster. Breaking free from the traditional 9-to-5 life, instant communication across continents in the palm of your hands, ordering anything to your doorstep; tech was supposed to make everything happen.?

The convenience that tech brought people in many sectors such as e-commerce, however, never fully reached the financial sector. Heavily dependent on legacy systems, the financial sector lagged behind. Instead of creating valuable financial solutions, most of the players created mobile versions of concepts that no longer served anyone.?

Traditional financial providers have been digitising existing products and services and converting outdated realities and beliefs into a digital format. Banks, for example, simply digitised traditional savings accounts.

Younger generations don’t need mobile versions of concepts that don’t fit the current zeitgeist. Instead, they need fundamentally different products. By looking at the financial challenges that millennials and Gen Z face, their wishes and current reality, we can help them build financial resilience instead of keeping a broken financial system, and the obsolete solutions that come with it, alive.

Building future-proof fintech solutions

If we want to build future-proof fintech services, tech should never be the end goal. Rather than forcing old-fashioned solutions onto new problems, we should keep financial needs and behaviours at the heart of any decisions we make. And align our own business realities accordingly.

By nature, human beings are hardly rational. We are born irrational; our brains love short-term gratification and we are simply not good at playing the long game. This means that we need products and services that shape positive financial behaviour.

It’s up to our industry to guide people on the path to financial wellness. Fintech startups and scaleups should therefore actively start asking themselves: who are we serving? The status quo or our clients??

If together, we apply a real customer-centric mindset, we enable people to make more rational financial decisions. For example, making diversified portfolios the default option - over risky shares with high, instant ROI.?

We don’t necessarily need more features; we need more value. Tech should never be the end goal, but an enabler of fundamental change.