Curated by: Sergio A. Martínez
FinTech has emerged as one of the most important aspects of the modern world, playing a crucial role in providing access to financial services and products to everyone and changing how we manage our finances. And there’s no doubt that FinTech apps and platforms have taken the financial world by storm, but as with anything, there are downsides to this popularity that are worth considering.
What exactly is the FinTech sector’s role in modern financial literacy and education? Does this industry bear any responsibility on this matter, or their participation amounts to just covering a marketing demand?
“As our daily lives become increasingly digitized, more and more people are turning to FinTech solutions for their financial needs”, says Rod Aburto, Co-Founder and Service Delivery Manager at Scio. “From mobile apps that offer budgeting tips to online lenders that help individuals finance their businesses, FinTech companies revolutionized the way we think about personal finance. But as FinTech continues to grow in popularity, some are wondering whether they have a responsibility to provide financial education to their users.”
On one hand, many argue that FinTech companies are simply providing tools and services that users can choose to utilize as they see fit. And just like users of traditional financial products can make bad decisions that lead to debt or financial instability, so can users of FinTech products. As such, these companies should not be held responsible for the financial education of their users. On the other hand, some argue that FinTech companies are responsible for providing financial education to their users. After all, these companies often market themselves as alternatives to traditional financial institutions, which typically offer their customers some form of financial education. Furthermore, many FinTech applications are designed for people who may not be familiar with personal finance concepts, making it even more important for these companies to provide clear and concise information about their products, so what happens when people use them without really understanding how they work?
Poor financial literacy can lead to serious mistakes, like overspending or making poor investment choices, creating a lot of financial anxiety or even worse outcomes. So, while FinTech apps can be helpful, the users must adopt this technology responsibly, understanding both the risks and rewards before getting started.
Financial literacy in the FinTech era
“Financial education has become an important complement to market conduct and prudential regulation and many countries have made improving individual financial behaviors a long-term policy priority”, says Simon Pearson of the Investment and Finance site HedgeThink. “In a world dominated by continuum technological advances, the efforts towards financial education shouldn’t be limited to economic affairs but rather focus on mastering the technology that will drive the financial mechanisms of the future.”
So as FinTech companies increasingly play a role in our financial lives, it also has a responsibility to help educate people about personal finance, budgeting, and investment strategies, as well as the nature of the financial services they offer. We can break it down into the following categories:
1) Marketing. FinTech companies need to be careful about the way they market their products. In a rapidly developing industry like FinTech, it can be difficult to keep up with the latest marketing trends, but there are a few key principles that all responsible FinTech marketers should keep in mind. First and foremost, always be transparent about your product or service. With so many options available, potential customers need to know exactly what they’re getting before they commit. Secondly, don’t make promises that you can’t deliver on. And finally, always put the customer first, remembering that you’re not just selling a product, you’re solving a problem.
2) Security. When it comes to FinTech, data security is essential. FinTech firms deal with sensitive customer data daily, so it’s crucial to secure it, making it accessible only to authorized personnel. But beyond that, it’s necessary to make it clear to the user what information is getting stored, explain why, and have clear means of communication and support if any serious problem arises. “FinTech firms and their customers are often targets of all kinds of attacks and frauds, so it’s important to have robust security systems in place to protect against these threats and inform the public of the potential risks involved”, advises Rod Aburto on the matter.
3) Communication. FinTech companies provide a valuable service to their customers by giving them access to financial products and services that they might not otherwise have. However, FinTech companies need to communicate with their customers regularly to ensure that they are providing the best possible service. Customers need to be able to reach out if they have any questions or concerns, and they also need to be kept up to date on changes that could affect their accounts. Good customer communication can help to build trust and loyalty, and it can also help to resolve issues before they become major problems.
The limits of FinTech education
However, beyond these good practices, it’s good to keep in mind that, while FinTech has made it easier than ever to access financial education, there are still some limits to what it can provide. For one thing, FinTech products can be a great resource for learning about financial products and services, but it can’t provide professional financial advice when it comes to making major decisions. These kinds of applications can provide people with the tools and knowledge they need to make informed choices regarding their money, but it is always best to speak to a qualified financial advisor that could provide a good outside perspective.
Additionally, FinTech can be a great way to learn about personal finance basics, but it’s not always the best resource for more complex topics. Many people view financial education as a dry and boring topic, and with the rise of more and more FinTech platforms and applications, there are now more ways than ever to learn about money management, but a lot of the responsibility of making an informed decision and assuming the ensuing risk still rests on the shoulders of the customer, so seeking information with a trustworthy source is still the way to go.
Despite these limitations, FinTech is still a valuable resource for anyone looking to improve their financial literacy. This is still a relatively new industry, and it’s constantly evolving, which means that there are bound to be some growing pains as the industry matures. So, while FinTech can be a great resource for managing your finances, as a user it’s important to be aware of the risks and limitations of these applications; they are often created to offer a solution to a particular problem, but they are seldom meant to be the be-all-end-all of every financial necessity.
And as a company, having an adequate ethical framework to approach the creation of a new FinTech platform, informing users and customers clearly of what they should expect, what they can’t do, and the basics they need to understand to make the best use of the product is a must. With these considerations, FinTech companies can help make sure that their products are safe and helpful for everyone.
The Key Takeaways
- FinTech applications and software are becoming more and more relevant to our daily life, making it easier than ever to get started on a new financial road.
- However, this abundance of options and innovations also brings new questions to solve: is financial education becoming a responsibility of FinTech?
- Even if that’s still an open question, there’s no doubt that most FinTech companies can adopt practices (in Marketing, Security, and Communication) to ensure their products are not misunderstood or used incorrectly.
- And finally, a deeper understanding of finance still falls on the shoulders of users, who should seek knowledgeable and trustworthy people to make sure they use any application or platform to its fullest.
Scio is an established Nearshore software development company based in Mexico that specializes in providing high-quality, cost-effective technologies for pioneering tech companies. We have been building and mentoring teams of engineers since 2003 and our experience gives us access not only to the knowledge but also the expertise needed when tackling any project. Get started today by contacting us about your project needs – We have teams available to help you achieve your business goals.