The Human Side of Fintech
By Nicole Casperson
When you think of fintech, what type of image pops into your mind?
- Robots with iridescent blue lights and abstract coding imagery
- Images of people of all different dimensions from all over the world navigating the human and social aspects of engaging with financial technology.
If you answered No. 2, you’re in the right place.
Human behaviors impacted by financial technology are just as important, if not more, than the machines and algorithms involved.
Understanding the social and cultural consequences of fintech is critical to moving our industry forward in a positive direction.
As a journalist who received a Master’s degree in Media & Communications, it was always the way fintech influenced human behavior that caught my attention.
That’s because there are moments in time when fintech pushed our culture so far into a direction that was never suspected.
Remember the Gamestop stock surge? Like many of you, I was enthralled with the entire phenomenon (and spent many long hours as a reporter covering it).
But I wasn’t impressed with the financial technology that enables a digital battle between Mainstreet and Wallstreet. Instead, I was mesmerized by the cultural implications that the saga had.
That moment in January 2021 was followed by millions of new investors opening brokerage accounts for the first time.
It was followed by multiple documentaries on Hulu, Netflix, and HBO to unfold and explain the events from that day.
The Gamestop stock surge and more users interested in finance as the pandemic shuttered IRL experiences shifted fintech from behind-the-scenes technology to center stage and wholly a part of everyday culture.
That moment proved that fintech, known mainly as a payment technology, is much more.
But it also exposed cultural consequences, like a lack of financial education.
The unconstrained application of fintech, like lending businesses and BNPL, has made fintech available for those who don’t quite understand those financial systems, not to mention the cost or risks involved.
With that in mind, Plaid and the Harris Poll released today the 2022 Fintech Report that proves how fintech has impacted culture.
Let’s unpack the top 3 trends I took away from Plaid’s new report and why they matter.
To help more people achieve financial equity starts with education, and the earlier, the better.
Almost every fintech leader I’ve interviewed for this newsletter or on Humans of Fintech mentions a need for more financial education.
Adults, particularly in marginalized communities, are the ones who end up playing catch up and slipping through the cracks.
In season 1, episode 10, I interviewed Jacqueline Schadeck. She became a certified financial planner after her family inherited over $1 million but lost it all due to poor financial advice and a lack of financial education.
Schools miss the opportunity to teach better financial education. So you might be thinking: “Nicole, why should fintech step in?”
Your users are demanding it.
Plaid’s report found that 79% of fintech users crave more financial knowledge.
This allows fintech companies to not only enable their customers to achieve their goals but help educate them so they can sustainably fulfill their goals.
And the topics they’re most interested in learning more about are:
- Building an emergency fund
- Checking/improving credit score
- Starting a savings habit
The demographic leading this is Gen Zers at 99% and 88% of Millennials that want more financial education from their fintech apps.
If there’s a time to jump on this trend, it was yesterday.
The drive towards equity is a fintech challenge.
Today’s fintech founders are problem solvers. Those problems aren’t simply making more profit, but personal ones they’ve faced:
Vrinda Gupta, the founder of Sequin, created a female-focused credit card after being rejected from a credit card she built at a traditional financial institution.
Nora Apsel, founder and CEO of Morty, helps more people receive mortgages after seeing too many people slip through the cracks.
And fintech has more answers – from providing better, more accessible products to making existing products, including luxury assets, more readily available to tomorrow’s investors.
Fintech founders increasingly see success as a rising tide that lifts everyone.
And users are responding.
Facing record inflation, rising interest rates, and uncertain markets, half of Americans (53%) say their financial stress increased over the past year, according to Plaid’s report.
Concerns included cost of living (69%) and fuel prices (53%), followed by recession fears (34%), healthcare costs (17%), and job market worries (16%).
As a result, 4 out of 5 consumers said the past year made them more focused on their finances.
Among racial groups, Black people (88%) and Hispanic people (92%) continue to use fintech at the highest rates, compared to White people (74%) and Asian people (79%).
Lower-income individuals see financial results. For example, 27% say they’ve increased their savings from using fintech tools in the past year, and 51% say fintech tools have helped them feel more confident.
The challenge of consumer engagement is that the digital transformation of finance might cause users to become disengaged.
Now fintech adoption is up 38% since 2020, according to Plaid.
But fintech is so good at providing access that users are now oversaturated with finance apps.
This oversaturation can lead to some significant analysis paralysis for users.
In 2020, consumers downloaded 4.6 billion finance apps.
In 2021, 573 million downloads in the United States, and during that same period, we spent 16 billion hours on finance apps.
That’s the equivalent of 1.8 million years of human brain power spent on finance apps.
Why is this happening? Fintech apps focus on engagement and getting you to spend time there, and they’re doing it incorrectly – like sharing lousy advice.
An article from the Fintech Times put it nicely and shares that “many financial institutions have fallen into a survivorship bias trap of focusing customer marketing on desired business outcomes rather than the unique needs of their customers.
Too often, financial institutions view their customers as another audience to sell new products or services to, without taking a holistic picture of their current needs and future aspirations.”
Banks and neobanks must address customer experience initiatives to benefit customers truly and retain loyalty.
And as Plaid put it, reaching the next wave of fintech — where it becomes the primary way people complete nearly all of their financial tasks — requires cooperation across the ecosystem to deliver an open and equitable economic system that works for everyone.
Helping consumers navigate financial challenges to deliver better outcomes is just the latest test fintech has passed.
Adapting to meet changing consumer expectations will be what leads us into a successful future.