How Fintech is Influencing Millennials’ Financial Literacy
For years, the financial services industry has remained stagnant; that is to say, the industry hasn’t changed too much for centuries. From banking to accounting to investing, the entire industry had essentially figured out a way of performing their services, and stuck to it for decades. However, this is the 21st century, and the technological and digital revolutions are impacting every facet of our society. And the financial services sector is no exception.
Enter the world of financial technology, or fintech, as it’s more commonly known. Fintech is, in essence, any form of technology that is used to assist or produce any financial service, ranging from computer software to mobile applications. And recently, in only the past few years or so, this incredibly young industry has managed to make a major impact on financial services. According to Financier Worldwide, last year alone saw huge interest in fintech, with over $15.2 billion in global investments. Newer fintech companies, such as Stripe, a mobile payments processing company, are becoming incredibly popular in the financial services industry, with Stripe having accrued a whopping $450 million in revenue last year alone, according to a report from Forbes.
As millennials, and even younger people, continue to rely more on their smartphones and mobile applications, fintech is becoming more powerful. This, in turn, is having a profound effect on the way that millennials use their money.
Recently, in an article from Forbes written by the co-founder of fintech startup Exeq, Isaac Kassin noted the huge gap between millennials and traditional banking services. According to the article, the Millennial Disruption Index, which surveyed over 10,000 millennials through the course of over three years, found that 33% of those surveyed do not think that they will need a bank at all. And another survey from Blumberg Capital found that a whopping 57% of millennials do not foresee traditional banking existing the way it does now.
And this is where Kassin’s company, and several other fintech startups, step in. They bridge the gap between traditional financial services and millennials who are looking for ease of use, and instant access. And by offering millennials quicker ways to access their finances or even invest, millennials will no longer need traditional financial services.
For example, the fintech investment application Acorns is changing the way that millennials are saving their money. The application, in essence, allows users to link debit or credit cards to their Acorns account, and spend their money as they see fit. And with every transaction they process, the application will automatically store a specified amount into a savings account. Acorns not only saves money, but also invests money into stocks and bonds automatically, sparing users the hassle of having to manually invest. In an article from Nasdaq, Acorns CEO Noah Kerner spoke to Benzinga about their company’s influence, and Kerner noted the change he has seen in millennial financial mindsets.
“I think the way the generation responds, we’re essentially removing every barrier to entry that might exist for someone to take advantage of something like investing and automating it and making it something that happens in the background. Otherwise it’s too much work. ‘I have to read too much. I have to learn too much. I have to do too much.’ It’s just too much of a distraction,” said Kerner.
Acorns not only invests money for millennials, but also offers guidance and assistance. Recently, the startup launched Grow magazine, which provides financial literacy to millennials, or anybody using the application, in the form of articles, videos and interviews with financial figures or celebrities. In doing this, they are providing necessary knowledge that any person needs to understand and use to their advantage.
Other fintech companies, like SoFi, even go as far as simplifying the financial lending industry. SoFi specializes in student loans, mortgages and even personal loans. Through the site, users can request loans instantly, and have daily access to customer service.
These fintech startups are doing what traditional financial services aren’t: making ease of use and access top priorities, and making complicated financial processes simple. As millennials continue to accept fintech startups as the standard, they will continue to form their financial literacy skills around fintech.