Cost of living crisis: what fintechs can do
Fintechs can’t fix the root causes of the current economic malaise, but can help people get out of it in one piece, writes Julia McColl, chief product officer at Chetwood Financial.
Image source: Pexels/Liza Summer
The driving forces of fintech in recent years – Banking-as-a-Service (BaaS), advances in open banking, and a renewed focus on innovation – have all led to a sea change when it comes to products financial instruments that people use every day. daytime. Integrated insurance, new credit products, and personalized accounts can go a long way to improving the consumer’s money management and transaction processing experience, but as we move toward a more financial future more troubled, what will these products and services do to improve financial well-being?
Recently, the Bank of England raised interest rates by 25 basis points to combat inflation, which had reached its highest level in 40 years and shows no sign of abating. Consumers are starting to feel the pinch, with the cost of groceries, gas and utilities all increasing month by month.
The duty of fintechs in recent years has been to revolutionize the financial services industry and challenge long-established financial institutions and traditional banks that have sat at the head of the table for years. As more and more people face financial difficulties in their daily lives, the duty of fintechs must change – these companies must start adjusting their offerings and their focus on improving the financial health of their valued customers.
But what can fintechs do to support consumers in the growing cost of living crisis? How can new financial products and solutions make a difference for people trying to make ends meet? And what impact will this have on the future of the financial sector?
Fintech for good
The solutions made possible by fintechs can do much more than help consumers spend their money – they can be used to consolidate funds, fill gaps and improve their credit score. Prudent financial management is essential in a crisis, and open and smart banking solutions can provide useful information and advice to those who need it.
Fintechs offering budget management apps provide a platform for users to monitor and consolidate their spending. I’d like to see more fintechs tailoring their offerings with this personalized approach in mind – having a clear picture of one’s spending and spending habits is the first step to improving financial well-being and can help prevent the downward spiral. indebtedness.
That doesn’t mean credit products are inherently bad for those trying to make ends meet. The main problem with credit is misuse – either using the wrong products or using the products in the wrong way. Fintechs can offer debt consolidation platforms, allowing people to better manage what they owe, while credit comparison platforms can help consumers find products that help them pay off debt or repair/ improve their credit rating. This, in turn, creates cumulative benefits, eventually providing access to better credit products.
Give a hand
In short, fintechs need to do more to improve the financial health of their users – part of that is providing products and platforms that make this possible, but the other side of the coin involves engagement and education. .
This is perhaps the biggest impact fintech can have – while educational resources for financial management and the proper use of credit already exist, most consumers should actively seek them out and may not be aware of them. their value. Fintechs can use their platforms to promote learning, awareness, and financial literacy to more people.
Offering engaging and interactive learning resources – potentially even prompted by in-app rewards – that help users improve their financial management and improve their credit rating would be a boon for consumers around the world as economic upheavals persist.
Healthier and happier
Fintechs have a responsibility to their users – without their customers, these companies cannot grow and succeed, but this is a two-way street. New and existing fintechs should put more emphasis on using financial products and services to become more financially secure and better equipped for the future, no matter what.
This can be achieved through the solutions and platforms they provide, but more importantly, these platforms can be used as a means of engagement, providing useful information and guidance on how best to use the solutions keeping in mind financial well-being and resilience.
Fintechs are unlikely to be able to do much to address the root causes of the cost of living crisis, but if they take the right approach, they can help people get through this in one piece.
The views and opinions expressed are not necessarily those of AltFi.