The Covid-19 crisis has perfectly indicated the essential role of financial literacy in helping consumers manage their money and withstand curveballs when they arise. This gives a new push towards a number of initiatives to work on and facilitate the increase in financial education and literacy.
Fintech players argue that financial education is an important starting point that can encourage people to save and invest long-term as people who are financially literate are more likely to understand, ask the right questions and take advantage of possibilities provided by financial markets. Therefore, the financial education needs to start as early as possible - targeting everyone no matter where it starts, in kindergarten and school for children, university for students, workplace and daily life for adults or even as late as at the point of sale for anybody that is already making a financial decision.
European Consumer Payment Report 2021, published by Intrum, uncovers that 6 in 10 consumers expect another global pandemic within their lifetimes. Accordingly, they want to ensure they are in a stronger financial position before the next one hits. More importantly consumers are striving to improve their financial wellbeing, for example by setting targets to better manage bills, or putting aside a ‘buffer’ money in case of a recession.
Over recent years financial sector has evolved dramatically, thus financial literacy and education has to step up accordingly. European Supervisory Authorities (ESAs) are continuously talking about further measures to increase digital and financial literacy of consumers and in such, make effective use of financial services provided via digital means, raising confidence and trust in the digital financial system as well as their personal financial outlook.
When thinking about improving financial literacy, the market can expect extensive emphasis on i) more environmentally friendly or ethical purchases, ii) sustainable behaviours, followed by digitalisation, with a specific focus on cybersecurity or fraud. You may wonder why. Yet the answer is simple.
Online fraud is becoming more sophisticated, consequently online payments are particularly at risk. Therefore, educating consumers about cybersecurity and fraud represents something that requires a continuous effort. According to the recent ESAs report, consumers with high digital financial literacy can, for example, make better decisions to mitigate security risks when using digital channels.
This trend is already notable in some of the Fintechs. Financial education and literacy is picking up its speed among Fintech as a way of improving consumers’ experience. Fintechs opposite to universities, schools, books are educating society by practice – through innovative products and services. For example, it is now a new normal to obtain virtual cards or receive physical card’s information online via secured means. Such solutions require customers to change their behaviour and become digitally oriented (and more ESG focused).
Additional push is from ESAs. One of such initiatives is the recent conference on financial education and literacy. In 2022 EIOPA, ESMA and EBA held their first joint high-level conference on financial education and literacy with the aim of gathering ideas, stimulating the discussion on financial education, raising awareness, exchanging experiences, and identifying good practices. Great thoughts and ideas are building financially resilient and inclusive society!
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