CIOInsider India Magazine
How Fintechs Are Influencing Financial Literacy
Established in 2007, Biz2Credit is one of the leading online marketplaces for small business funding. The company has network comprising 1.6 million users, credit rating agencies such as D & B and Equifax, and small business service providers such as CPAs and lawyers.
In the beginning, there was informal money lending. Then banking, then accounting, then investing. And then: nothing.
Financial services were stagnant for a good century, with the world preoccupied with banking. Banks have been lending to individuals and commercial ventures for years now, and because of banking’s entrenchment, many business owners seeking loans think first and only of banks.
What these entrepreneurs do not know, however, is that by limiting their options to conventional funding sources, they are missing out on new benefits: the benefits that await them in fintech.
What are Fintech?
Fintech–finance/technology – encompasses any form of technology used to aid financial service. Some fintech is mobile-first, some is computer-based, some is cloud-based. The industry itself is comparatively quite young, but it is picking up pace fast, impacting companies from solo entrepreneurs to large enterprise organizations.
The State of Financial Literacy
As industries progress with technology, with financial services, and with fintech in particular, we must ask ourselves: Are we ready for this? Are we financially literate enough? Even as financial services usage becomes more and more mainstream, the statistics reflecting the state of national financial literacy remain troublesome.
According to an S&P survey, more than 75 percent of Indian adults do not adequately understand basic financial concepts. The numbers are even worse for women: More than 80 percent of women are financially illiterate.
These issues cross national borders. As per yet another study, two-thirds of Americans cannot pass a basic financial literacy test, and the number of those who can pass such a test are decreasing annually.
These trends are reflected globally.
What makes financial literacy important?
• The ability to understand how money works
• The knowledge of how to make money work in the most optimal manner
• The art of investing
• The ability to manage money and make sound financial decisions
All of the above comprise financial literacy, and all are important.
Lacking financial know-how will obstruct you from making wise financial decisions, with potentially disastrous consequences
How are Fintech Lenders Bridging the Gap?
Many fintech have committed them to offering their customers financial education alongside the lending, payment, lending, or other financial services they provide.
Fintech lenders in particular have a reputation for being easy to use.
Many fintech lenders are known for:
• Easy digital applications
• Quick loan processing time
• Friendly assistance
• Collateral free loans
• No or low prepayment penalty
• Customer education
While collateral-free loans and no prepayment penalties are certainly attractive, the highlight of this list is really the technology. The easy application, the fast loan processing times. Accessibility. Less hassle. Less paperwork. And, crucially, the integrated financial planning processes not to mention the help available at your fingertips when you need it.
If you are a budding entrepreneur, you are certainly likely to benefit from financial guidance. And fintech roll out all sorts of informative articles, videos, interviews, e-books, and more, all in service of public financial education.
Where will Fintech Take Us?
Remember those statistics about financial literacy from before? As consumers become more comfortable using fintech apps to pay bills, receive money from friends and family, or get a home loan, they will inevitably come face-to-face with these fintech’s educational content. As fintech catch on, we can expect people – the whole world, perhaps – to become more and more financially knowledgeable.
So naturally, as we look to the future, we look to fintech.
