Consumers have greater access and more choice in how to manage their money than at any time in history — but managing money has never been harder and it's costing consumers and the wider economy trillions of dollars in lost value. The great irony is that Fintech is significantly to blame for this.
In the past, managing money was pretty simple — you joined a local bank in your teens, stayed with it for life and used it for most, if not all, of your money management needs. You stored your money, got some small interest back on it, got access to debit and credit cards to spend, borrowed money to buy bigger stuff and, if you were wealthy, invested as well — all through the same institution.
But in the last two decades that simple relationship has changed beyond all recognition. Those straightforward, if relatively low value, services have been revolutionized by the entrance of Fintech. Unfortunately, it’s now not unusual to have 10-15 money apps on your phone — the range of products and services and companies offering them is unrecognizable compared to the past.
Managing this complexity has fallen on the individual consumer, increasing the cognitive load and manual effort for them in managing money, something few people enjoy or want and even fewer do well. With the odds stacked against them, consumers are losing trillions of dollars in value.
Big Brand financial institutions have barely changed in decades — the majority of the innovation in the market has been driven by Fintech companies. These startups have radically changed the market, solving primarily for access: in making it easier to access information/accounts and new market opportunities, they’ve changed who can bank and how they bank.
First, you had to visit your bank or get a letter with your statement. Then you could go to an ATM or call via phone. Now, we can access real-time account information through a wide variety of devices and channels from almost anywhere in the world.
Similarly, access to information is unprecedented — almost anyone can get real-time or near-real-time pricing, market information and analysis on almost anything for free.
How we access and spend our money has also accelerated with digital spend, subscriptions, buy now pay later and one-touch or no-touch ordering becoming the norm. It's much, much easier to spend money than ever before.
For most of history investing has been the exclusive preserve of the few and the rich. Now almost anyone, including children, can invest commission-free from their phones and computers with just a dollar. The breadth of investable alternative assets has also transformed with the emergence of entirely new assets like cryptocurrencies and new ways to invest in old assets like precious metals, farmland, art and more.
These advances — made very rapidly and mostly in the last 10 or so years — have brought massive benefits but also have come at a significant cost. Fragmentation and the explosion of opportunity has led to increased complexity and the tyranny of choice for many consumers.
Managing wealth is still relatively simple in concept but difficult in practice. Spend less than you earn, invest early and often. It's the get rich slowly approach that everyone can understand.
The problem is that most people don’t do this and it's costing them dearly. The average age of beginning to save for retirement is 31, a decade into a career. Less than 33% of Millennials are investing in the stock market. Over 60% of both Gen Z and Millennials report they are stressed about money.
The simple truth is that Fintech-led innovation has not yet solved the problem of wealth management — and in some ways, it might have made it worse.
The majority of mass-affluent consumers routinely commit 3 basic sins in their personal finance (all of which are sins of omission not commission). It's the decisions they don’t make that largely hurt them. They keep too much money in low- or no-paying bank accounts; they stay for years, even decades, with a credit card that does not maximize their returns from their spend; and they don’t dollar-cost average.
Small regular savings from deposit interest and credit card returns made over time and put to work though investing and compounding could deliver an additional $20 trillion to Millennials as a generation over their working life by the time of retirement. That’s a jaw-dropping amount.
It’s not for lack of opportunity but largely motivation and cognitive bias that prevent us from doing better with money. It's a complex problem and demands a complex solution but most Fintechs are not focused on solving these issues. Instead, they continue to solve for access and new markets.
Any solution to the problem of managing money better has to directly confront our own psychology and it's a massive challenge on a par with those facing health and fitness. Think about how much money and resources have been committed for decades to get us to lead healthier lives — eat better, smoke and drink less, and lead more active lifestyles. And sadly, even with that yeoman’s effort, more of us are dying from entirely preventable diseases every year.
So, it’s clear that the answer has to be more than education and awareness — we have to make it incredibly easy. As easy as, for example, paying for an Uber. For health and wellness, that may mean bringing the gym home or onto an app. For wealth management that means automatic and effortless. That’s why we’ve built Unifimoney.
This requires a combination of technology, product design and marketing and overcoming decades of habituated behavior towards managing money. But it’s a challenge which, while hard, has the potential to change lives and move economies for the better for generations to come.
The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.