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Financial Health is What FinTech Should Be Empowering

12 November 2020    
Financial Health is What FinTech Should Be Empowering

FinTech applications are getting smarter; a fact that has many good implications for businesses and consumers alike, but offering the advantages of financial technology can have more strategic vision than the one currently being targeted.

Using innovative technologies like artificial intelligence (AI), machine learning (ML) and similar concepts have propelled both FinTech companies and traditional financial institutions that chose to adopt them to new levels of customer service efficiency, better banking, and smarter solutions. However, this innovation trend is being aimed at providing better, faster and more reliable financial services, but has left out the optimization of a customer’s overall financial health.

Some FIs and FinTech companies are realizing this and have come to slowly pivot from being product or service-focused to a more encompassing approach that places the financial wellbeing of customers at its core. Initiatives such as these can pave the way for a more prosperous future for the next-generation financial sector and its players. Prominent voices in the industry are talking more and more about how banks have a social “responsibility” to provide their customers with a financially balanced life by reducing financial stress and paying attention to their financial wellbeing.

What is even more compelling for banks to pursue financial health is the promise of the next step when it comes to financially sound customers; wealth management. Some wealth management firms today are recognizing this potential and accordingly are building client-centric digital platforms with an omnichannel approach in mind, by using AI-based customer service and video tech to offer better face-to-face communication and expert advice. This comprehensive platform gives customers access to all these wealth management services in addition to customized investment planning solutions. This enables the company to cater to busy customers of all ages, as they bustle through their daily lives without ever not being short on time. Even though the current times are increasingly led by digital platforms, most customers still prefer to have a human element in their dealings with banks and other FIs, and that’s exactly what this platform offers; the speed and convenience of digital wealth management services with a touch of human reassurance to guarantee the best possible outcome.

Financial health can be addressed using many approaches, whether directly or indirectly. Here are some ways that FinTech companies are trying to achieve just that:

A provider of finance-related technology solutions has also launched a new client-centric mobile app focused on proper financial planning and wellbeing. The app entices its users to learn about basic financial planning and encourages strategic behavioral changes in order for them to achieve their wealth goals in an engaging way. Conducted by retirement plan advisors, the app connects them to interested participants and enables a fruitful relationship between them through increasing awareness and healthier spending habits on a scalable, value-adding level to both parties.

Another way to enable financial wellbeing is being adopted by FinTech startups focusing on financial health in the Middle East, a region with half of its population under 25 years old and that witnessed an unemployment rate of over 25% in 2019. Various FinTech startups are tackling youth unemployment by creating platforms that provide support for job seekers and companies alike, enabling the unemployed to explore job opportunities and achieve the financial health they seek, allowing them in turn to get access to credit and insurance options.

Speaking of the MENA region, the underbanked adult population was at 86% back in 2017 as per the World Bank, and that has led some financial health startups to focus on this issue. With a rising rate of migrants working abroad and trying to make their way into the region, their paperwork is often not processed quickly enough for them to be able to open bank accounts due to not having official proof of creditworthiness in the respective country. Thus, this underserved population has almost no access to formal financial services and therefore are financially excluded. Enter the FinTech startups that are offering digital solutions targeting this population to promote financial inclusion by making platforms that provide financial institutions with verifiable credit history in their origin country and have access to finance that can get them back on their feet in much less time.

The Middle East and North Africa region also has financial literacy problems. Accordingly, some FinTech startups in the MENA region are educating people on financial matters through mobile apps and various digital platforms, aiming to teach them how to manage their money and slowly grow their wealth.

Access to proper capital is another pending issue for MSMEs in the Middle East, especially when considering that they account for 96% of registered companies in the MENA region while receiving a mere 7% of total bank lending, as per the IMF. Several startups nowadays in the Middle East are aiming to solve that issue by offering significant opportunities for MSMEs through factoring, invoice discounting and credit insurance platforms to digitize the whole process of merchants and can therefore get proper access to funding through their transactions history and have better cashflow management.

In a world struck by an ongoing pandemic, one can’t help but have financial health concerns in these troubling times. Financial health has always been an underlying concern for most people, and today economies are struggling and jobs are being lost, so it is safe to assume that financial health is a solid precursor to health in general. Consumers are worried about their income in the present as well as its future fate, so now is as good a time as ever to start catering to those concerns and to reassure customer - as banks or FinTechs - that FIs are doing their best to alleviate their worries by paying attention to their financial health so they can safely make financial plans as the future unfolds.

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