Despite the long history of using traditional financial tools, many people still do not fully understand the full scope of these financial tools; and hence are either using the available financial services on a limited scale or not participating in their uses at all. This has resulted in many remaining unbanked, even after many years of commercial and retail banking through channels such as banks, microfinance, savings and loans companies, rural banks, and agency networks among others.
While still exploring the use of existing financial services and with others catching up at varied paces, new ways of financial service delivery – on the back of financial technology (fintech) innovations – are being deployed at an even greater pace than before, with inherent complexities.
Evidently, these new fintech innovations are emerging as the dominant means of offering financial services – presently and in the future. This demonstrates the need to amplify initiatives that promote the acquisition of knowledge and use of these innovations, particularly among the current unbanked population.
The intention of this article is to offer some considerations for the promotion of financial literacy to enable the full participation of all in benefits of the new fintech innovations.
Financial literacy – what it entails
Ordinarily, any person who is able to read and write is said to be literate. The ability to read and write demonstrates a person’s understanding and proficiency in a given language. And so does the scope and nature of financial literacy. A person attains financial literacy when he or she is able to demonstrate knowledge and understanding of financial language. It involves the effective use of existing financial services and full participation in the use of new ones.
The lack of knowledge, understanding and proficiency among the populace in the use of financial services has necessitated the roll-out of financial literacy programmes to explain, build understanding and encourage the participation of all in financial sector activities and the use of its tools.
However, such efforts to achieve a high rate of financial services-awareness have always been fraught with challenges. The complexities of financial tools, the general level of formal education to understand and appreciate the use of developed services, information technology (IT) infrastructure concerns such as Internet availability, physical infrastructure limitations – such as the availability of service providers in challenged communities etc. – continue to impede the achievement of desired financial literacy goals. The result leaves most of the populace with no participation in traditional financial services, and no awareness of new fintech innovations.
Nonetheless, building knowledge for the unbanked population on the utilisation of existing traditional financial services and new financial opportunities enabled by technology is still being pursued as the overarching goal of financial literacy programmes. And to achieve this goal in the era of fintech innovations demands the adoption of some approaches discussed below.
Some ways to promote financial literacy
The benefits of a country’s high financial literacy rate accrue to all stakeholders – the individual, the regulator and the innovator. It signifies a working knowledge of a country’s financial sector underpinned by relevant products and services, strong adoption and use. Therefore, the goal of promoting financial literacy must be mandatory for all stakeholders.
Innovators’ responsibility
Yes, innovations are accounting for the changing landscape of financial services. Improvements to traditional service offerings and the design of new disruptive ones are being championed by them. So, the innovators owe a duty to ensure that new improvements and innovations are designed based on real user insights, and are not solely driven by technological advances.
New technologies must be leveraged to improve existing financial tools as well as develop new solutions that address real-user pain points. This design approach will ensure end-users spend less time and effort in appreciating the relevance of changes or new tools and adapt easily.
This responsibility must be carried out based on strong research and aggressive marketing investments to simplify the use of existing or new financial tools. On the marketing front, extensive educational campaigns backed by functional customer support services must be deployed by innovators to support early adoption and use of new financial tools.
Admittedly, there are several competing investment needs for fintech startups. However, supporting initiatives to gain a high financial literacy rate is a ‘golden buzzer’ innovators must activate early in the deployment of their innovations.
Regulatory efforts
Presumably, every regulatory directive or response to financial innovations is tailored to facilitate the interest of financial services’ end-users. These regulatory interventions are championed to ensure the populace gain considerable understanding and access to permitted financial services, so they can participate fully in the financial sector for the purpose of financial inclusion.
Without corresponding financial literacy, the end-users will not be able to understand the use-cases of available and permitted financial services in order to utilise them for enhancing their participation in the financial services sector. To this end, regulators must continue to intensify the promotion of financial literacy programmes by deliberately funding campaigns that provide end-user education and demonstrate the usefulness of emerging financial tools – particularly in local languages – across multiple channels and consumer touch points.
Additionally, as trade-offs, regulators must build strategic alliances with financial literacy-focused companies through endorsements, joint development of financial literacy content, provision of funding, and technical support to extend their reach and bridge knowledge-gaps for the unbanked population.
Industry stakeholders’ commitments
Other industry stakeholders have a role to play. Traditional financial service providers like banks, microfinance, savings and loan companies, rural banks etc. must show commitment toward supporting the unbanked population’s transition to knowledgeable status. This has the potential to upscale their participation and use of financial services.
Also, financial literacy programmes could serve as the channel for upgrading the skills and knowledge of existing banked populations for their adoption of new and emerging technologies. Therefore, these financial service providers must take advantage of their operational coverage to conduct community-based and on-premises education sessions for end-users – whether banked or unbanked – at planned intervals.
These community-based initiatives could be undertaken in partnerships with other ecosystem stakeholders like the Ghana Association of Bankers (GAB) and Ghana Fintech and Payment Association (GFPA), among others. The intended knowledge sessions must focus on leveraging industry expertise to facilitate training and demonstration sessions, in ordinary and plain language, for the end-users’ benefit.
These collaborative initiatives will foster a strong stakeholder alliance for ensuring that the end-user is supported to understand and develop the appropriate user-responses to changes in existing financial services and new innovations. This could also help establish a feedback loop for measuring end-user awareness, appreciation, understanding and use of financial tools.
Conclusion
The philosophical doctrine that ‘the brain is tabula rasa (empty) at birth’ is instructive of the efforts which must be made to ensure everyone becomes knowledgeable. To achieve this, especially for financial literacy in an era of constant technological advances, all stakeholders must assume some responsibility toward promoting the understanding, appreciation, awareness and use of financial tools, especially new and emerging ones.
There are enormous benefits for all stakeholders when high financial literacy rates are attained, and the pointers in this article can be considered in such pursuits.
>>> the writer is a Fintech Consultant and the Managing Partner of Sustineri Attorneys PRUC (www.sustineriattorneys.com), a client-centric law firm specialising in transactions, corporate legal services, dispute resolutions and tax. He also heads the firm’s Start-ups, Fintech and Innovations Practice divisions. He welcomes views on this article and is reachable at [email protected].
