European FinTech Association announces public launch
The financial services sector has been revolutionised over the last decade through the introduction of new and innovative technology.
This sweeping change means that consumers and businesses are now able to access financial services, banking and investment opportunities digitally and at the touch of a button.
Consumers across Europe also no longer need to visit brick-and-mortar banks or organisations to ensure their own financial wellbeing.
However, there is a consensus from industry players that this revolution is still in its early stages.
To drive further growth and the adoption of new technologies, particularly in light of the difficult circumstances many face as a result of COVID-19, fintechs across Europe have united to form the European FinTech Association (EFA).
EFA is a not-for-profit organisation that represents more than 20 leading fintech companies of all sizes across Europe.
It brings together the previously established EFAlliance and FinTechs4Europe to give one voice to those operating in the European fintech sector.
The organisation will operate against several key goals:
- To promote, communicate and develop cooperation and dialogue between fintechs in the EU.
- To deliver a consistent industry message and speak with one voice for the sector, while highlighting key developments affecting the industry and working on solutions.
- To advocate for and represent the interests of members at a political level, particularly in terms of interaction with EU institutions and relevant regulatory bodies.
To achieve this EFA will serve as a resource and forum for those in the industry. This will include the sharing of information, providing networking opportunities for members and policymakers and education opportunities.
It says: “Innovation and digitisation has introduced real competition in the EU, improving outcomes for consumers and businesses, empowering each and everyone in their financial decision making.
“By sharing our deep tech know how, we foster sound tech regulation that is beneficial for the overall EU financial market, making people see the advantages of technology for finance.”
The organisation aims to build a ‘digital single market’.
It supports, for example, the development of a strong single market for financial institutions that offers consistent consumer protection, future proof regulation and a competitive industry for both fintech startups and more established entities.
Similarly, it promotes safe and secure digital finance. Key to this will be the transparent use and protection of data and the building of risk standards across the EU.
By encouraging innovation, EFA aims to encourage consumers to look beyond traditional banking to fintech providers that deliver new, user-friendly technology.
FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.