Guest Post From Arindam Nag, CEO of CentSai | A lead generation platform where financial services companies connect with millennials and Gen X through education and storytelling.
“An investment in knowledge pays the best interest.” – Benjamin Franklin
In the next few years, one of the most significant investments that financial services companies can make – from big banks to robo-advisors – is in educating its next generation of customers.
The credit crisis of 2007–2008, the subsequent distrust in big banks, and the rising digitization of financial products have put the spotlight on financial education.
A recent PwC study showed that only 24 percent of millennials understand basics of finance, leaving the rest at the risk of making bad financial moves – from making bad investment decisions to taking on untenable amounts of debt to not saving enough for the future.
But what’s driving the need for financial education today? The biggest factor is the rise of the financial technology – or fintech – sector. Numerous tech- and finance-savvy entrepreneurs are making efforts to reach consumers. But consumers respond best when they are aware of what they need and why they need it – the ultimate role of financial literacy.
Take the SeedInvest platform, for instance. A decade ago, very few retail investors could dream of investing in a startup. It was left to venture capital firms and rich angel investors. But today, SeedInvest helps the average person to invest as little as $500 in a vetted startup.
Still, this average person needs the right financial education to learn how a startup works and what role SeedInvest plays. This democratization of the financial services industry is happening across a wide spectrum. Mobile devices and apps have fostered access. The fintech sector has responded by creating products that work well on these devices. Financial literacy brings all this together by helping consumers make the right choices at different stages of their lives.
Those future customers – mainly millennials and Generation Xers – need to make the right financial choices. This is essential if we want to avert another credit crisis like the one that led to the Great Recession in 2007 and 2008.
Today, there are around 80 million millennials in the United States, and given how few of them are financially literate, education is essential. The “magic” of compound interest, the beauty of 401(k)s, and the basics of investing in stocks are not easy for many people to understand; but they are fundamental to a stable life.
Traditionally, the U.S. education system has not made financial literacy compulsory. The onus of explaining the pros and cons of financial decisions is left to a family member – or friend, or colleague – who (hopefully) studied economics in college. While I’m a big advocate of STEM, why do we insist on teaching the Pythagorean theorem, but not how to budget and save?
This brings us to the role of the financial services sector in educating the public. Every point of contact by a financial brand is an opportunity to bond with consumers. But make no mistake: teaching finance is not easy – especially doing it in a way that resonates with people.
Bank of America has partnered with Khan Academy to ensure that it engages consumers. Visa adopted the NFL as a vehicle to teach its customers finance. JP Morgan Chase even set up its own newsroom to inform the public.
The democratization of finance is nascent; and if you are a bank, an investment firm, or a growing consumer-oriented fintech company, you will lose out if you don’t adopt education and engagement as part of your overall marketing program.
Teaching helps make an emotional connection. On a grand scale, you can build a community – and this can be powerful. There’s a reason why Facebook is attracting billions of advertising dollars every year. Consumer product companies find it valuable to target communities on the platform.
At CentSai, we’re building a community where – first and foremost – people learn how to cope with their financial needs. Once they acknowledge that they have a problem – anything from needing to lower their interest on a student loan to needing a different credit card – we bring them closer to a solution.
An effective digital presence with high-quality educational content is an essential part of the transparency and trust that financial services need to continue harnessing. To that end, CentSai’s burgeoning community brings financial companies closer to the public. While the platform is a work in progress, it strives to deconstruct the fine print of personal finance every step of the way.
Our research has shown that an average American uses about 30 financial products from age 16 until death. This can start with car insurance and extend to saving for one’s own funeral. Each financial product has a purpose, and hence an opportunity to connect with consumers. The goal is to demystify the perceived complexity and risk.
What’s more, we’re building a community where users can engage and ask each other questions. (As we all know, there is no such thing as a dumb question.)
If you’re a bank or an investment firm – or even an up-and-coming fintech company – and your aim is to connect with the public, financial education needs to be an integral part of your marketing strategy.
CentSai is offering securities under Regulation CF and Rule 506(c) of Regulation D through SI Securities, LLC (“SI Securities”). The Company has filed a Form C with the Securities and Exchange Commission in connection with its offering, a copy of which may be obtained at: /centsai.inc"
 CentSai research, 2015
This post was written by SeedInvest on August 30, 2017
Financial Education Will Drive Fintech Future