Role of Fintech in Improving Financial Literacy and Education

Role of Fintech in Improving Financial Literacy and Education

Children should learn financial literacy in their school like an ordinary course exactly the way they learn mathematics, science, literature, and primary skills. A person who understands finance early in life gets more time to enjoy compound interest rates, build a higher credit rating, and take more risks. Plus, the positive effects benefit the entire community.

Financially knowledgeable people are less prone to bankruptcy, make more investments and take calculated risks in uncertain situations. Thus, they can live the least worrisome and stressed life. Financial literacy can boost society's overall health. Fintech emerged as an advanced tool to promote financial literacy at the start of the fourth industrial revolution, an era of increasing risks, opportunities, and uncertainties.

The elimination of intermediaries has made it possible for almost all operations to be performed with a smartphone, an user-friendly tool, which shortens the distance between the finance world and young users. A low level of financial literacy creates complications when using financial products.

Fintech eliminates such complications and increases financial literacy worldwide. Many intuitive, user-friendly, and interactive apps can teach personal finance to various age groups. Want to know the role that fintech plays in improving financial inclusion, literacy, and education? Check the points below:

Make Banking More Accessible
Fintech can boost financial inclusion by making banking more accessible to users. A high percentage of the world population can't access banks but can use a smartphone. App-based smartphone solutions help unbanked people by giving them first-time access to a variety of digital products, such as instant loans, savings, bill payments, money transfers, and high-yield investments.

Promote Other Literacies
Fintech can spur other types of literacies, including environmental literacy. It can occur indirectly by saving huge amounts of paperwork as most convenient non-fintech contracts are generally printed and not stored on an individual device. The issuing company usually stores contracts directly via innovative fintech companies, which help in controlling pollution. For instance, Kakubi, a new kid on the block, gives access to other tough-to-buy EUA carbon allowances (exchange-traded certificates, which represent the right to eradicate one ton of carbon dioxide).

The acquisition of every allowance via Kakubi means polluters won't be allowed to pollute a ton of carbon dioxide, which works under certain conditions. Fintech can prove to be positive only in the existence of other vital literacies, like technological literacy (capabilities of using, understanding, managing, and analyzing technologies effectively and safely) or media literacy (capabilities of accessing and critically analyzing media messages).

Plus, Fintech technologies may degrade financial health as they may cause impulsive purchases and indecisive investments. Mobile apps, which support operations and save the time between asset acquisition and consumption can cause impulsive purchases and overspending if not supported with sufficient knowledge and training.

Increase Awareness of Cryptocurrencies
The world of cryptocurrencies is a great example of possibly harmful technology for users with no sufficient financial literacy. It causes unexpected riches for a small minority of the population (including fortunate investors, sophisticated investors, and early adopters) and massive losses for the rest of the population. Cryptocurrency trading and financial literacy are negatively correlated. Financially literate people are more aware of the cryptocurrency's existence and least likely to trade them mainly because of their higher capabilities of perceiving risks.

Even though cryptocurrencies require technology and media literature, the most crucial skill is financial literacy. "Generic" economy doesn't isolate such digital currencies. Like all financial assets, cryptocurrencies are largely assessed by the economy's primary macro-drivers, like interest rates. Most of their excellent performance seems to be linked to the long period of almost no interest rates.

The Bottom Line
The points above reflect how fintech is significantly improving financial literacy, education, and financial inclusion. The latest technologies can help in boosting global well-being by escalating financial literacy but only if correctly introduced in learning programs. Countries are getting increasingly aware of this and financial literacy is gradually invading certain policy decision-making. Implementing fintech effectively can help in this process.