The Current State of #Fintech: Save vs. Spend

When it Comes to Financial Literacy, #Fintech Is Dropping the Ball

Americans face serious challenges because we’re doing a lackluster job of managing our money, personally and as a nation. Our booming fintech industry could be part of the solution but is at risk of becoming part of the problem instead.

Just two of every five Americans spend less than they make. Two spend all they make, and one out of five spend even more by borrowing (FINRA Investment Education Foundation Survey). This is little changed since 2009 – the height of the the financial crisis. What’s even more worrisome: 76% of respondents gave themselves “very high” ratings on financial knowledge, up from 67% since the financial crisis, but just 14% could correctly answer five “everyday life” questions about interest rates, inflation, bond prices, mortgages and risk.

Unfortunately, the fintech industry – and we’re very much part of it – appears to also suffer from a disconnect between self-perception and reality. Disrupt is one of the most overused words in fintech but there’s little disruption happening when it comes to breaking Americans’  habit of spending too much and saving too little. As we face a national debt approaching $20 trillion and an ongoing debate about when, not if, Social Security will go bankrupt, the fintech industry is choosing to focus on finding more effective and convenient ways to get people to spend or borrow. This isn’t innovation, it’s iteration.

According to Citigroup’s “Digital Disruption” report published in March, of the $19 billion invested in fintech last year, up from $1.8 billion in 2010, more than 70% went into the “ ‘last mile’ of user experience in the consumer space” – in other words, spending.

Media coverage of fintech reflects this. Breathless stories about fintech startups tend to focus upon companies that help people to send and spend. A 60 Minutes story in May about “the fintech revolution” featured a firm that helps companies accept international payments online. Stories about fintech industry trends in publications ranging from the Wall Street Journal and the New York Times to Forbes often spotlight payment and lending companies and services.

In July, boutique investment bank Keefe Bruyette & Woods launched a financial technology index on Nasdaq to provide a benchmark for fintech investors. But of the 49 companies listed – many of them veteran financial services players rather than fintech pioneers – less than a half-dozen actually do something to help consumers to save and invest their money. The vast majority of the rest are focused upon – you guessed it – ways to make it easier for people to send and spend their money.

There are exceptions, of course. Acorns, for example, has an app that gives people a way to automatically invest their spare change and encourage further saving and investing. CAIS has built a platform to give financial advisors, and their clients, access to due diligence and opportunities to invest in blue chip hedge and private equity funds. Envestnet has built an alternative wealth management eco-system for financial advisors and their clients that is more efficient and transparent than what major Wall Street wealth management firms have.


But compared with what fintech is doing in payments and lending and the wall-to-wall media coverage of the same, these seem like drops in the bucket.

If more voters, and the politicians they elect to represent them, had a clearer understanding of how to manage their personal finances, investing and retirement, America would be in a stronger position to solve its most pressing economic issues.  

The fintech industry is missing out on a huge business – and public relations – a genuine opportunity to improve the average American’s financial literacy.  It’s time to get started.

SOURCE: Digital Disruptions: How FinTech is Forcing Banking to a Tipping Point (pp. 1-112, Rep. No. March 2016). (n.d.). Citi GPS: Global Perspectives & Solutions.
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