Could a cost of living crisis be a catalyst for Fintech?
With the words recession and inflation thrown around more often, consumers seem fearful of a potential escalation of the ongoing cost of living crisis, making it an excellent opportunity for fintech to take center stage.
The cost of living crisis is essentially a way of describing a prolonged drop in disposable income after tax and after inflation.
As inflation pushes wages to alarming new heights, it can outpace both wages and benefits, and in tandem with tax and interest rate increases, the crisis will only worsen.
When governments and regulatory bodies begin to draw up strategies and take measures in the form of fiscal policy, the impact on the individual’s cost of living is not always felt directly, but rather comes from overall policies. These guidelines, in turn, do not really focus on the middle ground, i.e. the individual consumer and companies.
Consequently, there are other players seizing the moment to influence the financial landscape: fintechs.
What can Neo-Banks and Fintechs do to help?
Despite not having the necessary resources or the long-term influence to sit at the decision-makers’ table, given their reach, fintechs are still in a prime position to provide banking and financial products to millions of people.
Consequently, that same reach together with fintech’s inherently agile nature can be a trump card in providing support to many as individuals face financial hardship.
Fintechs can reach where the High Street cannot
With BaaS (banking-as-a-service), banking products can be fully customized and specifically tailored to meet the needs of both customer segments and individual customers.
This provides great opportunities for growth as new avenues can be explored and new demographics can be reached.
Now more than ever, this flexibility will allow them to support their customers with practical, no-nonsense financial solutions that can face things like unexpected costs, sudden bills and many other financial disruptions such as BNPL (Buy Now, Pay Later).
In stark contrast to the many predatory credit products out there, providing an appropriate line of credit and promoting responsible credit use can go a long way in improving the financial literacy and financial well-being of individuals and families.
As a smaller financial service provider, a new bank, digital bank or fintech is able to deploy targeted solutions for any user in any situation, even for those struggling to meet their repayment terms.
Moreover, by leveraging big data, machine learning and AI, fintechs can even assemble predictive models to help you navigate costs and further study consumer behavior change.
The fintech challenge
The digital financial industry is growing every day, but the news of fintechs and neo-banks can still have a hard time resonating with demographics other than the tech-savvy.
As such, if fintechs want to challenge the high-street, bridging the gap becomes absolutely essential as it is the way to build consumer confidence and a much more stable foundation going forward.
By leveraging open banking services, fintechs can begin to provide their users with financial education materials, a financial management platform and even use push notifications at certain touchpoints, making them more attractive given the increased financial literacy they provide.
Last word
Although policy management will hopefully solve the cost of living crisis, it is the average person who will feel the effects the most.
As such, it is up to any financial institution to put its consumers at the heart of its activities, and as we have seen, fintechs do this particularly well.
If fintechs can bridge the gap and their reach expands to different segments of the population, their tailored products can certainly be a good outcome in a gloomy economic forecast.
With the words recession and inflation thrown around more often, consumers seem fearful of a potential escalation of the ongoing cost of living crisis, making it an excellent opportunity for fintech to take center stage.
The cost of living crisis is essentially a way of describing a prolonged drop in disposable income after tax and after inflation.
As inflation pushes wages to alarming new heights, it can outpace both wages and benefits, and in tandem with tax and interest rate increases, the crisis will only worsen.
When governments and regulatory bodies begin to strategize and take measures in the form of fiscal policy, the impact on the individual’s cost of living is not always felt directly, but rather comes from the politics of the big picture. These guidelines, in turn, do not really focus on the middle ground, i.e. the individual consumer and companies.
Consequently, there are other players seizing the moment to influence the financial landscape: fintechs.
What can Neo-Banks and Fintechs do to help?
Despite not having the necessary resources or the long-term influence to sit at the decision-makers’ table, given their reach, fintechs are still in a prime position to provide banking and financial products to millions of people.
Consequently, that same reach together with fintech’s inherently agile nature can be a trump card in providing support to many as individuals face financial hardship.
Fintechs can reach where the High Street cannot
With BaaS (banking-as-a-service), banking products can be fully customized and specifically tailored to meet the needs of both customer segments and individual customers.
This provides great opportunities for growth as new avenues can be explored and new demographics can be reached.
Now more than ever, this flexibility will allow them to support their customers with practical, no-nonsense financial solutions that can face things like unexpected costs, sudden bills and many other financial disruptions such as BNPL (Buy Now, Pay Later).
In stark contrast to the many predatory credit products out there, providing an appropriate line of credit and promoting responsible credit use can go a long way in improving the financial literacy and financial well-being of individuals and families.
As a smaller financial service provider, a new bank, digital bank or fintech is able to deploy targeted solutions for any user in any situation, even for those struggling to meet their repayment terms.
Moreover, by leveraging big data, machine learning and AI, fintechs can even assemble predictive models to help you navigate costs and further study consumer behavior change.
The fintech challenge
The digital financial industry is growing every day, but the news of fintechs and neo-banks can still have a hard time resonating with demographics other than the tech-savvy.
As such, if fintechs want to challenge the high-street, bridging the gap becomes absolutely essential as it is the way to build consumer confidence and a much more stable foundation going forward.
By leveraging open banking services, fintechs can begin to provide their users with financial education materials, a financial management platform and even use push notifications at certain touchpoints, making them more attractive given the increased financial literacy they provide.
Last word
Although policy management will hopefully solve the cost of living crisis, it is the average person who will feel the effects the most.
As such, it is up to any financial institution to put its consumers at the heart of its activities, and as we have seen, fintechs do this particularly well.
If fintechs can bridge the gap and their reach expands to different segments of the population, their tailored products can certainly be a good outcome in a gloomy economic forecast.
