LONDON, UK — One of the major themes throughout the two-day Innovate Finance (IFGS) event was financial inclusion.
The Summit convenes industry leaders ranging from innovators, institutions, and regulators to policy-makers, startups, and investors in one place.
The agenda shone a spotlight on the global fintech ecosystem, with an increased focus on the critical areas of enhancing, empowering, and ensuring that fintech and financial services are sustainable and inclusive to all.
On day one April 4, Sebastian Siemiatkowski, co-founder and CEO of Klarna, discussed post-Brexit regulation, advertising methods, and the future of innovation in Buy Now, Pay Later.
He explained that traditional banking is not currently working for consumers because many of the services on offer do not benefit society. He said the future is about personalized data, and so inevitably, the banking sector as an industry will shrink but become more bespoke.
Klarna officially launched its card on Jan. 26, 2022, with 100,000 active users. BNPL usage in the UK quadrupled in 2020, hitting £2.7 billion in transactions, according to official data.
The Financial Conduct Authority found that 5 million people used BNPL products between the onset of the pandemic and the end of last year.
‘Stop the Klarnage’
But perhaps the most interesting discussion centered on how Klarna advertises and how this marketing strategy impacts consumers.
There have been critiques from many sections of society, most notably the campaign to “Stop the Klarnage” led by Labour MP Stella Creasy. The New Clause 7 – the Financial Services Act was debated in parliament criticisms include:
- The targeted online ads.
- Consumers’ lack of understanding of credit.
- The potential to create indebtedness.
In response, Siemiatkowski argued that “some of our branding and advertising is tied to promoting Klarna as a payment method. But in the UK – since we only offer credit – we took some of that with us, which wasn’t great. We should have thought that we’re so deeply associated with credit, and that was a mistake on our side.”
“The other side about our brand marketing is this idea that trust is built through a lot of middle-aged white men in normal offices shaking hands, and consumers out there associate that with trust. I’m sorry to say so, but that’s not the case. We were trying to market a brand in a way that is approachable, available, and speaking the customer’s language.”
This conversation around financial literacy continued through IFGS. On day two, a panel discussion called “Using Technology to Drive Financial Inclusion” was well delivered. Panelists included:
- Mary Agbesanwa, FinTech Growth Lead, Seccl
- Louise Hill, Co-founder & COO, gohenry
- Karen Kerrigan, COO, Moneybox
- Francesca Carlesi, Molo Finance
- Sophia Guy-White, Co-Founder and Head of Customer Success, Generation Home
They discussed enabling more inclusion in fintech/wealth tech through their proposition and the innovation driving this.
Hill founded gohenry when she realized kids were being left behind in the financial inclusion revolution.
“In an increasingly cashless, it has become even more important to teach kids and young adults about finance,” she said. They have a prepaid debit card and app that teaches kids to budget so they spend more wisely.
‘Investment has become a misleading word’
Last month gohenry commissioned research with CBI Economics into the impact of financial education.
They found that of those currently unemployed and actively seeking work, 41% didn’t receive any financial education, compared to just 9% who did, and 46% of those who didn’t receive any financial education as a child are earning £15,000 or less per year, which is less than half of the national average income in the UK.
Kerrigan notes that wealth management is elite, serves 2% of society, and navigating the financial industry alone can be confusing.
At Moneybox, they aim to remove these barriers with their app, encouraging saving and investing.
Accessibility is crucial, and opening an individual saving account (ISA) can encourage healthy investment habits. “you only need a pound to open one, and you can also consolidate existing pensions,” she remarks.
She also highlighted that “investment has become a misleading word” the rise in speculative trading, meme stocks, and “fin-influencers” (financial influencers) on TikTok has been incredibly harmful to a lot of people’s financial literacy.
However, the panel could agree that education can solve this, but it’s also about striking the right balance between unregulated advice and appealing to consumers through social media.