Fintech for Financial Health

In the first of a series of two blogs, Carl Packman, Research and Good Practice Manager at Toynbee Hall – our partner for the Financial Health Fellowship – explores the potential for fintech to support financial health and reach those currently underserved by mainstream finance.

For a couple of years now, conversations in the financial health world have often focused on whether fintech is a possible solution for the problems we perceive.

Sir Mark Walport, the Government Chief Scientific Adviser, unwittingly offered us an answer to this question, when he said:

“Like any technology, fintech is neither good nor bad in itself. It is the specific uses of the technology that can be good or bad.”

Perhaps those of us who are interested in financial health, particularly in low-income households or those underserved by mainstream financial services, should perceive fintech in this way:

Fintech is not necessarily the end in itself, but has the potential to be used in a way that offers solutions.

But what is fintech? Digging a little deeper, I found two definitions by Thomas Schellen, the editor of Executive Magazine.

The first, his ‘cuddly’ definition, is products that result from firms that “build and implement technology which is used to make financial markets and systems more efficient”, in areas involving “crowdfunding and peer-to-peer lending to algorithmic asset management and thematic investing, as well as payments, data collection, credit scoring, education lending, digital currency, exchanges, working capital management, cyber security and even quantum computing”.

His second definition: “Other definitions of fintech are more aggressive, emphasising that companies in this area are commonly tech start-ups out to push the buttons of established banking and financial services companies by being more agile, cheaper and absolutely superior in innovating information technology products and services when compared with the big banks.”

Such promise! But we don’t get a sense that there is any particular push for fintech to challenge or disrupt existing services for those who are currently underserved.

For example, my colleague Haydn Jones recently reminded me that many apps from fintech providers require users to link up to a bank account, which already excludes those 1.7m people in the UK without a bank account. Cynically, this may be because of assumptions about the digital skills of those who are not ‘financially included’.

New research by Toynbee Hall (for Lloyds’ Consumer Digital Index 2017) shows the potential for people without a bank account to use digital services from fintechs and other providers:

  • 87% of people without a bank account either sometimes or always use the internet
  • 27% of people without a bank account primarily use the internet to look for deals online, while 21% primarily use it for shopping
  • 65% are either very or fairly confident using search engines and comparison websites
  • 52% are either very or fairly confident using social media and leaving feedback on websites
  • 45% of people without a bank account own and use a smartphone

Another report from Toynbee Hall, looking at the informal savings behaviour of low income households, recommends that fintech providers liaise with services and organisations developing principles around financial health, as a way of ensuring that existing and future financial products and services are designed with the digital needs of low income households in mind.

For this reason, we’re extremely excited to be working with the Finance Innovation Lab on the Financial Health Fellowship, a six-month programme developing the leadership capacity and business skills of innovators focussed on financial health. Through the Fellowship, we’ll be able to share our expertise in financial health with innovators from the fintech world and beyond. By working together right from the beginning we can make sure that innovation provides a social good for those it seeks to serve.

Financial Health Fellowship is open for applications until 10 April 2017.