March 4, 2020
The financial tech industry is often portrayed as a service mostly used by youngsters. Even though 64% of banking customers have used fintech industry services, the majority of those customers consist of the younger or middle-aged population. In fact, even the financial industry, in general, does not make strong efforts to provide financial services for the retired people. This is especially ironic since people over the age of 60 make up for the wealthiest part of the financial system.
This begs the question: What will be the future of the fintech industry keeping in mind the aging world population and their specific financial needs. Recent developments in the AI tools are promising to enable fintech inclusion for the older population. In this blog, we will seek to understand what will be the future of the fintech industry keeping in mind the drastic change in their future customers and the steps they can take towards financial inclusion.
Today, the general population is living much longer than the previous generation due to advancements in technology and the healthcare industry. Hence, governments and businesses need to evolve with the needs of the changing population demographics. For instance, traditional banks were not designed for clients that lived for a longer period of time. Even today, only a minimal percentage of bank customers are over the age of 100. However, this demographic is likely to change drastically in the coming years.
Hence, the future of the FinTech industry will largely consist of companies offering products and plans devised for clients who will live long lives and want to stay financially stable. Clients of these ‘Longevity Banks’ will evidently have more accumulated wealth on an average and longer investment periods. Hence, future fintech products will need to have a comprehensive take on insurance, taxes, and regulation.
This might also result in the growth of the WealthTech industry which will be simplified for the older generation. WealthTech industry unites wealth and technology and provides digital solutions for more efficient wealth management. In the future, WealthTech companies will offer services to people over 60 with the help of AI and big data. For instance, the use of Robo-Advisors will become more prevalent.
Robo- Advisors are machine learning algorithms that provide financial advice to people so they can make profitable investments. They take into account factors like investment options, risk aversion, yield targets and many more. Similarly, companies in the Robo-Retirement industry will help clients manage their retirement savings. Furthermore, digital tools and platforms will increase customers’ access to their assets and investments. Finally, micro-investing will become far more popular than it is now.
The growth of the aging population will also result in the development of other financial products like special savings accounts and specialized retirement plans. In fact, financial advising will be done keeping in mind the long age expectancy of the clients.
It is highly possible that the fintech industry will start proliferating products like new investment strategies and longer-dated bonds. In fact, some financial industry players have already started providing services like these. For instance, HSBC has started creating Alzheimer- friendly products while Barclays is developing a software that is senior-friendly.
AgeTech services are a subset of the HealthTech sector. These services are specifically optimized for people over 60. This will play a major role in the future of the fintech industry as they will enable older clients to conduct banking seamlessly taking into account their medical background, issues, and contingencies. AgeTech services include products like medical alert systems, banking interfaces, and phone amplifiers. These services will enable ‘longevity banks’ to work with older clients seamlessly and offer less complex services.
It is a big possibility that WealthTech and Age Tech will come to be seen as complementary services to the functioning of ‘Longevity banks’. The rising life expectancy will definitely create more challenges for the financial industry. However, with the combination of the right financial, AgeTech and WealhTech solution, the fintech industry will have a lot of oppurtunity to grow.
Experts say that the first ‘Longevity Valley’ i.e. the hub for longevity banks will most likely be in Switzerland. This is because Switzerland has a high concentration of HealthTech, AgeTech and preventive medicine structure. In fact, it has been recognized by the UN as the most AgeTech friendly country in the world.
Switzerland is extremely stable when it comes to social, political, and financial frameworks. Moreover, it already houses a significant number of the aging population that will fit the client profile in addition to the existence of the necessary AgeTech ecosystem. Swiss Investment banks are efficiently regulated and supervised. In fact, they are one of the countries that are leading the developments that are evolving as a result of the digitization of the banking industry.
There are many theories on how AI and FinTech will all diverge into a single advanced technology. The future players of the fintech industry will have to evolve systems that treat technology and finance as one single unit. Evidently, this will offer the banking industry an unlimited potential to grow. Historically, humans beings have been known to desire longevity in addition to health and wealth. However, the near future will be the first possible time where they achieve all three. It will be interesting to see how the fintech industry will evolve to accommodate the needs of a completely different demographic as clients.
This blog was authored by Etee Dubey. It was edited by Tony Benoy.