This report is part of the ‘‘Fintech for Social Inclusion’’ project supported by the UK’s prosperity fund. You can download the report in it’s full here.
Financial inclusion demands the availability of digital financial services, as well as the knowledge and skills to use such financial products and services. Therefore, creating an effective financially-inclusive ecosystem calls for the promotion of financial literacy.¹
As fintech frees opportunities from traditional financial institutions, thus liberating the individual from complexities, it also places the burden of core knowledge on the individual rather than the institution, thus requiring a higher intellectual bar for successful engagement with fintech products.²
Financial literacy is a necessity across all groups of people, regardless of their wealth and income. According to CB Insights, “Millennials will inherit the largest amount of personal wealth of any generation — and personal finance apps are emerging to seize on this opportunity.” It is estimated that 92 million millennials will soon be in what Goldman Sachs calls their “prime spending years.” In aggregate, they command $1.3 trillion in annual spending. They have a deep antipathy to traditional financial institutions. Promoting financial literacy within this group is also significant to prevent the mismanagement of such sized wealth.
Not only the wealth-inheriting young population but also other groups, who lack the necessary financial knowledge or skills, are looking for solutions to have better control over their finances and achieve their desired life goals.
Money management fintech companies are designed to improve users’ financial literacy, helping them understand their income, expenses and allow them to track their spending in a simple way. Often confusing, understanding the basics of managing budgets, and making informed spending, and saving decisions are crucial before setting realistic goals.
Highlights from the UK
In the UK, money management platforms come in a variety of shapes and forms. Osper & GoHenry aim to provide a solution for parents to manage their children’s money, teaching kids how to spend, budget, and save their allowance. Moreover, Tully seeks to change people’s behavior- from spender to saver to investor, through assisting adults in building a budget and understanding precisely what their money situation is, as well as paying off their debts in a timely manner.
The self-explanatory Money Dashboard helps people save money, plan and achieve their goals, ranging from buying a house, saving for a holiday, or be completely debt-free. Cleo is an AI-powered chat interface helping people save more and control their finances. Cleo can give instant answers to questions about spending and affordability of purchases, and snapshots of savings while making the interaction humorous and fun. Similar to Cleo, Plum is an AI assistant, facilitates seamless savings after analyzing its customers’ spendings once they link their bank account to Plum. The UK residents have another alternative, Moneybox, which round-ups purchases to the nearest pound, and the spare change gets put into an investment account automatically, according to each individual’s risk profile: cautious, balanced and adventurous. In addition to consumer-facing companies, there are fintech companies that aim to bring solutions to businesses. For instance, Soldo offers prepaid cards to businesses, providing transparency on where and how the employees are spending and automatically preparing expense reports.
In addition to money management platforms, the UK has taken deliberate steps in spreading financial literacy. According to an article, England made financial education mandatory in state-funded schools starting in 2014. At the time it appeared to be a global leader in the effort to raise financial awareness among young people. MyBnk reaches 35,000 young people a year and has the UK’s most substantial impact based on teaching financial education. However, the UK, like many other nations, is still struggling with the problem; in the latest OECD survey of adult financial literacy, the UK ranks 17th out of 17, on a level pegging with Albania.
Highlights from Turkey
Similar to the UK, Turkey’s financial literacy is a problem that requires more attention from industry players, NGOs, and the government.
One of Turkey’s most extensive and continued initiatives in promoting financial literacy is Parami Yonetebiliyorum. The leading program created in partnership with Visa, UNDP, and Habitat aims to increase financial literacy, initially created to teach budgeting to the Turkish youth. With the shared vision, FODER (Financial Literacy and Inclusion Organization) is another active player that cooperates with government, private institutions, and other civil society organizations. They have offered financial education programs to young people, women, and farmers.
Parami Yonetebiliyorum
Parami Yonetebiliyorum (I Can Manage My Money) is the largest financial literacy project in Turkey in terms of geographical coverage and volunteer network, launched in 2009 by Visa, in partnership with the United Nations Development Programme (UNDP) and Habitat Association, along with the support from 27 Turkish banks. The multi-partnered support from the public and private institutions, and NGOs has enabled the program to be highly sustainable and inclusive.
In the past ten years, the training delivered to 1.5 million young people, entrepreneurs, farmers, and blue-collar workers. Habitat has played a significant role in expanding the program by integrating its network of volunteers. Adopting a “train the trainer” model, the program reached more than 2k volunteer trainers in 81 cities. Project’s reach is expanded through collaborations with various public institutions and ministries, such as Ministry of Education, Ministry of Family, Labour and Social Services.
The program initially started with a single content targeting youth aged between 15–30. Based on the feedback from volunteer trainers and trainees, today, Parami Yonetebiliyorum training is available in 6 segments: High school students, university students, young adults, entrepreneurs, farmers, and blue-collar workers. Two new segments will be added by the beginning of 2020, addressing senior citizens and women cooperatives. The program also offers a mobile budgeting app, where people can track their budgets and can set reminders to pay their bills on time.
The project’s impact is measured on an annual basis. The recent study (2019) reveals positive results showing a significant difference in the financial knowledge and behavior of the people who had received the training.
Parami Yonetebiliyorum contributes to 6 SDGs (Sustainable Development Goals) which are no poverty, quality education, gender equality, reduced inequalities, responsible consumption and production and partnership for the goals.
With regard to money management platforms, Turkey has fewer players in this area. Similar to GoHenry and Osper, Manibux offers Turkish parents a way to manage and track their children’s spendings through a prepaid card and an app while teaching the children how to manage their pocket money.
Manibux
Manibux, established in 2016 by Canan Bayrak (CEO & Founder), offers a solution designed for parents to track and control their children’s pocket money through a prepaid card and an app. Its recent piggy bank feature is designed to teach children how to save money. Manibux is able to operate without an e-money license, by utilizing ininal’s API, they already comply with related regulations. Manibux’s prepaid card is available for purchase online and key retail stores; the card can be used for online and in-store purchases, where credit and debit cards are accepted. Bayrak’s 16-year counselor background and experience as a mother were for her to realize the need for a solution to keep track of her children’s spending.
Manibux is preparing to expand its operations into foreign countries with a high Turkish population, such as Germany and Belgium, by Q1 2020. Bayrak rationalizes, “The parents and the kids are the same everywhere. Once we find the right strategic partners overseas, we will only need to change the language on our app.”
Despite its current success, Bayraktar has initially faced adoption problems “It is hard to change parents’ behavior around giving pocket money — switching from cash to digital,” says Bayrak. While the children have been very fast to adapt to a digital pocket money solution, the parents have been slower.
“Another bottleneck in Turkey is the approach to fintech and start-ups, while being a woman raises a lot of eyebrows, too,” admits Bayrak. This underlines the need for progress towards equality between men and women. “Especially for Manibux, understanding the relationship between a mother and child is extremely important,” stresses Bayrak.
Capital flow into start-ups make the biggest hurdle in Turkey, observes Bayrak explains:
“… and therefore we need to be very careful when we take risks, and if we do, it needs to be extremely calculated. We need to take risks to bring our visions into life; however, due to lack of investments, we cannot take steps forward easily. As the world is advancing very fast, this is why we are always left behind,”
With the introduction of PSD2 regulation, the introduction of open-banking infrastructure, the number of money management platforms is expected to increase significantly in Turkey.
¹ Financial Literacy is key to financial inclusion
² The Importance of Financial Literacy in the Age of E-Finance
You can continue the report with the ‘Expanding Fintech For Good: Impact Investment’ chapter from here. You can also download the full report from there.
Credits
Project Management:
Duygu Kambur, imece
İrem Topçuoğlu, imece
Research and writing:
Canberk Dayan
İrem Topçuoğlu, imece
Contributors to the project:
Esra Akın, Aeva Ltd., Director
Hande Özüt, British Embassy Ankara, Prosperity Fund Coordinator
Design: Monroe Creative Studio
This report was reviewed by Fintech Istanbul and Turkey startup ecoystem’s data was collected through startups.watch.
