FinTech’s road to financial wellness

During London Tech Week, Deloitte partnered with Innovate Finance to host ‘Money Talks: VCs Take The Stage’, where we turned the tables on the traditional dynamic of start-ups pitching to venture capital companies (VCs) and asked them to pitch to a crowd of start-ups (you can watch a video summarising the event on YouTube).

Dan Smith of Anthemis Exponential Ventures (AEV) was one of the VC ‘pitchers’ and he spoke about their focus on investing in start-ups that drive financial wellness. In 2016 Anthemis Group and Exponential Ventures joined forces to create a joint investment vehicle dedicated to the theme of financial wellness. This concept got us thinking: don’t all FinTech start-ups have a focus on financial wellness?

Six or seven years ago it seemed that nearly every new FinTech carried the promise of improving financial wellness. But with the boom in the numbers of FinTech start-ups over recent years and noise in the market, keeping track of who’s focussed on improving financial wellness and what they’ve achieved has become a little harder. So, we’ve looked at some of the biggest issues that FinTech is solving and some of the start-ups who are addressing them.

1. Financial inclusion
   According to the World Bank, 1.7 billion adults remain unbanked, meaning they don’t have an account at a financial institution or through a mobile money provider. Then on top of this, there are the underbanked.
   
   The unbanked have no bank account at all, the underbanked have an account, yet are using it to withdraw all their money once a year, missing out on the financial inclusion that a bank account can bring. Start-up Monese, part of the AEV investment partnership, is trying to solve this problem. Monese is an inclusive, instant and on-demand mobile current account, and anyone in Europe can open a UK current account in minutes with them. Start-ups like Monese aim to not only increase the number of people with access to financial services (the unbanked), but perhaps most importantly, increase the amount of people who use those services regularly (the underbanked).
2. Household savings
   According to a study by the Money Advice Service in 2016, more than 16m people in the UK have less than £100 in savings, with most living pay cheque to pay cheque. Qapital, another start-up which the AEV joint investment vehicle has backed, is an everyday banking app that allows users to create goals and rules to drive saving habits. Helping consumers budget and be more aware of their financial activity has been a huge focus for start-ups like Pariti (recently acquired by Tandem) and Plum, and is the focus of many FinTech start-ups around the world.
3. Investing
   It’s one thing to build up a pot of money (saving), but it’s also vital to make that money work hard for you (investing). Investment platforms like Moneybox and Nutmeg are giving everyday people the ability to make their money go further. Robo-advice in particular is making it considerably easier for consumers to invest their money in a way that matches their circumstances and attitude to risk. A key benefit of these start-ups is that they often have low minimum investment limits, which has led to younger generations and those with small savings pots being able to invest.
4. Insurance
   A recent report found the insurance sector lags only behind the utilities sector when it comes to disappointing customers with a poor online customer experience. These bad experiences are causing consumers to be put off dealing with insurance and insurers, meaning those consumers often aren’t financially protected.
   
   InsurTech companies like Lemonade, however, are using behavioural economics and new technology to create aligned incentives between the insurer and the customer. Laka is creating communities (specifically cyclists for now) of insurance pools where costs are shared after a claim rather than charging upfront premiums. These start-ups are tapping into evolving customer expectations, adapting to the needs of the millennial generation and generally making insurance easier to access and understand.
5. Employee financial wellness
   Some may argue financial wellness is just a buzz phrase, but it’s becoming an issue that employers are really starting to take serious notice of and financial wellness programmes are on the up. The annual Employer-Sponsored Health and Well-Being Survey from the National Business Group on Health and Fidelity Investments found that 84% of 141 large-to-mid sized companies in the US now have programmes in place, increasing from 76% the year before.
   
   Companies like ABAKA, a financial wellbeing app and also part of the AEV joint investment vehicle, enables employers to directly engage with their savings and pensions by providing them with financial education and advice through Ava, a unique Intelligent Agent. Similarly, Payoff, also part of the incubator, applies science, psychology and technology to help members reinvent their relationship with money.

FinTech has achieved a lot over the past ten years, challenging incumbent practices and increasing options for consumers. It’s clear that FinTech offers great potential for improving the world’s relationship with money and customer experiences more generally. However, recent studies, for example the FCA’s Financial Lives Survey, show that there is still some way to go. Focusing venture capital on great ideas that promote financial wellness is exactly the kind of foundation stone that can help build a more inclusive financial services sector.

Deloitte helps a range of start-ups scale their ideas and grow their businesses every day. If you’d be interested in having a chat about how we do this, we’d be happy to host you in our FinTech Lab.