Wealthtech platforms are solving the financial literacy gap

The growing significance of the financial literacy gap

Covid-19 has testified to the value of creating a carefully built and monitored financial corpus. Due to unexpected job losses and wage reductions, people have experienced financial hardship; businesses worldwide have encountered never-before-seen difficulties. The positive side of the coin is that individuals have come to understand how vital saving and investing are for overcoming challenges. Consumers became aware of how sound financial management can help them safeguard their future and avoid dealing with unexpected expenses.

Given the accelerated rate of digitalization in the world and the emergence of fintech firms, many digital solutions have assisted customers with saving and financial literacy. Numerous personal financial applications are now available that may track and organize one’s spending and investments, encourage disciplined saving, as well as check and raise one’s credit score. Some apps even assist users in locating unnecessary subscriptions, so they can cancel them and concentrate on saving money. Many of these apps include tools and techniques for guiding investments. These apps are an excellent approach to advising customers about investing possibilities and can be seen as a crucial tool for customers’ financial literacy. However, users should always know the apps’ reliability, usability, and security.

Wealthtechs bridging the gaps

Increase outreach: Even though many Indians are switching from physical to financial savings, the market is still incredibly underdeveloped, with only 2% of Indians investing in equities and even fewer in bonds.However, increased outreach to Tier 2 cities, where most Indian households are located, will be essential to closing this gap. By giving investors of all ticket sizes and demographics top-notch financial services, wealthtech companies are reducing this gap. They can use technology to their advantage to reach a wider Indian audience and strengthen their presence in rural India by leveraging their low-cost offerings and improved user experience. Asset allocation, portfolio rebalancing, investment policy statements (guardrails), product marketplaces, etc., are value additions that existing investors can access at lower costs. Wealth techs are developing tools to make this possible.

Enhancing customer experience: First-time investors are frequently deterred from investing because of the technical terminology, lengthy onboarding procedures, and vast selection of goods in the sector. For both existing and first time investors, wealthtech reduces the financial literacy gap. However, new platforms in existing asset classes (AIFs, PMS, Bonds, Gold Bonds) and new asset classes combined – structured notes, international equities, structured credit products, cryptocurrency, fractional commercial real estate, asset-backed finance products, P2P lending products, and revenue-backed finance products—are being introduced for new, first-time investors, especially HNI investors. Although wealthtech platforms have already taken many measures to streamline the processes and improve the user experience, there is still much room to improve the entire customer experience. Companies will continue to simplify present procedures as the industry expands, working with authorities to give investors a simple investment experience. This will support the expansion of the sector and will bridge the financial markets and investors’ gaps.

Integrate technology into the value chain: Companies continuously modernize traditional investing by incorporating cutting-edge technologies like artificial intelligence and predictive data analytics to make wise investment decisions. Platforms effectively control risk and cut costs by implementing technological advancements, such as automated back-end operations, throughout the asset management value chain. Additionally, eliminating any emotional bias from investing and maximizing returns can be accomplished by making decisions that are solely supported by realistic data and impartiality.

Digital Push: Online transactions are typically preferred by working-age millennials who are tech-savvy. The pandemic has also accelerated digitization by encouraging habit-building among investors of all ages. Wealthtech businesses focus on offering digital solutions, making them a better match for individual investors who are more at ease utilizing digital platforms. As a result, this digital effort boosts natural platform onboarding and expands audiences.

Based on their risk and return profiles, wealthtechs are providing cutting-edge tools to help investors accomplish their financial goals and diversify their investment portfolios. They provide a variety of fixed-income assets that serve as a hedge against inflation and equity market volatility, as well as a source of regular income and capital preservation. Additionally, they eliminate the fallacy that only ultra-HNIs should invest in fixed-income securities. Investors might decide whether to invest in fixed-income instruments depending on their risk-return profile.

The Way forward

As part of a comprehensive financial services offering, wealthtech is effortlessly blending into daily life as it develops. Individuals are free to control their financial future by removing traditional obstacles. However, there are some advantages we have in weathtech industry while bridging the literacy gap such as, according to industry experts, wealthtech platforms will concentrate on the social aspect of wealth generation in the coming future, and the cryptocurrencies will not only continue to be in high demand but also gain popularity in the following years. Furthermore, more wealthtech businesses will focus on impact investing, which is growing in popularity. In addition to it, companies are putting more effort into creating systems that let couples or families manage their wealth together.