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The Ins and Outs of Financial Citizenship – The Next Level of Financial Inclusion?

Financial inclusion has been one of 2022’s biggest fintech buzzwords, and with good reason. As digitisation grows, companies are realising there is a budding market in unbanked and underbanked countries and regions. Financial inclusion is a great first step to ensuring everyone has equal access to financial services, especially in these aforementioned societies. But what is the next step?

Though the term financial citizenship is not new, rapid digitisation has seen its resurgence. Now, it has the potential to be financial inclusion’s successor.

But what does it really mean, and how does it differ from its predecessor? We reached out to the industry to get a further understanding of it, and how it can be used.

What is financial citizenship?

In truth, there is not a huge difference between financial inclusion and financial citizenship. In fact, the core concept of inclusion: the availability and equality of opportunities to access financial services, is a key pillar in citizenship.

The biggest difference is that citizenship involves financial education too. In addition to providing the unbanked and underbanked with solutions, financial citizenship offers people guidance and advice. Access to financial apps won’t solve financial problems if citizens don’t understand how to utilise these apps. By combing accessibility and education, its users will feel empowered and in control of their finances.

Anthony Villas, managing director at First Wealth
Anthony Villas, managing director at First Wealth

According to Anthony Villas, managing director at First Wealth, good advice is a key component for successful financial citizenship:

“Society in general needs to start producing the knowledge and trustworthy sources to make financial citizenship work. This could come from individuals, companies, or governments.

“I think traditional finance has been motivated for far too long by financial reward and profit. And, as a result, good social outcomes have been pushed to the side. With more companies wanting to use their status to help people, we are starting to see (for perhaps the first time) a mass move away from this approach and towards financial citizenship.

“Financial citizenship is, at its heart, about giving citizens the adequate financial products, services, and education, to have the opportunity and confidence to make informed decisions about their finances.”

Financial citizenship in action

It is all well and good speaking about financial citizenship in theory, but how can it be put into action? Villas also addressed this as he informed The Fintech Times about First Wealth’s foray into financial citizenship:

“One of the ways finance companies are trying to change their attitudes is by attempting to move into the financial education space. As a Certified B Corp, this is something that First Wealth is also working towards. We’re doing so with the launch of our financial education platform, Thrive Money, taking place in January 2023. Our fintech initiative, Open Advice, going live this November, is also another way we’re working towards this. We want to make financial planning more accessible by making the process more straightforward, and digitally engaging.

“The idea for Open Advice has its foundations in financial citizenship, having been built as something which advisers can white label, giving them the ability to jump in and help clients with planning when needed. As we grow, the software will look to automate some of the planning journey, using data and algorithms to suggest the best advice based on the probability of the outcome, removing bias and subjectivity in advice.

“Having worked on Open Advice for a long time now, I’ve come to the conclusion that Financial Citizenship is simply the next iteration of Financial Inclusion. This is a natural development for the finance profession. People must see the benefits of changing the financial narrative, and initiatives like Open Advice and Thrive Money are a massive step towards achieving that visibility,” he concluded.

education

Two sides to the same coin
Roslyn Weems is the principal of Wealth Consortia
Roslyn Weems, principal of Wealth Consortia

According to data from the WorldBank, 25 per cent of the world’s population is underbanked. This equates to 1.7 billion transactions. Roslyn Weems is the principal of Wealth Consortia, an investment strategy and education firm. Weems analysed the impact this stat has had on businesses and why it has sparked outrage and a demand for financial inclusion, and now, in turn, financial citizenship. But she also took into account the potential downsides to it:

“The problem with equality is the models available to level the playing field. Financial citizenship and financial inclusion are riddled with issues that run deep and long and cannot be fixed easily.

“In democratic societies, responsibly behaved citizenship give individuals the right to participate in decisions that impact social well-being for the collective. But financial citizenship expands those rights to encompass access to products and services of the society’s economy and as well as products, services and levels of financial education.

“Financial inclusion, on the other hand, offers all individuals and businesses access to products, services, education and financial opportunities that are not only affordable but also appropriate and meet their needs at every level of finance beginning at banking.

“Both concepts yield a potentially better financial situation for the masses in very different ways given the inherent challenges. Clearly, a small percentage of the population economically dominate the other, herein lies one of the largest issues. While these concepts merit study, both require an enormous amount of acquiescence and compromise on all sides.”

What does the future hold?

The term financial citizenship is still new to many ears. However, due to businesses’ and customers’ changing attitudes, it is likely we will see the term become more mainstream.

Organisations around the world are doing their part when it comes to financial inclusion and financial education. Be it in the UK, where Revolut’s financial education and crypto courses saw over one million users in July; or in Argentina, where grass-roots campaigns from non-governmental organisations, like Bitcoin Argentina, are being launched to educate Argentinian students on Bitcoin; or across the African continent, where organisations are ensuring more adults have access to bank accounts.

A global change is taking place.

The next step will be combining accessibility with education, and that step is called financial citizenship.

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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