New research released today reveals that a massive 9 in 10 (93%) Brits feel undereducated when it comes to personal finance with half (47%) believing it is their bank’s duty to help them make better financial decisions.
UK consumers are open to help from banks despite a quarter (24%) of them believing they have been misled by banks’ financial advice.
Research revealed in ‘Banks’ Role in Modern Society’ report commissioned by Pepper, the 100% digital challenger bank created by Bank Leumi, Israel’s leading bank, also found that two thirds (67%) of Brits do not feel well-equipped to make the best financial decisions for themselves, with over two thirds (68%) admitting they are not financially observant.
The lack of financial literacy is particularly prevalent in young women in the UK, with only 28% of females agreeing they feel well equipped to make good financial decisions.
These stats echo research commissioned last year from UCL Institute of Education (IOE) and University of Cambridge, which found England to have one of the lowest levels of financial literacy in comparison to other developed countries.
Pepper’s latest report questions the role of banks in modern society. In the absence of a robust financial education, there’s a growing expectation for banks to empower customers to make sound financial decisions.
In response to the research Michal Kissos Hertzog, CEO, Pepper, said: “Consumers want their bank to be much more than just a safe house for cash; they want more help with their money - just like they don’t use Spotify as their music storage only, they want to discover new artists through customised data. The UK’s financial literacy gap is preventing many Brits from making the best possible financial decisions and digital banks have a real opportunity to empower consumers to make better money choices.
“We’ve started to see this initiative with money management apps that provide personalised spending breakdowns, helping customers be better aware of how they are spending their hard-earned cash. With a flexible digital core, there’s no reason why traditional banks cannot provide such services and more, enabling customers to take charge of their finances.”
Commenting on the findings Louise Hill, co-founder and COO, gohenry, the pocket money card and app for families, said: "The research results are clear - adults want access to a similar service that we offer to 6-18-year-olds. Good money management is a vital life skill that, like most life skills, is best taught when young. We have a unique opportunity to use tech for good and teach the skills that can help the next generation of adults avoid the stress that comes with a lack of financial education."
Unsure and insecure when it comes to growing savings
While managing everyday expenditure is a priority, Brits are missing out on opportunities to grow their savings. Pepper’s research also found that three quarters (72%) of consumers do not currently invest in stocks and shares or in an investment fund, with a fifth (18%) admitting they do not know how to.
As with money management, financial awareness is also key to helping Brits understand their investment options. In addition to new players offering money management tools, the growth of investech is starting to break down the investment barriers many Brits face, providing the necessary guidance and education. But clearly there is still work to be done to lower the barrier. Such technology is vital to helping those that want to get on the investment ladder (e.g. 73% of 18-24 year olds) but feel like they can’t (e.g. 81% of 18-24 year olds). Additionally, in a visible gender investment gap, tech can be used to provide guidance for females wishing to invest - as 50% more men than women claim they currently hold investments[i].
Kissos Hertzog said: “In the current political and economic climate, it is unsurprising that consumers are risk averse with their cash. But so many consumers are missing out on the opportunity to grow their savings simply because they lack the know-how. In a low interest rate environment particularly, investments can be a great option for many consumers to grow their savings, provided they know where to start. Again, with the right technology banks can provide solutions to educate customers - just like we have done for our customers with Pepper Invest.”