How are Wealthtech Tools Improving Financial Inclusion?

Financial advice can be a sensitive topic – those giving it don’t want to mislead customers, while customers are wary about the level of trust they can place in their advisers. Nonetheless, done correctly, investing can be a very beneficial way for someone to use their funds. This November we are exploring all the aspects of wealthtech and how the industry has developed this year.

While wealthtech is traditionally associated with investing, solutions in this field also have a part to play in improving financial inclusion. To find out how “Fintech simplifies the complex world of financial services, acting as a democratising force for those who have historically been excluded,” explains Tobie Van Heerden, CEO at 10x Investments. “The wealthtech sub-sector simplifies the management, growth and protection of investments. Previously, investing was only available to elites, highly financially educated people or those who could afford a financial advisor. “Easy-to-use digital platforms now allow individuals to interact with their investments and adjust them according to their requirements. Through online tools, users can opt for higher- or lower-risk portfolios and avoid investing in stocks which don’t align with their ethical beliefs. “The retirement investment landscape is another great example. By making information more accessible, investors can now see what’s happening in real-time. In the not-too-distant past, calling up their advisor or waiting for an annual portfolio email was the only way to get an update. “Critically, these wealthtech tools reduce the barriers to entry for individuals who are eager to begin investing. These platforms cost significantly less than traditional financial advisors and savers can begin with a much smaller investment portfolio and grow as their budget allows.”

Wealthtech breaking down barriers

Elizabeth McCluskey, managing director of discovery fund at TruStage Ventures, also explains how wealthtech solutions are helping to help people improve their financial literacy: “We’re seeing a growing number of partnerships between wealthtech-focused fintechs and community financial institutions, which are helping break down traditional barriers to wealth management and financial literacy. “By making financial tools and guidance more accessible, they’re giving more consumers the opportunity to build and manage their wealth effectively. For instance, one of our portfolio companies, Debbie, enables credit unions to attract and retain younger members by rewarding them for paying off debt, ultimately encouraging better savings and spending habits. “This company helps consumers set financial goals – like paying off credit cards and building savings – and provides financial education. Through these partnerships, consumers can pay off debt three times faster and save ten times more. One example is a consumer who was able to reduce her APR on a $20,000 credit card debt from 20 per cent to nine per cent, while another grew her emergency fund from $0 to $1,000 in just six months. “Another portfolio company, Frich, focuses on reaching Gen Z, a group often overlooked by traditional financial institutions. Their social finance app breaks down financial taboos, giving users an anonymous platform to compare their financial status with peers and gain insights into money management. This helps Gen Z make informed decisions on key topics such as budgeting, managing student loans, and planning for housing, as they navigate university and early career stages.”

Improving accessibility of wealthtech tools

“At this time, tool usage rates are often less than 25 per cent of a bank’s total digital user population,” adds Jennifer White, senior director, banking and payments intelligence at J.D. Power. “There is room for all financial institutions to improve usage rates. We do see that usage is higher for those customers who are currently ‘overextended’, that is, those who may have long range financial tools like a 401k but are struggling month to month to pay bills on time or may be overextending credit use. “Usage is also often higher among younger customers which leads to a position that financial institutions must have patience to yield ROI or gains from investments in these services. Capturing younger customer attention now will hopefully lead to higher loyalty and wealth-building in the future. “To make all of this happen, tools for spending analysis and budgeting need to make the shift from just showing customers how they spend their money today and instead categorise spending in a way to automatically help create a budget and compare spending to norms (even if that norm is just how much the customer spent themselves in the last month or that month last year). “That’s something that can be useful to many customers, but especially those who are struggling to save and build wealth for the long term. Some tools do this already, and more should aim to do so.”

Wealthtech bolstering a brighter future

“Wealthtech isn’t just for people already in the system,” concludes Peter Wood, chief technical officer at Spectrum Search. “Platforms like Kuda are doing amazing things, especially in places where traditional banking is more of a myth than a reality. Think about it: in some countries, getting a bank account is harder than getting a decent cup of tea. Kuda, though, is offering fee-free digital banking that’s making it easier for millions to access financial services. No queues, no paperwork – just a quick sign-up, and you’re in. “And it’s not just about the basics; Kuda also provides micro-loans and personalised savings plans, even for people with no credit history. Instead of relying on outdated metrics, Kuda uses AI to assess creditworthiness based on more accessible data points. This means more people can save, invest, and borrow, finally having the financial tools they’ve been shut out of for far too long. It’s the kind of innovation that makes you feel like the future’s looking a bit brighter for everyone.”