Who’s helping the (g)old-diggers?
Despite longer life expectancies and greater wealth accumulation, elderly people still fall outside the target group of financial providers. As the world’s demographic is ageing, how are financial institutions making sure they cater for the needs — and specificities — of our senior customers? And are fintech solutions innovating for the non-innovators?
The world’s population is ageing.
Virtually every country in the world is experiencing growth in the number and proportion of older persons in their population. It is estimated that by 2050 one in six will be over age 65 globally. And that’s one in four for those living in Europe and Northern America.
Older people tend to be more vulnerable, prone to errors or simply not technologically schooled, while apps may not appeal to older technophobes. As a result they obtain poor treatment compared to their younger counterparts, in turn having to adapt to an ever changing and digitally focused system.
As the share of the elderly population is increasing, financial companies are lagging behind in finding adapted solutions and services for this age group. Taking into account the fact that seniors are holding the lion’s share of the savings, they represent an untapped market for many financial providers.
Age is a state of mind
The elderly also include more vulnerable groups, such as people with disabilities, mental health issues, that are less well-off or that lack digital skills. All kinds of impairments that effectively exclude them from proper access to financial services.
Some governments have even called for financial providers to take on a legal duty for care for customers, to ensure their services remain accessible, comprehensible and adapted. This means keeping tellers alive, banning cashless stores, and not making paperless admin the default option, as not all Silver Ocean customers are equally comfortable with digital tools (that’s around 8 million people in the UK alone).
Other argue that the number of elderly not being digitally savvy is minor and decreasing, and focus should therefore be on the next generation of grand-parents. The truth probably lays in the middle, though technology isn’t the only thing to worry about.
Age only is one element of vulnerability. Poverty, indebtedness or financial abuse push elders even further from the functioning financial system.
A senior moment
Senior athletes set aside, with the increase in numbers of older people comes a steep rise in the number of people with dementia and other cognitive impairments. Coupled with a concentration of wealth in older generations — such as pensions, savings, housing assets — , this age group is more prone to financial abuse.
As the WHO frames it — ‘the illegal or improper exploitation or use of funds or other resources of the older person’ — financial abuse is a growing risk for the elders, usually ill equipped to make (digital) financial decisions. Hard evidence however, is hard to find.
On average, the best estimate for the UK is that between 1 and 2 per cent of people aged 65 or over — that’s about 130,000 citizens — today have suffered (or are currently suffering) financial abuse since turning 65.
Various US studies found that between 3% and 8% of people aged 57–85 had suffered some kind of ‘elder mistreatment’ of a financial nature in the previous 12 months.
These figures are likely to be conservative estimates, and the suspicion remains that the true extent of financial abuse is actually much greater and is unlikely to reduce in the future, as phishing, fraud and financial crime attempts become more sophisticated and specifically target elderly people.
It would be wrong however to assume that all older people are rich.
In fact, statistically speaking senior citizens are income-poor. Because they are excluded from the services financial institutions provide (read: mobile and online), their options are reduced, and their financial choice is narrowed.
Large proportions of elderly groups run debts after expenses, and this figure is positively correlated with (mental) health issues. People with mental health problems are three times as likely to be in problem debt, as incomes often fall and managing money becomes more difficult.
To top up the risk factors, age only is one element of vulnerability. Poverty, indebtedness, financial abuse, physical and mental disabilities, or homelessness are other traits older people can be confronted with. Which in turn pushes them further from the functioning financial system.
Hmm, doesn’t sound too good.
Luckily, when there is a problem there usually also is a solution (or someone thinking about one).
Financial institutions and new digital players intend to come save our grandparents from their financial misery. In other words, tackle the essence of financial inclusion; banking the unbanked.
Coined as the 7th continent, age-friendly financial products are using AI to identify and respond to the risks seniors are facing.
We’re not getting any younger
AgeTech, WealthTech, Longevity banks or Contextual banking, is just some of the jargon to address the Silver generation’s multi-trillion (actually, estimated to double to $2 trillion by 2025) market.
In traditional finance, various banks and insurance companies have started to roll out services for people with hearing, speech or visual impairments, while also ensuring that fraud detection systems are up to speed.
The reason is pretty simple: rather than focusing on the demographic time bomb, some industry players are betting on the longevity trend — an estimated $15 trillion annual global spending power of those aged 60 and over.
By adapting their infrastructure for the elderly, banks are partnering with the Alzheimer’s Society to develop dementia-friendly products, or even creating dedicated ‘clubs’ to future-proof their financial well-being.
Investment banks, pension funds, and insurance companies are also developing new business models, stock exchanges and funds to come up for the liquidity needed for new offerings to emerge.
Most of the initiatives are done in a contextual way, in which customers are offered services tailored to their particular circumstances and needs.
Coined as the 7th continent — a virtual place representing the more than 1 billion people currently in retirement — , the market for age-friendly financial products is utilizing AI and machine learning to identify and respond to the risks seniors are facing.
As a result, new fintech providers are also tapping into this niche market bringing HealthTech and AgeTech together in their offerings.
As such we’re seeing mobile banking experiences that are easier and safer for older people, financial management app’s connecting family members to get insights into the family financial data, platforms that monitor seniors’ credit card and banking transactions for signs of financial abuse or bad habits, or technology geared toward helping younger generations take care of their parents’ finances.
As the industry battles with the dilemma of vision vs value mindset, it is important players do not overlook the customer-need mindset. Only by having an in-depth knowledge of the customer — what context they operate in, what their circumstances are — will they truly service the specificities of the older generation.
But services alone won’t do the trick.
With shortfalls in social care spending and failings in government priorities to support the next generation of retirees, policymakers must ensure this growing vulnerable group is given the necessary attention.
Even if technology becomes less of a relevant issue for elders in the future, the risks this age group are exposed to is not reducing.
‘And they lived happily ever after’
Financial services play an important role in understanding the issues faced by elderly groups and in helping them to navigate their way confidently through their financial journey.
As the number of HWNIs and regular aged middle-class individuals continue to grow, they represent an opportunity for tailored services for both incumbents as well as new actors. But, the transition to an all-digital financial environment is creating a new category of financial excluded people among a population that was fully integrated into society so far: elderly people.
Even if the question of whether older people will want to use technology in the future becomes less relevant, the risks they are exposed to is not reducing.
Efficient policies need to take into account vulnerabilities of older people in its entirety — financial, health, social factors — to ensure one measure does not negatively affect other facets of age. To do so, more research needs to be done in understanding how mental health problems affect our financial behavior and what needs and usage of financial services the next older generation will look like.
Banks and fintechs should collaborate more with legislators and customers as well as the public to identify the risks of a problem that is only going to grow in size.
Supporting our growing ageing population is one of the most important issues of the future.
As our current care systems are relying on them to pass on a legacy to the youngsters. So start thinking about ways to help your grand-parents get their finance right, or you probably won’t get that birthday gift you’ve been hoping for…
