Low incomes, high urban rents, hefty student debt and spending habits are just a few reasons millennials struggle with their finances. That’s why this generation is an easy target for fintech companies, which often claim to help people save money and manage their spending.
However, many current efforts fall short because they’re focused on the wrong aspects of financial health. A panel of Forbes Finance Council members shared their thoughts on how fintech startups are dropping the ball in helping millennials work toward a secure financial future.
1. They’re Not Protecting User Data
Protecting the private information of individuals is a glaring issue across fintech. Most services require sensitive information, from date of birth to bank passwords and SSNs. Although it may be easy to think that these services require this data to grant convenience, the security of this sensitive information and how much is shared with others is a top concern among users of these platforms. - Atish Davda, EquityZen
2. They Won’t Change Someone Who Can’t Set And Commit To Goals
The “gamification” of saving and investing is an interesting fintech development and seems to hold some promise. In my experience, however, it all comes back to goals and commitments. Are you clear on your financial goals? What would it feel like to achieve them? Do you have a burning desire for that bigger future? If you’re serious you will write it down and commit to it, app or no app. - Erik Christman, Oxford Financial Partners
3. They’re Not Focused On Retirement-Age Needs
You should work backward and figure how much it will cost to live past 80, especially if you will be taking on the extra burden of supporting additional family members. You should start saving early and use compounding interest or investments as a tool. This is about thinking long-term and sacrificing in the short-term. - Khurram Chohan, Virtual CFO Group
4. They Can’t Educate Your Employees For You
Many companies have retirement programs with company match, like 401(k)s or Simple IRAs, but fail to educate their team on the benefits of such programs. Often people who currently participate in these programs know very little about where their money is being invested. Empowering your team with education will encourage them to both value the program and take ownership of their financial future. - Shane Hurley, RedFynn Technologies
5. They’re Enabling Borrowing Rather Than Investing
The majority of fintech innovations have been in the payment/lending space, where the process of underwriting loans, mortgages and credits is made easier with the use of technology. While it is easy to get loans in as quick as 10 minutes with a swipe on your phone, there are fewer products in the market that encourage millennials to invest easily with the help of new technology for a better future. - Breana Patel, Bonova Advisory Inc.
6. They Capitalize On Social Pressures To Spend
Societal pressure and comparisons make it harder to save -- competing to see who’s got a bigger, better car or house. We can afford these nice things, but we’re not putting the right dollars away. The “Society of Saving” is no longer a benefit. Benefits like remote working have taken their place. - Sal Rehmetullah, Fattmerchant
7. They’ve Democratized Access But Not Proficiency
Fintech pioneers democratized access to markets via easy-to-use trading apps and robo-advisors. However, access is now commoditized, leaving investors looking beyond the mere act of placing trades and thinking more deeply about what they should be buying. The next wave of innovation will be here -- helping people build proficiency and make much smarter decisions with the support of technology. - Bernard George, Nvstr
8. They’re Focused On Debt Reduction Rather Than Passive Income Enablement
Many millennials begin their careers mired in student loan and credit card debt. “Aggressively pay down that debt” is often sounder advice than “Start saving or investing right away.” But don’t ignore the opportunities of earning extra income from a side hustle that generates mostly passive income. Content businesses that earn money from advertising and affiliate programs can prove lucrative. - Ismael Wrixen, FE International
9. They’re Relying On Outdated Savings Strategies
One of the biggest problems millennials face is the burden of student loans. It’s hard to talk savings when your audience is living paycheck-to-paycheck. This generation also has different priorities and a more difficult financial start than previous generations. Instead of just using antiquated methods of savings, financial advisors should strive to help solve these upfront issues as well. - Greg Herlean, Horizon Trust
10. They Don’t Prepare Millennials For Economic Disruptions
We need to prepare millennials for recessions and economic downturns. Millennials who have recently entered the workforce have seen a strengthening economy and haven’t had to worry about the aftereffect of a decline in our nation’s economic activity. We need to prepare them for the changes that come with economic disruptions, including increased unemployment and decreased consumer spending. - Ben Gold, QuickBridge Funding
11. They’re Not Serving Millennials Where They Already Are
Do you know how many bank websites I’ve seen that have cutting-edge, intuitive calculators and tools? A lot. Do you know how many millennials hang out on bank websites? Not many. We need to take cutting-edge tools to Instagram, high schools and colleges. Recruit millennial influencers to hype the fact that being broke isn’t an identity. We need to stop sounding like their parents, even if we are. - Howard Dvorkin, Debt.com
12. They Fail To Provide Transparent, Unbiased Advice
Fintech has helped consumers take charge of their financial futures, but the financial services industry falls short in demanding that the investor’s best interest comes first. We must do better by demanding transparent, unbiased advice to ensure that investors are protected from unethical practices. One way to do that is upholding standards that better separate financial advice from product sales. - Jay Shah, Personal Capital