Lubaina Manji, Senior Programme Manager, Nesta Challenges
Whilst the sun is far from setting on the COVID-19 pandemic, predictions and hopes for a new “normal” are shimmering on the horizon.
Amid the trail of devastation left by the virus, there has to be some semblance of change and positivity to be taken. One such shift is the increase in digital services usage which poses a huge opportunity for our fintech community. Confinement has forced even the more sceptical of us to dabble in digital, and embrace how it has made many everyday tasks more easy and convenient.
Online and mobile banking has been helping many people stay on top of their finances for some time. Research conducted by Open Up 2020 Challenge last summer found half (48%) of people would like to use online tools and apps to help them manage their money[1].
Then along came a global pandemic that has undoubtedly forced the hands of even the more sceptical to log on, download and transact – quickening the pace of long-lasting change in terms of how we manage our money. Recent figures from deVere Group suggest the virus is behind a 72% rise in the use of fintech apps in Europe[2]. Never before have we been so reliant on technology in maintaining some sort of normalcy and in helping us continue day-to-day tasks, like everyday banking.
Another unfortunate byproduct of protecting communities from the virus means many people have been left out of work and with less or no income. In times of financial strain, the need for people to engage with their finances – be it budgeting, saving or shopping around for better deals – is far greater.
Issues of trust in traditional banking services and a lack of awareness of the helpful money management services available are some of the barriers preventing people from taking more control of their finances. But the solutions made possible through open banking can provide people with a lifeline to build their financial resilience and better manage their money.
Open banking has the potential to revolutionise financial services, by giving people control over their financial data in order to access innovative products tailored to them. Since it launched in 2018, open banking technology has opened the door for new fintech innovators to create cutting-edge tools designed to help people better manage their money – from budgeting, debt management, comparing and switching banks to automating savings and more. These could have a significant impact – it is estimated that UK consumers could gain as much as £12bn over the course of a year from open banking-enabled tools[3].
So far, it’s been effective – the UK FinTech’s State of the Nation report[4] totted up more than 1,600 fintech firms in the UK in 2019, whilst predicting this could more than double by 2030. Figures from the Open Banking Implementation Entity showed there were 243 regulated providers, 169 third party providers and 74 account providers as of April 2020[5]. The UK adoption rate of fintech is 42% – higher than the global average of 33% – making it ripe for opportunity[6]. Coupled with lockdown restrictions creating greater dependence on technology – including ATM cash withdrawals falling by half[7] – fintechs are well placed to be part of the solution – and offer help to those struggling to manage.
With more than a fifth (21%) of the adult population saying financial stress is having a bigger impact on their mental wellbeing than physical health concerns during the crisis, and a quarter more stressed about money than usual[8], fintechs can be part of the support available to them.
However, in order to fully realise the opportunity we need to ensure budding entrepreneurs with bold ideas have the means to turn them into reality. Nesta Challenges exists to design and run challenge prizes that incentivise people to help solve pressing social problems that lack solutions. Through our Open Up 2020 Challenge we are supporting 15 fintech finalists to develop their solutions to enable more people – particularly those underserved by traditional financial products – to manage their finances better, whatever their circumstances.
Of the 15 finalists, some offer app designed to help people budget,, save, switch and invest – aided with alerts and notifications that allow people to stay on top of their finances and make their money work harder for them for the long term. For example, Cleo is an AI financial assistant that is already helping more than 3 million customers monitor their spending, budgeting and saving, while Moneyhub empowers people to do more with their money by offering actionable insights from a review of all of their accounts.
Some of the apps are designed for those with more specific circumstances, such as Mojo Mortgages, which analyses income and transaction data for first time buyers to produce mortgage affordability scores and savings recommendations if they aren’t quite ready to apply. Finalists Portify and Wagestream cater for workers with irregular earning patterns.
As well as monetary grants, Open Up 2020 Challenge provides these companies with non-financial support and promotion to help them on their way to achieving their full potential – which in turn helps them reach many people to help them achieve their monetary goals.
While COVID-19 has created personal finance headaches for many, it has been inspiring to see how quickly fintechs have been able to innovate and develop digital solutions that help solve these problems and equip people to better manage their money.
[3] Open banking Consumer Priorities for Open Banking report
[4] UK Fintech State of the Nation
[5] Open banking Highlights April 2020
[6] UK Fintech State of the Nation
[7] https://www.link.co.uk/about/statistics-and-trends/
[8] Open Up 2020 Challenge
