Inclusion in US financial services is at an all-time high

Technology and innovations in the financial services industry have enabled the most accessible, inclusive, and low-cost financial market there has ever been in US history. Hand-in-hand with this accessibility is the need for education. According to Pew Research Center: “Technology assets are strongly tied to the likelihood that people engage in personal learning”, with 82% of the US adult population with access to a smartphone and a home broadband connection having done some personal learning activity in the past year. This tells us that technology not only provides the opportunity for increased financial education; it can also be the solution for delivering that knowledge.

Consider reporting from the World Bank that states “delivering financial services through technological innovations … can be a catalyst for the provision and use of a diverse set of other financial services – including credit, insurance, savings, and financial education. Those who are now excluded can enjoy expanded access.” Technology serves as a gateway for individuals and communities who have historically not had access to manage their financial future.

What’s more, technology can allow for real-time learning and education; a crucial complement to increased access. The US’s National Financial Educators Council estimates that “lack of financial literacy cost Americans a total of more than $388 billion in 2023.” It is necessary that we embrace the unique value – and economies of scale – that digital delivery of financial education provides.

Contextualized learning is anchored in the principle that learning improves when it exists within a context that is relevant and delivers value for the learner. This is why Operation HOPE proudly pioneered the Investors’ Bill of Rights in 2021 as a call for the entire financial services industry to provide financial literacy and education to the next generation of investors. We believe that coupling education with access is core to economic empowerment. Further, with innovations in technology a third factor – affordability – comes into play. Technological advancements have helped level the playing field for first-time investors and investors of limited means to engage in the markets in the same way the wealthy few have enjoyed for decades.

In late 2023, the SEC proposed a rule – Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers – that addresses the use of technology and could limit advancements that have been in practice for decades. Introduced with the worthy premise of investor protection, the measure could have unintended consequences given its broadness. Specifically, it could eliminate efficiencies achieved via technology, which could increase costs, hinder access and compromise progress made with regard to market inclusivity. Take, for example, the Ariel-Schwab Black Investor Survey (2022), which highlighted that when it comes to growing and protecting their assets, Black Americans are less trusting of people (32% vs. 45%) and more trusting of technology (31% vs. 21%), than white Americans. This tells us how critical technology is for inclusion.

While investor protection is paramount, it must grow in conjunction with technology. Indeed, it is why we launched the Investors’ Bill of Rights: to provide a clear path for financial institutions, asset managers and their trusted advisors to incorporate greater financial literacy, knowledge and transparency in their offerings to retail investors. Regulation should not stand in the way of technological innovation as a tool for education.

While Operation HOPE centres the needs of families in our work, there is clear evidence that financial literacy is also good for business. That’s why the Investors’ Bill of Rights works. Financial institutions know that the more educated their customers are, the more valuable they are. Take for example the work of Cities for Financial Empowerment Fund’s Bank On programme, which forges coalitions between local governments, financial services institutions and non-profit organizations to uplift communities, deliver financial education, drive wealth creation and ultimately create a virtuous cycle of financial empowerment through education.