With thanks to expert analysis from:

Trends in Personal Finance

Table of Contents

Foreseeing the Future of Personal Finance

Personal finance just got a whole lot more real. Josy Soussan, Funding Circle.

Making Finance Personal How to build a financial services products that put the personal touch

back into finance. Nick Bortot, BUX.

Opening Personal Finance Open banking is bringing the personal back into personal finance. Leon Muis, Yolt.

Financial Planning Automation How software is automating some aspects of financial planning – but

is not ready to completely take it over.

Nathan Brouwer, Figlo.

Josy Soussan, Head of Communications & Public Affairs.

Foreseeing the Future of Personal Finance

Personal finance just got a whole lot more real.While only few people have a crystal clear understanding of investing, many individual investors feel disconnected from where they al-locate their money. But what if you can put your personal finance to work in a way that supports a tangible goal or community? Welcome to the world of direct lending.

FROM SAVINGS TO INVESTMENTS

Current household savings in the Netherlands are peaking at a historic EUR 370 billion.1 This is partly because of the drop in household indebt-edness over the past few years. Add the current extraordinarily low interest rate environment driven by monetary policies of most central banks, and you can see why many individual investors are actively looking for yield to over-come the lean years.

However, historically investing has always been left to experts. Alone or advised by financial advisors, directly on the stock exchange or through the banks: those that knew how to nav-igate the financial system were predominantly the ones ready to take a bet. Luckily, that has changed with the advent of technology...

More than three out of five digitally active consumers worldwide engage in one or more

fintech services.

1 DNB, Savings Dutch households. July 2019.

The so-called democratization of investment by a wider group is directly linked to the fact that consumers, as well as small and midsize busi-nesses (SMEs), are embracing fintech services at a blistering pace.

BACK TO BASICS: CONNECTING OFFER WITH DEMAND

Financial markets traditionally connect lend-er-savers with borrower-spenders. However, with an increase of financial intermediaries these two groups have more than ever been driven apart.

Fintech firms are narrowing that gap by making a real impact in areas people care about: giving small businesses access to crucial loans, as well as helping consumers save, invest more wisely and get better value from their health and motor insurance.

Similarly, for the first time, direct lending plat-forms have opened up an asset class, tradition-ally only available to the banks, to a wide group of investors. Investors can now directly support the growth of small businesses and their local economies. Something never seen before.

Source: EY, Global FinTech Adoption Index 2019

PUT YOUR PERSONAL FINANCE TO WORK

One of the reasons why the industry has been given the go-ahead and support across Europe is that direct lending platforms have demon-strated their relevance and the important role they can play in the broader financial ecosystem.

They neatly feed a growing trend of so-called impact investing. Where traditional investments are usually abstract and number-driven, backing activities such as small businesses or renewable energy projects have proven to be impactful.

...BUT THERE IS MORE

Although it still seems like a long way to go, saving for unexpected life events is essential to a sustainable financial situation.

Some tech-driven companies allow insights into your financial situation, advise on how to budget your spending or enable you to invest in a pool of small business loans and make attractive re-turns. Especially taking into account consumer price inflation and readily available alternatives.

It is important to realise that investment products differ in terms of risks from savings accounts. Diversification –spreading your investment across different risk levels, asset classes and industries- is therefore essential to offset potential losses. As well as only investing a fraction of your disposable income.

SO, WHAT IS NEXT?

There is a strong growth potential for fintech firms offering budgeting and financial planning along with savings and investment services. Part of the opportunity lies in reaching out to demographics where adoption rates for these categories is still relatively low, including wom-en, consumers in rural areas, and consumers without university degrees.

Despite growing fintech adoption rates, the use of fintech savings and investment services is still...

We will start to see proof of the fact that fintech is changing every aspect of our financial lives, and handing control of individuals’ own financial futures back to within reach of more people than ever before.

A decade after the global financial crisis, governments have looked at ways to promote that idea of channel-ling real savings to the real economy.

In the UK, Individual Savings Accounts can be in-vested tax-free in stocks and shares, cash -and since April 2016-, innovative finance. The Govern-ment introduced the Innovative Finance ISA (IFI-SA) enabling savers using P2P lending platforms to receive tax-free interest. Likewise, individual investors in Belgium can now deduct investments in start-ups and SMEs made through authorized platforms from their personal income taxes.

Oxford Economics found that loans issued through Funding Circle in 2018...

Supported over 115,000 jobs, and

Contributed EUR 4.4 billion to global GDP.

A recent AltFi report found that an investor with a perfectly diversified portfolio of loans originated by the UK’s big-four direct lending platforms is earning a net return of about 4.1% or more.

4.1%

for women27%

for men40%

Source: Oxford Economics, The Big Business of Small Business. April 2019.

Source: Link Asset Services, Marketplace Lending Index, March 2019. Com-panies include: Zopa, RateSetter, Funding Circle and MarketInvoice.

Nick Bortot, CEO & Founder.

Making Finance Personal

How to build a financial services product that puts the personal touch back into finance.The world of personal finance has undergone a 360 degree transition in the past 50 years. From the days of meeting face-to-face with a person-al financial advisor, to the years of convenient, yet impersonal, desktop trading and investing. The loop has now been completed and people are once again seeking out the human touch in the financial products they want to use.

The question, however, is how will technology help facilitate rather than inhibit this?

Whether it’s a more engaging support network or simplified and personalised user experiences, consumers are demanding a more approachable way of managing their finances. These elements will help satisfy these market demands, leverag-ing the best of the old and the new.

DIGITAL COMMUNITIES

Digital communities no longer exist only in the ecosystems of Facebook and Twitter, but now are becoming prominent features in a number of digital services. From Google Reviews to Am-azon, people are increasingly reliant on digital communities to decide what they buy, eat or travel to.

Just as customers factor in peer reviews and experiences when buying a camera on Amazon, they are similarly looking for a sounding board when it comes to choosing their financial products.

In order for fintechs to provide a truly valuable, familiar service to customers, they would be wise to integrate a digital community into their products. This allows communities to form where customers can learn from each other, gather knowledge by following the habits of others, and share their own learnings.

Personalization also goes hand-in-hand with a thriving community. Consumers want companies to see them as more than just investment profiles, and in return, customers will invest their hard-earned money into the brands that are aligned with their values and interests.

SIMPLIFICATION

Many millennials will find themselves having to take ownership of their finances for the first time. But the question is how can fintechs make it an inviting, non-intimidating experience?

Complex terms, charts and blinking tickers are off-putting to those without a background in finance. Part of humanizing the experience is making it understandable, accessible and even fun for a broader audience. By creating financial products that are easy to navigate and by providing places where customers can educate themselves in a non-intimidating forum, fin-techs are inherently empowering their custom-ers to own the trajectory of their finances.

Digitization and humanization are not mutually exclusive, as digitization should help facilitate fintech products becoming more human-orient-ed. The original intent of digitization was to help facilitate connections between people, and this new era in fintech is the perfect opportunity to finally achieve this.

Two key elements will help drive human-forward experiences in

fintech:

Digital Communities

Simplication of User Experience

YOLTIn the UK, the Open Banking initiative was a precursor to PSD2. In 2018, banks opened up for TPPs to gather trans-actional data from consumers. Yolt was the first and now the leading TPP to connect to the banks and use this financial data to empower people to be smart with their money. Yolt has built an app that moves beyond account aggregation – not only providing users with a central view of their debit, credit and savings accounts but also providing smart and actionable insights. The possibility to add products from multiple financial providers to the same money management platform makes each user the centre point of their own personal financial ecosystem.

With the aim of empowering people with their finances, the app enables users to plan budgets, monitor bills, track spending, pay friends and family and even switch household bills– allowing people to make informed and holistic financial decisions.

For years banks have controlled how consumers manage their finances and banks have largely owned this customer data. Now that the new PSD2 legislation is around the corner, this will radically change. Banks will need to start sharing their customer data (with the consent of the customer) with authorised Third-Party Providers (TPPs). But will this also make managing financ-es more personal for consumers?

Over time, people have started using more and more financial products and services. The days when you would get all of your financial products, such as insurance policies and de-posit accounts, from the same bank are long gone. Today, people are using neo-bank cards, investment, trading, round-up savings, pension and insurance apps. With so much more choice in the financial sector, and people choosing multiple businesses to provide them with these products and services, it’s resulted in less of a personal relationship between consumers and their ‘daily’ bank.

DeNovo’s monthly consumer survey indicated that while...1

However, wider choice in the market does not necessarily mean consistently strong user ex-periences or perfect persnoal finance manage-ment. This is where the EU directive, PSD2, open banking and to a greater extent, open finance, come in. PSD2 places people and their data first, and was designed to ensure a standard and secure way for financial institutions and services to connect to one another, to share data, initiate and receive payments, all for the benefit of users and the industry more broadly.

1 https://www.pwc.com/gx/en/industries/financial-services/assets/pwc-global-fintech-report-2017.pdf

Together, these make a more innovative and competitive market, and ultimately create more transparency, more choice, more security, and more ease when it comes to personal finance management.

Through open banking, consumers are in control of their own banking data and who they share this data with, making money management personalised to each individual and ultimately putting the ‘personal’ back into personal finance.

PSD2 and open banking are just the beginning of a revolutionary change in how consumers will interact with financial products in the future. The future will focus on personal data, personal choice and personalised and tailored products. This movement will empower businesses and consumers to do more than ever before, so be ready to get on board.

Leon Muis, Chief Business Officer.

Opening Personal Finance

Open banking is bringing the personal back into personal finance.

of consumers plan to increase their usage of non-traditional Financial Services providers, only...30%

plan to continue using solely traditional service providers .39%

Nathan Brouwer, Enterprise Account Executive

Financial Planning Automation

How software is automating some aspects of financial planning – but is not ready to completely take it over.There have been various fundamental shifts in the financial planning practice over the last 30years all stemming from one major factor: technology. The growing consumer demand to have quicker, easier access to more information has resulted in some, if not all, areas of the planning process to become automated. A swell of consumer-driven financial tools, most com-monly referred to as robo-advisors, have driven key change in both consumer expectations and financial advice provision. While fintech innova-tions expedited the journey between clients and quality financial advice, consumers have shown a strong indication that the time for total auto-mation of financial advice has not yet arrived.

THE RISE OF ROBOS

Robo-advisor tools emerged with the intention of poaching customers by offering lower com-mission fees, enabled by automated investment advice that would provide more consumers with access to financial markets. By providing the mass market with low-cost investment fees and successful returns, eventually high-net-worth (HNW) investors would be swayed into leaving their existing advisory relationships. However, instead of a HNW investor exodus to robo-ad-visory services, the incumbents responded by lowering their advisory fees in kind, resulting in industry wide fee compression.

Alongside fee reductions, the rise of robo-ad-visors drove the planning industry to offer more consumer-driven technology solutions to enhance the planning experience. Where robo-advisors automate the entire planning process, innovations such as account aggrega-tion and client portals have reduced the barriers of entry for affluent clients to receive financial advice from a human advisor. This helped shift early planning engagements to be more con-versational encounters where an advisor could begin to truly comprehend a client’s financial situation.

PREFERENCE FOR COMBINATION OF HUMAN AND AUTOMATED ADVICE

While the convenience offered by automation in the planning process has been instrumental inattracting more consumers to financial planning, there is one essential element that totalautomation has yet to achieve: trust.

Many assume millenials would show the highestpreference for technology. Instead, research from Charles Schwab’s Consumer Digital De-mands study found that of Millennial consumers surveyed...

Further, Capgemini’s 2019 World Wealth Report found that...

This data proves just how important a human advisor’s value is with consumers. In the financial planning process, consumers want to trust that they are making the right decisions and are on the right path forward. They want to have a trusted resource to which they can bring life’s new goals, challenges, and discuss how to prepare for them.

Rather than completely automating advice, the planning practice will continue to advance forward with innovations that make it easier to access the core benefit of working with a human financial advisor, not replace them entirely.

of high-net-worth- investors (HNWIs) expressed a high demand for a personal connection to their wealth managerso that their unique financial situation, needs, and goals are understood.

86%

prefer to build their financial plans with either a combination of automation and a human advisor or with a human advisor alone.

79%

Today, firms need to find ways to appeal to the HNW clients of tomorrow, which will soon consist primarily of millennials.`