Erin Dangler:

As we all know, knowledge is power, and when it comes to money matters, knowledge can also mean security and even opportunity.

Silvia Mensdorff-Pouilly:

We're trying to include more and more people into the financial ecosystem because we know from loads of studies that if people are financially included, their lives improve dramatically. Making sure that people understand how to get onboarded, what help there is out there to be part of the financial ecosystem and to be able to lead a financially sound life, financial education is critical.

Erin Dangler:

But unfortunately, good financial acumen isn't something that's easy to come by. And it's a knowledge we either have to seek out for ourselves or learn by doing.

Louise Hill:

Schools do a great job, but at best they can teach the theory. If I use the analogy of another life skill, think about swimming. You can learn the theory, but until the moment you get into the water and do it for yourself, you are not going to learn properly. And until you actually have some money, until you're actually using it, you're actually taking those decisions, making those mistakes, you won't learn fully.

Erin Dangler:

This is Financial Futures, the podcast that charts the frontiers of fintech innovation. In this special three-part miniseries, we're exploring the work FIS is doing by partnering up with fintech's and entrepreneurs to shape the future of the financial services industry. I'm your host, Erin Dangler, and in today's episode we are exploring the role fintech plays in financial education, and finding out how this often overlooked aspect of learning plays a critical role in financial inclusion.

We'll find out why leaving young people's financial education up to schools isn't enough and what the consequences of neglecting money management tutelage are. And we'll find out why financial inclusion is such a vital component of modern society and what institutions can do to reduce the numbers of financially underserved and un-banked individuals.

Joining us today on our exploration of financial education and inclusion is head of Banking and Payments for Europe at FIS, Silvia Mensdorff-Pouilly and co-founder and Chief Operating Officer at GoHenry, Louise Hill.

But before we can begin to look into some of the solutions behind financial education and inclusion, we need to start with the basics and find out what we mean when we talk about financial literacy.

Louise Hill:

I think for me, financial literacy is three key elements, the knowledge, the understanding and the confidence that an individual needs to be able to make informed and effective decisions with the financial resources available to them. It's a key determinant of lifelong financial outcomes. And increasingly, I'm very happy to say, recognized as being a core life skill.

Silvia Mensdorff-Pouilly:

And I would add to that, that it's not just understanding it but also forming good habits around it. Money can be a very difficult and complex subject and there was often time a lot of shame involved around getting money wrong and not understanding it. And so being able to overcome that shame and get the confidence is critical, as Louise said.

Louise Hill:

And I think perhaps another angle to look at as well is in an increasingly digital world, there are more and more financial services being created, which makes money more complex for individuals to navigate, the rise of the buy now, pay later schemes over the last couple of years, subscriptions, accessing music, games, entertainment, all the way through to managing your income. It is becoming a more complex world. And so, those skills and that financial literacy is ever more important.

Erin Dangler:

So, these are really important lessons that young people need to be learning. Where are kids currently getting their financial education from? And what exactly are they being taught about money management?

Louise Hill:

The question I often get asked is, isn't it the job of schools to teach children about money management? And the response that I've used many times to that is that I was a school governor for eight years at our local secondary school. And if that did one thing, it was that it taught me just how much schools are responsible for and just how many things they are expected to teach kids. Not just reading, writing and arithmetic, as they used to call it.

And while I think schools do have a large part to play in financial education, we need to do more than simply putting it on the school curriculum. I think that we all need to work together. I think money management isn't the role of one group. It's for industry, for government, for schools, and for parents to ensure that everybody has access to financial education from a really young age.

Erin Dangler:

You're saying that more is needed to teach kids about financial matters, and it's going to take different groups working together to really tackle the problem of financial illiteracy. Where do you think that schools are falling short in this task?

Louise Hill:

Schools have so many things that they're expected to teach children. They're not specialists in the area of financial literacy. And very often, certainly in the UK where it is taught, it tends to be in secondary school, which we would very much say is too late.

And I guess the challenge with financial education is it's not as interesting to a child as swimming. So, we need to find a way to make them want to take that leap and learn about money. And that's really why GoHenry exists. And why about six months ago we launched our money missions, which are in-app gamified money lessons, and they engage kids in the full financial education curriculum, including all the money, basics, earning, savings, spending, investing, credit, money safety and more, but in the way that kids like to learn.

And what we're seeing is GoHenry Kids absolutely devouring those and working their way through them. And that is now giving them the theory as well as the practical tools of the debit card and app.

Silvia Mensdorff-Pouilly:

If I can add to that, kind of a European continent perspective. I completely agree with you, Louise. It's everybody coming together, creating financial education for children. But what I see with schools, and they have so many jobs they have to do, but one thing that I would say is there is no money management curriculum. At least in the Netherlands, that doesn't exist. And I've checked, and it doesn't exist in most countries in Europe.

In the Netherlands we have something called Money Week. Our queen is very engaged when it comes to money matters, but it's one week out of the year. And so, if you don't offer and include a curriculum that starts at a very young age, then that is very difficult. But again, the schools can't offer the practicality. They can only offer the theory. And so your analogy holds perfectly, yeah. Louise is kind of bringing the practicality and the theory together as well. It becomes really strong.

Erin Dangler:

And let's say no one was to offer this kind of money management education. What are the consequences of not arming young people with good financial knowledge?

Louise Hill:

We commissioned a study at the end of last year to show just how vital it is that we teach financial education in order to bridge that capability gap that's costing the UK billions every year. And some headlines from it, people who did not receive financial education as a child, are more likely to be unemployed or earning substantially less today than those who did. And 40% of those people who said they didn't receive any financial education said that they had no savings at all, whereas adults who did receive financial education as children, 46% more likely to start a business than those who don't.

Just think about the business opportunity that that creates, and the income and revenue opportunity that that creates. Those people will be 70,000 pounds richer in retirement. It's a real sea change in people's life outcomes. And when we bundled all of that up, and these are UK stats, it showed that prioritizing financial education in the UK would inject an extra 7 billion pounds into the UK economy every year. So, roll that up to 2050, and that's 200 billion pounds. Then replicate that across Europe.

And you can just see the difference that doing this right, teaching these skills young, can make to our society and our economies.

Silvia Mensdorff-Pouilly:

And that's I think the beauty of financial education when you get it right, because I think there is sometimes a very negative vibe around the financial services industry, and some of that is really fueled also by people who don't understand it and therefore through [inaudible 00:10:41] understood bad behavior get into trouble. And I think the financial services industry, when they contribute to financial education, actually also help in the perception. And ultimately, it helps everybody, and it helps society overall. It's a big thing to solve with something that makes a huge amount of difference.

Erin Dangler:

Clearly, there's an opportunity here for society to promote financial education and to be more financially inclusive, so I imagine that the way our financial systems have evolved over the last decade and with the rapid advances that COVID inspired, money has in some ways been a little more abstract. How do you think the rise of digital payments and the decrease in cash use has affected young people's understanding of money?

Silvia Mensdorff-Pouilly:

I've got three children, and ultimately money is a means to an end, right? We use money to exchange. It's what we've built as humans to enable us to trade. So ultimately, every time you buy something, it's a trade. And when you give a child physical money, and they trade on, say, ice cream, you understand that you've given something, and you've gotten something back. It's changed in its physical form.

As soon as money becomes digital, as soon as it's just tapping a card, then you keep the card, you get the ice cream. So, for small children, it is very difficult to understand that there is not an endless pool of money at the tap of a card, and that really persists into teens as well.

I found personally with my children that the moment they really start understanding the nature of money is when they get their own jobs, because then you can kind of say, "Okay, well, that's what I want to buy. Oof, I've got to work 10 hours for that." And we think about that again.

It's so critical when we combine digital with money that you actually give them the tools that they can try it out, and they can fail. They can suddenly run out of it, which is easier to show when it was a piggy bank, and you brought it to the bank, and they emptied it, and they counted all the coins.

Louise Hill:

The fact that money is more and more digital, if we think back to the last couple of years, the pandemic has accelerated that shift to digital, both in terms of people shopping more online and the number of shops who've elected to stop using cash. That has really propelled digital payments even faster than they were already increasing. And when we look at our youth economy report that looks into the spending, saving and earning behaviors of GoHenry children, we've seen ever since we started producing that, that Generation Z and Gen Alpha coming through, they will almost always choose to go cashless.

Only 14% of six to 18-year-old spending was in cash. And that makes it doubly important that they are understanding that when it's gone, it's gone. Money doesn't grow on trees. Therefore the importance of payments tools, spending tools, and of course GoHenry, we bring that to life for them. They can see that when they spend their money, they get a little ping on their phone to tell them they've just spent 4.99 pounds, and they've got this much left. Or they've tried to spend something and the transaction has failed. We tell them why. We tell them because you don't have enough money. So, that's always front of mind.

Erin Dangler:

Due in part to the rise of digital payments, many young people have lost the concept that the numbers they see on screen reflect a real-life bank balance. With bills and coins playing a smaller and smaller part in financial transactions, it's no wonder that kids aren't as well equipped to navigate money matters as older generations. And combined with the increasing number of financial service platforms and products, the need for better financial education becomes clear.

But financial education is just one part of the larger financial inclusion puzzle. So where exactly does this knowledge fit into the bigger picture?

Silvia Mensdorff-Pouilly:

We're trying to include more and more people into the financial ecosystem because we know from lots of studies that if people are financially included, their lives improve dramatically. Making sure that people understand that, how to get onboarded, what help there is out there to be part of the financial ecosystem and to be able to lead a financially sound life, financial education is critical when it comes to financial inclusion because a lot of times people are excluded because they don't grasp the system.

So when we talk about financial education, we don't look just at it from the perspective of financially educating children. There are lots of adults out there that are not financially educated and that need help. So, it's really to me about reducing shame. Everybody finds money difficult. They don't often admit it, but it can be easy in a couple of simple steps, and here's how you go about it, and don't be ashamed of asking for help. Don't be ashamed if you don't know this. And making that accessible is critical to be financially inclusive, and that is sparked by education.

Louise Hill:

I think Silvia is absolutely right, and I think one of the things fintech has done is they have built services and products to fill gaps or weak spots in financial services. So GoHenry, we spotted a gap where children were being left behind, and seek to fill that gap. If you think about a lot of the other fintechs that have been very successful, they've found other underserved or even completely not-served groups of individuals, and have launched products and services that address those needs, and very much have debunked some of the slightly more esoteric or cryptic versions of financial services that exist.

The idea of the stock broker in a cloistered, dark, wood-lined office trading shares, well, you can now download an app and auto-round-up your transactions so that when you buy something for 2.79 pound, the extra few pence gets rounded up and put into your investment pot. And those services, they're using simple language. They're debunking all the mystique that used to exist around investing. That's all about financial inclusion. That's giving people who maybe can't access what has been provided in the past that they are able to access in a way that meets their needs and makes sense to them.

Erin Dangler:

You mentioned something there, Louise, that I'd love to dig into a little more, the underserved, the un-banked. Can you tell us a little more about this issue?

Louise Hill:

There are more than 1.2 million un-banked adults in the UK alone. And the age group that's most likely to be un-banked is 18 to 24. So, the 18 to 24 age group accounts for almost one in four of that 1.2 million.

What interests me, of course, is that to date, figures of excluded children. There's been no assumption in the stats that have been produced in the past that children actually need to be banked or need access to money. And there's little to no information in the public domain about that in the UK.

In the USA, there are some stats that predict 34% of teenagers are un-banked. And I think for many, I know young people that we talk to, many of them say that starting university or their first job is first touchpoint with a bank. And that really does mean that we are throwing a huge number of young adults into the world of adult finance without practice, without guidance, without education. And the only thing that can result in is poor borrowing practices, unwise financial decision making and debt.

And I read something that horrified me over the past year in the UK, one in eight young borrowers has been chased by a debt collector. So, if that doesn't say we need to be teaching kids as young as possible, then I don't know what does.

Erin Dangler:

Wow, that is a startling statistic, one in eight. I have kids that are right at that age. They're just being launched into the world out of college starting their first job, and it has been a lifelong process teaching them about money. I couldn't imagine them just walking out and starting their first job without knowing any of this, so I'm wondering. We've already talked a little bit about where the issues around financial education stem from. What about the un-banked? What do you think the root causes of that are?

Silvia Mensdorff-Pouilly:

I think the issue comes from a couple of places. A lot of the un-banked is migrant population, unfortunately, and that is something that needs to be solved. What gives me hope is that when you look at the Ukraine war crisis, you can see that there was a very distinct drive to make sure that as Ukrainian refugees came into different countries, that there was the capability of onboarding them quickly onto the financial system.

Oftentimes when you look at getting into the financial system, the banks are required to perform KYC, know your customer. If you don't have a document, if you don't have a place to stay, then it becomes very difficult to actually have a bank account. And that is something that is being recognized, because obviously there are good reasons why KYC is there to prevent abuse, but at the same time, that is a hurdle for certain parts of the population.

So again, both governments but also the financial services industry and some fintechs have stepped into this to say, "Okay, how can we solve those problems?"

Erin Dangler:

Yeah, it's scary how inaccessible bank accounts can be without having a fixed address. And of course, people got trapped into that vicious cycle of no fixed address means no bank account, which means no job. And it's a tough cycle to break. With that in mind, how can institutions, educators help people avoid that trap? Where and when does financial inclusion begin?

Louise Hill:

One of the research studies that we often turn to is a study done by Cambridge University quite some time ago now, and it showed that children form their attitudes and habits towards money from the age of seven. That's just soaking up things in society, in their home life. And if they're starting to form those attitudes and habits by seven, that tells you why financial education, financial inclusion as children is so critically important for adult life.

Silvia Mensdorff-Pouilly:

And if I may add to that, oftentimes people think that financial education and not being able to deal with money well is related to poverty. I actually believe that there is a persistence of being not able to deal with money, but that ability is also formed in very affluent homes where children are consecutively bailed out. The money is not an object. They don't have to save up to buy something, they don't have to get a job to be able to afford doing things, and therefore none of the habits are formed.

And I think that's just as big a problem as if you come from a background where money's tight, and then money is an object. Potentially, you then learn better how to balance it because you are seeing that your parents are having to do it. So, I think the inability to deal with money doesn't really depend on your background. It depends on what you've been taught about money, what it is and how you deal with it.

Erin Dangler:

To have the strongest and most positive impact on financial education and inclusion, children need to develop good habits from an early age that they can carry on into adulthood. But as we've learned, schools might not be the best place to develop these skills, which leaves it up to fintechs and society to equip them with the knowledge they need. So, what is it that makes for a great financial education tool or platform?

Louise Hill:

As we've developed GoHenry, I guess the thing that we keep top of mind is that kids need to want to use GoHenry, and they need to have fun when they're doing so. So, design is crucial If what we're building isn't fun, it has to be visually appealing. We want people to learn, and we want them to be proud to show their GoHenry card and be seen using it.

And I guess part of that is making sure that we build in empowerment, because if we're empowering kids and allowing them to learn by doing, then that's giving them a great foundation, and that is going to make them pleased to use the services and proud of doing so. We've built in, there's a framework there where the parent sets limits and controls that make sense for them and their child, and that means the child or teenager can make mistakes in a safe environment.

We talk a lot in the business about the four pillars of money management, earning, saving, spending and giving, and creating open conversations in the home around each of those four topics. And the whole concept is about theory and practice. So, basic using the service. It's practical learning.

We have a huge range of cards which can be personalized with the child's name. I think we're somewhere around 80 different designs at the moment, and we've again learned over the years how much kids like that. And I've already mentioned Money Missions. We were really proud to release that, actually. As I said, it was something we worked on long and hard in the pandemic, invested our time and energy into building, and that was to marry the theory with the practical tools that we offer.

But you asked what have we learned that matters? I could talk forever. There are so many things that we've learned, but fundamentally it's that, the four pillars of money management, the marrying of practical tools and theoretical education, and letting kids take the lead, and learn from them how we need to shape the service to meet their needs and their parents' needs.

Erin Dangler:

That's great. I love how you talk about bringing together all the facets of money management, and learning from the children how to make the best platform. Something you both mentioned earlier was the importance of creating safe spaces for young people with their money. Could you explain how you're doing that with GoHenry?

Louise Hill:

The basic service offers a prepaid debit card and app. There is an app for the children, there is an app for the parents. And the parent can set up regular pocket money payments to the child, or not, if they don't wish to. They can set up tasks and chores. That's to teach kids about earning money. So, I think some of the most common ones are things like emptying the dishwasher or walking the dog or doing your homework, and set money against each of those so that the child learns about earning money.

Either the child or the parent can set savings goals, and the child can auto-save towards those. With the spending, every time a child spends, actually both the parent for the younger children and the child get a little ping on their phone or tablet to tell them they've just spent 2.99 and they've now got 3.27 pound left, or if the transaction fails, why it's failed.

And then the fourth pillar, earning, saving, spending and giving. In the UK, we partner with the NSPCC. In the US, we partner with the Boys and Girls Club of America, and we allow the kids to make micro donations to those charities. Earlier this year, we went over the threshold of 250,000 pounds had been donated to the NSPCC by GoHenry kids, and I think the average donation was seven pence. So, you can imagine from that just how many kids had taken that decision to give to other children, which was fantastic to see.

So, there are all those tools there so that kids can learn practically about earning money, saving it up, and that delayed gratification idea of waiting until you've got enough money to buy something bigger. Spending and learning about the implications of spending, and then also learning and understanding that they can do something really positive with their money, and donate to children who might not be as fortunate as they are.

Erin Dangler:

Wow. Wow. It sounds like there's a lot going on with the GoHenry platform. You've got parental controls, education tools, even a bit of gamification, it sounds like. And presumably, having that partnership with FIS has helped enable a lot of this. Could you tell us a bit more about GoHenry and FI's working relationship? How have the two organizations helped each other?

Silvia Mensdorff-Pouilly:

The partnership with GoHenry, I think started more than 10 years ago. So, FIS provides the card processing and card issuing capabilities to GoHenry's prepaid card for kids. And we're very proud that we've been able to help go ahead, and we also expand into the US, and so we're looking at what more we can do also in terms of supporting financial education.

But Louise, I'm curious, because you've been there all this journey, what you think about the partnership?

Louise Hill:

Well, as Silvia says, we've worked with FIS for a long time. The 10th of November this year will be our 10th anniversary of being live to the public. And we've actually worked with FIS for longer than that, because of course we had to build the bits of the jigsaw puzzle and bring all the partners together that we needed to create GoHenry before we launched to the public.

And we did always hope that we would be able to build GoHenry to a large size. We do have well over 2 million customers across the UK and the US, and we've recently acquired a French company called Pixpay, who operate across both France and Spain. So, we're expanding our global footprint fast, and intend to continue to do that.

So, when we launched, one of the things we looked for was what I like to call world class partners so that we knew we could tap into their strengths and their knowledge, and we could grow with them, and they could help us grow. And I think the team at FIS helped us with a huge amount of advice when we first started. And that sense of partnership, I think, has continued throughout the 10 years and we're proud of what we've achieved with FIS.

Erin Dangler:

Well, it sounds like it's been a busy 10 years building GoHenry to what it is now. And I'm curious, because you've talked a lot about how it helps to develop young people's financial acumen, but at the same time it's a fully operational financial platform. So my question is, do you see GoHenry as a financial service platform or as an educational tool first?

Louise Hill:

I think that's a really good question. It's not a question I'd asked myself before, and I guess you would expect me to say we're both. We are a financial service, and we're an education platform. But fundamentally, education first. That is what triggered the idea for GoHenry. It was how on Earth I could teach my children that every time they clicked on the iTunes account, they were spending my money, and how I made that make sense to them in a way that they would understand. That's where the idea came from. So, education first, and it is absolutely what I'm still most passionate about, as I hope has come across during this conversation.

Erin Dangler:

I definitely wouldn't worry about that. I think the focus on education really has shown through our conversation. So, as we start to wrap up now, I'd really like to get both of your predictions for the future of financial education and inclusion. Do you see our society becoming more financially inclusive?

Silvia Mensdorff-Pouilly:

I absolutely think the world will become more financially inclusive, and GoHenry is leading the charge of including every child. I think there is a lot of realization at many different levels about the importance of financial education in combination with financial inclusion, more so than there ever was. And I think the tools are becoming easier. I think digitalization is making reach wider.

There are problems that come with that, right? So, when you think about financial inclusion, and you combine that with digitalization and financial education, you don't have that digital asset or you don't know how to deal with the digital world, then it becomes more difficult. So, there are layers to it. The UN recognizes it. Governments recognize it. Financial services industry realizes it, fintech realizes it, and we're edging on. There's always going to be more work to do. It's one of the reasons that I'm part of the ecosystem, I think. Contributing to money access is a service to society.

Erin Dangler:

And Louise, what about you? What are your thoughts?

Louise Hill:

I do think the world is becoming more financially inclusive. I think digitalization has meant that companies like us have been able to step into a gap and build something, I think in a way that was impossible 50 years ago. And as I said, a lot of the fintechs in particular have identified and filled areas that were underserved or not served at all.

And I also think something I've seen over the last few years is a lot of institutions recognizing that the financial wellbeing of their staff, of their employees, is critical to them functioning well in their workplace.

And so, they're starting to add financial wellbeing products to make sure that their employees and staff are well, are confident, are making good money decisions, because they now understand what an important part of a person's entire life that plays. So yeah, I think the world is becoming more financially inclusive, and that's a great thing. That's something that gives hope.

Erin Dangler:

Silvia Mensdorff-Pouilly is head of Banking and Payments for Europe at FIS. And Louise Hill is co-founder and Chief Operating Officer at GoHenry. That's it for today's show. Thanks for joining us. We'll see you next time when we'll be learning about ESG's secret weapon, business process optimization.