How embedded education is disrupting fintech
You’ve probably heard before that the best thing to do with your extra money is to invest. And the stock market was built so that any average person could do just that. In fact, the New York Stock Exchange was originally just a group of merchants who met in person daily to buy and sell stocks and bonds. Over time, however, regulations were put in place that limited the type of people allowed to take part in the financial markets. A big reason was the level of financial literacy needed to handle sudden drops and crashes in the market.
Centuries later, the financial services industry has become much more accessible, but there are still many barriers to entry. While any investor can now trade shares of companies on stock exchanges or purchase ETFs, the complexities of the financial markets still remain a question mark for much of the general public.
A big incoming driver in financial accessibility, however, is the concept of embedded education. Embedded education is the practice of educating people by leveraging their encounters in delivery channels that exist primarily for non-educational purposes.
What exactly does this look like?
In a modern classroom, students spend the majority of their time memorizing notes and lecture content in preparation for exams. After taking the exams, they receive numeric grades, which quantify how well they understood the subject. But regardless of what their grades are, it can still be difficult to connect topics taught in a classroom to real life. With embedded education, learning first happens through experiences.
Many companies have recognized this need to invest in their users’ education and are starting to adapt embedded education onto their platforms. Slack offers a suite of resources about how organization leaders can unlock productivity in their workflows or facilitate good communication among digital teams. Mirror invites users to join a Discord server where they can ask experts as well as other community members questions about creating and investing in NFTs.
Applying embedded education to fintech
Investing has long been reserved for the wealthy and educated. In fact, as of October 2021, the wealthiest 10% of American households owned 89% of all U.S. stocks. With recent innovation in fintech, however, financial services are becoming more readily available to the general public. As we gradually automate and replace work done by humans with technology, we’re also bringing down costs and enabling more widespread accessibility. Still, with more people opting into emerging digital investment platforms, we began to see a huge educational gap between investors who do well and investors who don’t.
As a result, fintech companies are using the embedding of public educational resources onto their platforms as an effective growth strategy. The most successful fintech companies know that the complex learning curve of finance is a huge pain point and barrier of entry for their users, and we’ve seen several iterations in the space so far with how they’re addressing that.
Embedded Education 1.0: Financial Services for the Average Consumer
In the earliest generation of fintech, robo-advisors disrupted the financial services industry. These are digital-first investment platforms with much lower fees and account opening balances than ever before, and they aim to replace human wealth managers. Anyone with an interest in investing can sign up and start growing any amount of money. They help the general public better understand their financial situations through individualized investment targets, risk tolerances, and portfolio diversification.
Companies such as Wealthfront, Betterment, and Ellevest dominate the robo-advisor space. Many built their missions around improving their users lives through financial literacy. For example, Wealthfront created a public blog where experts from their team share thoughts about their portfolio strategies and investing best practices. Educational content adds a layer of transparency with users, who can more easily learn about the company’s intentions and develop trust for the product.
As people begin realizing how easy it is to reach their financial goals, they become more invested into self learning. With digital advisors, however, users have relatively limited ability to experiment on their own. Their portfolios are automatically built for them based on their investment profiles; they can’t choose their own mutual funds, ETFs, or individual stocks and bonds. In this generation of fintech, users can conceptually learn about the game of investing, but they can’t really be players.
Embedded Education 2.0: DIY Investing Apps
In this generation of fintech, we see a rise of Do-It-Yourself (DIY) Investing apps. Typically, these platforms allow individual investors to join for free and build their own portfolios with complete autonomy. New features of these platforms include individual stocks and bonds, fractional shares, and categorical lists to sort through and discover new companies.
These apps rely more heavily on embedding education into their platforms than in Embedded Education 1.0. That’s because the product itself grows from helping its users grow as investors. As a result, we see many platforms offering investment research and analyses, so that users can guide their decisions with the knowledge of experts.
This article originally appeared on uxdesign.com, to read the full article, click here.
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