How are you with numbers? Fairly good? Above average, do you think?
Maybe it’s like driving, though. We all think we’re above average drivers. But when it comes to parallel parking or trying to explain that scratch on the passenger door, not so much.
Nearly one-third of Brits say they struggle with everyday maths. More than a quarter avoid situations involving numbers, research has found.
So, how would you fair with these questions?
- Suppose you need to borrow £100. Which is the lower amount to pay back: £105 or £100 plus three percent?
- Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add more money to your account in the second year than it did in the first year, or will it add the same amount of money in both years?
- Suppose over the next 10 years the prices of things you buy double. If your income also doubles, will you be able to buy less than, more than or the same as you can buy today?
Only one-third of adults are financially literate
These questions were taken from Standard & Poor’s global financial literacy survey. This showed that just one-third of adults worldwide are classified as financially literate. On average, Europe scores more highly at 52 percent, but huge variations exist.
Countries such as Denmark, Sweden, Germany, the Netherlands and UK score highly with 65-75 percent of adults being financially literate. However, Portugal and Romania score less well with financial literacy rates of around 25 percent or less.
This matters because making money go further has become even more important since the COVID-19 pandemic. Basic numeracy, understanding interest rates and inflation are key to making financial decisions. Yet people may lack the confidence to engage with their finances.
This not only makes people financially vulnerable. It also exacerbates financial exclusion if they reject mainstream financial services, because they don’t feel confident to transact. Or the products available do not fit their needs.
The financial literacy opportunities…and threats
Poor financial literacy and inclusion affects lives and livelihoods. It could also be costing national economies dearly – up to £25 billion a year in the UK, according to research from ProBono Economics.
There are huge opportunities for providers to design products that help customers, who struggle with overspending, understanding interest and repayments, and keeping track of their finances. At the same time, there are huge threats to those who don’t give customers a fair deal.
The regulatory and reputational impact on those who put their own profits and income above customer protection could be extremely damaging. Take the mis-selling scandal around payment protection insurance (PPI) in the UK. It’s estimated to have cost UK banks £50 billion collectively.
How Monavate can help
In the past, launching innovative financial products may have been an uphill struggle. Firms had to overcome legacy infrastructure and legacy mindsets, which was time-consuming, complex and potentially costly. Nowadays, infrastructure-as-a-service streamlines the process of getting new ideas to market, making launches quicker, simpler and cheaper.
Monavate are an FCA-authorised e-money institution and principal members of Mastercard and Visa (card schemes) to offer issuing services and BIN sponsorship for debit, credit, prepaid card programmes and more. In a nutshell, this means we have the licences, expertise, partnerships and tech to turn your ideas into viable payment solutions.
Contact us today to find out more.
1. £100 plus three percent, 2. more, 3. the same