Fintech Robos exploits ‘informatics engineering’ to solve regional savings and pension issues

Ebrahim K Ebrahim

Pension Researcher & Chairman of the Annual MENA Pensions Conference

“When savings and financial planning become a lifestyle”

Over the past few years there has been a proliferation of mobile apps and consumer devices for tracking personal information and quantifiable aspects of our lives, particularly those related to health and wellbeing. The spread of these tools has contributed to a new field within Human-Computer Interface (HCI). Many apps can now be downloaded for free or at a low cost and some physical devices, such as pedometers, cost trivial amounts. Mobile phone manufacturers, including Apple, Samsung and Motorola, have also begun to make specific provisions for activity tracking. For example, mobile phones and smartwatches incorporate always-on accelerometers.

The advent of wearable computing in the consumer domain is creating a new lifestyle. With the popularity of smartphones and digital devices the area of personal tracking appears to be one of great investment and growth. As young people mature with these technologies, it is important to consider the role personal informatics (PI) could play in their lives. A recent report suggests that as many as half of UK adolescents have used a self-tracking technology to learn about their health, typically without adult support.

PI refers to a class of software and hardware systems that help individuals collect personal information to improve self-understanding. These foster self-insight and promote positive behaviors. Current models of how people use PI are largely based on behavior-change goals.

Thanks to the advancements in ubiquitous and wearable technologies, PI systems can now reach a larger audience of users, from recording finances for accountability to tracking location for pure curiosity. Health tracking has perhaps captured the most attention, with nearly 70% of US adults tracking a health indicator.

PI can serve a goal-driven purpose, such as tracking weight loss, increasing physical activity, having a record of places visited, or tracking loan payments. Beyond these goal-driven motivations, self-tracking tools are now a part of everyday life, or “lived informatics”, with people tracking out of curiosity or a fascination with numbers.

 UK Government turns to dashboard to fix pensions

Since the introduction of auto enrolment in 2012, the pension industry in the UK has been in a state of flux. The vast majority of final salary pension schemes have closed. The number of AE pension schemes grew exponentially. The pension freedom policy became effective, putting people directly in control of their future pension. To assist end users with the transformation the UK government has resorted to building a Pension Dashboard. Individuals often have many different pension sources; state provided, occupational and private pension pots. The dashboard aggregates information on all of these into one place.

The experience of people saving for a pension in the UK is changing. The responsibility for making decisions is shifting increasingly towards the individual as the proportion of those in defined contribution (DC) schemes increases, largely driven by the introduction of AE pensions. This larger reliance on defined contribution schemes means that, for the individual, it is less clear what their income will be at retirement. With increased responsibility there is increased risk for the individual and more decisions to be made. Clean, unbiased, low-cost advice is needed.

AE has already succeeded in increasing pension participation with millions more of today’s workers saving into a workplace pension. The workplace pension participation rate in the UK was at 79% (22.6 million employees) in April 2021. This is helping to make saving into pensions a social norm again. Yet despite the success of AE, there are still around 12 million people under-saving for their pension.

The uncertainty about the eventual size of one’s retirement pot and resulting retirement income was cited as an urgent problem that could be resolved through the delivery of the Pensions Dashboard. The UK’s Pension Dashboard is a 6-phase initiative that started in 2019 and is estimated to complete by 2025. It requires information from a huge ecosystem of pension providers, financial regulators and UK employers.

Developing a well-functioning and engaging pensions dashboard was found to be the key to solving many issues arising from the transformation process – how much savings people have, what’s their expected retirement income, the investment options they have and how they are progressing towards their target pension. This is believed to encourage citizens to interact and reconnect with their pensions, and see for themselves if they are fit to face their future.

Practically, the Dashboard (or PI) will enable citizens, at a time of their choosing, to see all their pensions online securely. This will include all workplace pensions, public and private sector occupational and contract-based pensions, and non-workplace pensions. Crucially it will also include the state pension from day one, which for many is the bedrock of their retirement income.

 Fintech Robos empowering people to aim towards change

As savings and pensions experts, the founders of Fintech Robos recognized from the outset that there are a range of behavioral problems and barriers that prevent people in the MENA region from saving. The founders are pioneers with years of experience in savings and pensions services. They are fully cognisant that ‘savings’ products are currently sold rather than bought, and that savings behaviour is not greatly ingrained in the Arabic culture. As a savings expertise house in the Arab world, we had to think carefully about tools and strategies that bring savings and its deeper philosophy closer to people's minds. These strategies rely primarily on the power and magic of visual performance that reflects the accumulation of savings, returns growth, compounding, and the steady progress toward the financial goals. We wanted a better relationship between people and their money and wanted to provide them with their ‘lived informatics’ of the difference savings could bring to their lives. If we wanted to sum it all up in one word, we needed a powerful “dashboard”.

Here are some of the issues faced and how they have been behaviourally addressed in Fintech Robos savings app:

First, we have around 79% of people (of those surveyed) don’t feel confident about their financial future. We figured that this is primarily due to lack of visibility on their finance and that most of them lack access to financial planning. For this, we have designed a 24/7 accessible dashboard that displays the full picture of their savings - where they are invested, the allocations to different funds/ instruments, performance per goal and per fund, the daily valuation of their savings portfolio and the progress they are making towards their goals month by month. Furthermore and to address the financial planning part, we have produced gamified, bespoke actuarial calculators (with all the relevant economic assumptions) that people find handy in predicting their future financial outcomes.

Second, we have 39% of the people who don’t save any money. With these individuals, we provide them with financial education. We show them how savings could change their lives and what their saved money could generate for them in passive income. We also use animation to show how simple it is to start the process, where savings, even for a starting small amount, become an automated monthly behaviour done by the app and a large fund built. It’s all about changing the mindset and triggering change in the positive direction.

Third, we have 41% of people who save a little every now and then, but don’t do that on a regular basis. For this segment, the Fintech Robos app has made savings an automated behaviour that’s configured in their routine lives. Very much like the ‘set and forget’ pattern, the app allows you to set a date in your calendar where your savings contribution will be automatically sent every month via your bank DDI that shows on your dashboard both upon transfer and once traded. Hence, savings becomes seamless and a monthly habit, without us worrying much about doing it ourselves.

Fourth, we have a vast majority of those who save but they do that through bank cash accounts with no or very low returns. For this very large group, the app gives access to quality, high-yielding collective investments such as mutual funds, ETFs and strategies whose returns, in the long-term, far exceed bank returns. The app enables clients to easily run comparative simulations between cash returns and investment funds using actuarial calculators, for them to see the difference and make the right decisions.

Fifth, we have a decent proportion of people who don’t know what they should be saving for. For this section of the population, we had two options/ actions. First, we present them with an easy-to-use and well designed list of the most globally accepted financial goals such as pensions, college education for children, buying a home, child’s wedding, buying a car, starting a business, travel, etc. Once they choose a theme, then that becomes their savings goal. However, if they are still not ready to choose a specific financial goal even after seeing the list, then they are defaulted in the ‘super-saver’ option which is an open-ended savings goal powered by comparatively high-yielding investments. Here they are able to see both their contributions and returns separately as well as the overall relative progress. As their confidence builds with the App, they can choose a goal from the list, or custom their own goal.