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Introduction
In the last 10-15 years, the average American has gained more access to self-manage his or her financial wellbeing. Whether it’s banking, investing, budgeting, income generation, or even alternative currencies, as innovation and technology have opened up the financial world, frankly, our financial lives have gotten complicated. The choice to take on increased access and control inevitably comes with increased responsibility. The problem is, education always lags innovation.
Depending on where you get your information, researchers claim between 60-80% of American adults face significant financial anxiety. Mainstream media often points to rising living costs and debt as the villains of that narrative, but an essential leading cause that is too often ignored is lack of financial literacy in the United States. In 2022, Standard and Poor’s conducted a study showing 43% of Americans are financially illiterate, and what’s worse, another 2022 study found that 25% of Americans who claimed to be financially literate didn’t know as much as they thought.
As a technology company, we certainly have a reason to pause here. The question may no longer be “what can we build?”, but rather, “who are we building for?” More information and more access can’t be the only solution. In order to keep moving forward, there's an opportunity to leverage technology to build an understanding of the new financial world, and then give people the tools to take advantage of that knowledge.
Our Current Landscape
Without diving too deep, let’s briefly survey the financial education landscape in the U.S. as-is.
The fact is, Americans are expected to take personal responsibility for their financial education. Only 27 states require high schools to even offer personal finance courses, a mere 15 states require a financial education course to graduate, and only 5 of those 15 states had those policies in place pre-2020.\
Past high school, it’s impossible to find widespread information on financial education requirements at the university level. This seems to point to a lack of those requirements as a typical requisite in general education courses. So, unless you choose to get a business degree, it’s unlikely that your university experience will address your financial education - unless you actively seek it out.
This means that much of our financial education takes place in adulthood and via self-directed means and social learning. Eighty three percent of Americans claim they wish they learned more about money growing up, and coincidentally, 83% of Gen Z (the most financially educated generation), claims their primary financial education comes from one of three sources: their family, their friends, or the internet.
The Problem with the Internet
Although social learning is vastly important to changing our culture of financial education, if we’ve already demonstrated a financial literacy gap and rampant financial anxiety in the U.S. adult population, then we’ve already illustrated the problem with solely educating yourself via family and friends. So let’s bring technology back into the conversation.
The fact that the third primary source of financial education is the internet poses several significant problems. A quick Google search for any financial literacy help provides results that are shaky at best. There is a lot of great, free information, but it’s extremely difficult to differentiate between who is trustworthy and who is writing a financial blog just to try to get your money. Not only will you be greeted with reams of conflicting information, many times useful tidbits are well-disguised ads for financial products, services, and the so-called expertise of “financial gurus.” Ultimately, the incentive structure of the current internet search favors the financial benefit of the publisher over the consumer.
So how do we start changing that incentive structure to align the benefit of the consumer with the benefit of product builders, innovators, and information providers?
Here Comes AI
If you haven’t played around with Open AI’s ChatGPT, our own NLP chatbot, or any of their peers, you may be under the impression that they’re just more advanced versions of Siri, Alexa, and Cortana. It’s an easy mistake to make—after all, Siri and friends have been the standard “AI” assistants for years now—but times have changed.
See, Siri and Alexa are simple command response machines. You ask Siri to turn on your dryer and she does it (after you repeat the command several times). You ask Alexa to play songs from a playlist and she does. You can ask them to take dictation, run searches, look up the weather, and any number of other things you could easily do without barking orders at digital assistants..
ChatGPT and its peers are different. If you ask ChatGPT a question, it doesn’t return a list of results; it returns a relevant and cogently constructed explanation. It can explain complex subjects in layman’s terms, write essays, construct cover letters and even write functional code. These new AIs may not be quite as fluent as humans yet, but they’re leaps and bounds ahead of a simple Google search or virtual assistant.
Where AI Works
The rise of artificial intelligence-driven products like ChatGPT may be exactly what we need to align the incentives of fintech innovation and financial literacy, but let’s save that point for now. First, let’s talk about how AI can fill in the financial education gaps theoretically and practically.
Financial Concepts
When it comes to learning financial concepts, ChatGPT and other NLP chatbots can function like a middle ground between a search engine and a human instructor.
Think of it like this: Say you want to know what credit scores are, what they affect, and how they’re calculated. Previously, you only had a few options, each with their own problems. You could:
So if you don’t want to pay (or are embarrassed to ask) someone to teach you about finance, aren’t great with self-directed learning or filtering out irrelevant and inaccurate information, and don’t want to spend time watching videos that may not even answer your questions, you were pretty much out of luck.
Until now.
Conversational AI's flip the whole paradigm on its head. If you ask ChatGPT to explain the concept of credit scores, it isn’t going to judge you or charge you or bury you in irrelevant information. It’s just going to explain what credit scores are and elaborate on the subject if asked. That takes a lot of the time and emotional requirements out of the equation.
Theory in Practice
Conversational AI's like ChatGPT aren’t limited to answering questions or writing cover letters. It may not be possible to ask ChatGPT to find you the best mortgage rates or determine whether you can find a better deal on a loan at a different bank right now, but it’s only a matter of time before conversational AI's gain that functionality.
When you layer in live insights and personal portfolios, like we have with Daizy, it creates a seamless bridge between the theoretical information and the personal application of that knowledge in practice.
Conclusion: Aligning Incentives
Most importantly, there is hope in the nature of artificial intelligence. The better the information that AI's like ChatGPT use becomes, the more people will use them. So, they are incentivised to provide the highest quality information, because the more each user benefits, the more that person will keep coming back, and as each user adds to the AI’s training data, the better the information becomes.
At Daizy, we believe the rise of conversational AI points technology in a helpful direction for the future financial education landscape of the world. Because as we each benefit, we all benefit, and that creates a beautiful combination - the best of technology and humanity.
