TLDR

This article explores the emerging opportunity for fintech innovators in the field of financial middle management. It discusses the demographic changes that are leading to new challenges and the need for innovative solutions in financial services. The article highlights the phenomenon of the “sandwich generation,” middle-aged individuals caught between the financial responsibilities of supporting their ageing parents and their own children. It also discusses the impact of economic downturns and increased life expectancies on family finances. The article identifies the lack of existing platforms that address the complexity of managing multiple financial products and the potential for Open Banking to cater to family dynamics. However, it recognizes several challenges, including trust, technological accessibility, demand, and legacy systems and regulation, that may hinder innovation in this area. The article suggests that novel solutions may come from outside the traditional banking sector and emphasizes the need for adaptable financial products that can meet the evolving needs of consumers. Overall, it presents the concept of collective financial support as a potential avenue for creating more wealth and financial capabilities within the family unit.

Key Points:

• A significant demographic shift is creating challenges and opportunities for innovation in financial services.
• The “sandwich generation” of middle-aged individuals supporting both ageing parents and children is growing.
• Economic downturns, increased life expectancies, and conditions like dementia contribute to the financial burden on families.
• Existing financial services lack a centralized overview for managing diverse financial products.
• Trust, technological accessibility, demand, and legacy systems and regulation present challenges to innovation in financial middle management.
• Solutions may come from outside the traditional banking sector, and adaptable financial products are needed to meet evolving consumer needs.
• Collective financial support holds potential for creating more wealth and financial capabilities within the family unit.

Full Article

A significant shift is occurring in the demographic landscape, presenting unique challenges and opening new avenues for innovation, particularly in financial services. This demographic transformation is not just a trend, but a catalyst for rethinking and reshaping financial products and services. As we have seen with increasing life expectancies and ageing populations, financial regulation and industry solutions have had to adapt to cater to longer lifespans and changing retirement expectations. Innovative financial products have emerged to address this, such as retirement planning tools that incorporate longer life expectancies, and investment strategies tailored for different stages of life.

This shift has also contributed to the growth and emergence of a new phenomenon – middle-aged people finding themselves caught between the financial responsibilities of supporting both their ageing parents and their own children. This is often referred to as the “sandwich generation”. At conservative estimates, this “sandwiching” of responsibility – to their parents and their children – impacts over two million people in the UK today. However, that data only accounts for those with a more formal role as a carer, as opposed to the more informal helping out that goes on continuously for many people in this situation.

Driving this increased dependency are factors like an economic downturn, which can go hand in hand with job losses, reduced income and increased financial insecurity, as well as life expectancy increasing while dementia and Alzheimer’s disease, amongst other conditions continue, to be a focal point. On this horizon, scams are always a present factor and managing the money of others safely and securing can be difficult. The result of these factors can place a huge financial and emotional burden on families. Alongside difficulties in assisting with the financial affairs of elderly – sometimes not digitally enabled – parents, supporting children, and handling their own personal finances, the impact of digital transactions, subscription-based models, and the invisibility of virtual spending adds another layer of complexity and obscurity. When money is tight, and the pressure is on, understanding and managing money more effectively matters. Unfortunately, many applications that exist today, despite us living in an Open Banking-powered world, do not easily offer a layer of financial management digitally, even with things like power of attorney.

When it comes to a connected financial ecosystem of products and services that help to improve visibility and streamline the management of multiple financial products, as of now, innovation is lacking. While there are existing platforms that address individual needs, alongside niche players focusing on specific financial aspects, the potential complexity and messiness of managing diverse financial services without a centralized overview is a concern. Currently, figuring this out is passed onto the end user, left to obscurity or outsourced to expensive financial managers. Existing services are predominantly individual-focused, with limited consideration for familial relationships. Open Banking, a still underutilized asset, hasn’t been harnessed to cater to family dynamics, suggesting a lack of appetite for addressing financial needs within the family unit.

Clearly, there’s an opportunity for banks, fintechs, or players from other industries to enhance or create all-new services by exploring the unique dynamics of family-based financial management. However, the challenges of integrating financial services into a holistic, family-focused platform – akin to a super app – may go beyond what traditional financial institutions are equipped to handle. Trust, technological accessibility, demand, and legacy systems and regulation are all potential barriers to innovation in this space.

Looking to the future, novel and adaptive solutions to these challenges could come from anywhere, perhaps even from outside banking. Regardless, trust will have to be built carefully, because despite the need, there may be no want for it. That said, a one-size-fits-all approach is no longer suitable in the rapidly changing financial landscape. Financial products need to be adaptable and capable of changing with the evolving needs and circumstances of consumers. The dawn of generative AI and its connection to design could realize this by signaling the democratization of production, with design focusing on the problems to solve rather than the realization of it in pixels. Wherever change originates, it’s clear that those managing both their parents and children’s finances are ripe for innovation and commercial exploration, and the concept of collective financial support is well worth exploring if it can help create more wealth and financial capabilities within the family unit.