We are experiencing an unprecedented global shift in demographics. Our society is aging; we are living longer, healthier, and more productive lives. Life expectancy has improved significantly, and we have added decades of healthy living since the early 1900s. Along with longer lifespans, we are also staying employed longer than before. Soon, we will have five generations working alongside each other. Not only “when” or “how long” we are working has changed, “how” we are earning a living has changed as well. There are an increasing amount of contingent workers participating in the gig economy. There are also more women joining the workforce or even starting their own company than ever before. According to the Women’s Business Enterprise National Council (WBENC), there are 12.3 million women-owned businesses in the U.S., and women now own 4 out of every 10 businesses. Gone are the days of single-earning households with one steady paycheck. Adding to the increasingly complex picture is our varied financial obligations, from tuition for our children to financial caregiving for our parents. How do our financial institutions innovate to meet the needs of our evolving world? One could perhaps take a page of the playbook from the East.
The story of Grab
Grab started as a ride hailing company in 2012 in Singapore. Since that time, it has evolved to Southeast Asia’s leading super app, fueled by US $1.46 billion in fresh funding from the Softbank Vision Fund. In addition to transportation, it now has a robust food delivery business, and an ever-expanding financial services platform, with the goal of becoming the region’s largest merchant network, insurtech policy provider, and fintech lender. Their newly launched financial services offerings branded “Grow with Grab” will include payment and microlending, aimed especially at the 9 million micro-entrepreneurs that Grab serves today.
Elsewhere in the U.S., various fintech companies are enabling companies to pay workers instantly for completed work. For example, Caviar couriers using the Square Cash can access funds immediately after completing delivery. Marketplaces using Stripe Connect can send Instant Payouts to sellers or service providers. Meanwhile, Uber and GoBank have partnered to provide Uber drivers instant access to accrued funds via GoBank checking account and debit card; and Earnin sends a workers’ earnings instantly to their bank accounts – instead of having to wait. All of these seemingly small innovations are important, especially for many consumers today, where bi-monthly pay cycles do not line up with their bills, leading them to turn to credit card debt and overdraft fees to bridge the gap.
The multistage life
But the story doesn’t stop at payroll. If we are living longer and healthier lives, what do we do with those extra years? Traditional pension schemes and retirement plans assume a direct path of education, career, and a hard stop at age 65. But a longer lifespan will enable us not only to work longer, but also take more risks and try out new things – re-invent, re-skill ourselves, perhaps even start a new company. In fact, over half of all new entrepreneurs in the U.S. are over the age of 45, according to the Kauffman Foundation. And as much as 85% of jobs that will be available in 2030 do not exist yet for today’s graduates – it is never too late to disrupt ourselves. 50 is indeed becoming the new 30.
Given this new paradigm, is retirement still relevant? Or should we retire the traditional notion of retirement, and re-think how we should manage and grow our savings? As Professor Andrew Scott wrote in his best-selling book 100 Year Life:“The simple truth is that if you live for longer then you will need more money. This means either saving more or working for longer.” But with relatively low rate of savings and investments, what can financial services companies do to help nudge consumers into healthier financial habits?
Part of this lies in understanding the current longevity trend. While aging is universal, how we age is not homogeneous – and we can no longer segment individuals and their needs by age. A 50-year old today is vastly different than a 50-year old twenty years ago. A 50-year old in China is also different than a 50-year old in Europe or the U.S.. Their financial needs, aspirations, and obligations are also likely different. Perhaps the best way to serve them is to better understand where they are in their life stage. Someone putting children through college will likely have very different needs than someone as an empty-nester – though they could be of the same biological age. Likewise, an entrepreneur starting up a new business will have different needs than those still in traditional corporate or manufacturing roles. In an increasingly connected world where we are leaving digital breadcrumbs of nearly every aspect of our lives, emerging technologies such as data analytics and artificial intelligence could prove useful in not only providing contextual insights based on habits, but also guidance or even decisions made automatically on our behalf.
Just as much as we need to become more flexible in the new era, It is paramount that financial services innovate and adapt to the changing needs of our society. With longer lifespan and longer earning power, we could afford to take more financial risks than ever before; saving smaller amounts will have a much larger impact on our lives with this extended time. We need to be more fluid than ever when it comes to managing our assets, expecting more up and down cycles, and matching our financial tools to help us plan for a greater frequency of multi-generation households and the growing complexity of our financial obligations.
It is more important than ever for us to invest in our future selves – and to take advantage of the extra time that we have. The question is, will financial institutions guide us through this new normal, or will we increasingly rely on fintech and big tech platforms to meet our financial needs? After all, the future of aging should not be a story of survival – but one of living.