We have an ageing population and an increasingly dematerialised economy. So how can we avoid our senior citizens being excluded from the new digital economy?
By 2020, one in three French people will be 65 or over. And France is not alone in this trend. Seventy years on from the close of World War II, the baby-boomers are now the ‘granny-boomers’ and the world as a whole is seeing a wave of population ageing. The World Health Organisation (WHO) predicts that the number of older people, defined as those aged 60 and over, will reach 2 billion by 2050. The reasons are simple: a demographic explosion coupled with a worldwide increase in life expectancy, which has now reached 71.4 years. This is having serious repercussions on the global economy, which will need to respond to the challenges of this phenomenon and try to turn the Silver Economy to advantage.
L’Atelier BNP Paribas digital analyst Alessandro Promutico points out: “The 'Silver Economy’ traditionally referred to older people between 65 and 75 who retired and were mainly interested in real estate and planning for their heirs. But the huge increase in life expectancy has turned these people into powerful economic drivers because they have the ability to start a completely new life. By that age, most people have amassed enough capital to live the dream they used to fantasise about while they were working. Basically, they say to themselves: ‘So, I have another ten years to live, this is my last chance to fulfil my dreams’. The Silver Economy is a new ‘raison d’être’ which is based on the new availability of financial resources.‟
Meanwhile, in parallel with this ageing phenomenon, digital and other new technologies are having an increasing impact on our lives. Part of the economy has already gone digital and the traditional financial circuits are going online. However, these new ways of doing things clash with the entrenched habits of a population more used to stamped envelopes than emails, more at home with banknotes than bitcoin. And beyond 75, increasing life expectancy raises major issues. Not only do physical abilities diminish; cognitive capacity also declines. So how can we make sure that the elderly are not excluded from the new financial channels? Will the boom in new technology-based financial services create financial silos, leaving the older generation on the sidelines? Or will the services offered by FinTech companies – and increasingly by banks – serve to assist senior citizens and protect them against financial abuse?
Senior citizens becoming more connected
Senior citizens and new technology: a contradiction in terms? The digital divide is already something of a social divide, but will it become entrenched as a generational divide –connected grandchildren, disconnected grandparents? We really need to lay all these kinds of assumptions to rest because – never mind the clichés – older people are increasingly demanding to be connected. According to a 2016 survey from market research company TNS, 69% of French people aged 55 and over own a connected device – smartphone, computer or tablet – and 39% have at least two. Says Florence Paour, Marketing Director at telecoms giant Orange. “We can feel a rising demand among this sector of the population. Older people need to stay in contact with their friends and family, their children and grandchildren, who are all now using smartphones. They are not necessarily reluctant to use new technologies‟. The same trend can be observed on the other side of the Atlantic where, as long ago as 2014, 77% of all seniors owned a mobile phone, 59% had an Internet connection, and 47% possessed a tablet. And these numbers are growing. This is why there is an entire segment of mobile telephony focusing on this market, one example being Swedish company Doro, which has designed smartphones specifically for older people.
So if there is a genuine desire to be connected and significant numbers of senior citizens are being inducted into the digital ecosystem, are they also ready to take advantage of technology-based financial services?
FinTech and the ‘Silver Economy’: an emerging market?
Given that the FinTech microcosm is focusing firmly on ‘digital natives’ and the Millennial generation, senior citizens are for the moment not really on the radar of such providers. For now, the use of FinTech tools among older people is minimal, and in the long term this could entrench a financial gulf between the generations. However, such usage does exist and is on the rise. The United States has seen an increase in senior citizens’ use of online banking services, with the proportion of this age group using these services growing from just 5% to 13% between 2011 and 2014. “Many seniors are ready to use these technologies. You just have to be able to give them the right support by offering them dedicated services,‟ argues Paris-based financial services expert Yves Morel.
Capital One, a US online bank, has forged a partnership with social impact organisation OATS (Older Adults Technology Services), and micro-learning specialist Grovo to develop a tool specifically designed to train seniors on online payments. Forty 2-minute videos provide them with all the information they need on FinTech and its potential to help them manage their own money. Says OATS founder and executive director Tom Kamber: “We’re working with a hundred or so older people who want to understand how to carry out financial transactions online and on their mobile devices, but they’re really scared and there’s no resource to help them.‟ Ken Kido, EVP of Local Distribution at Capital One, agrees with him on this point: “All our customers are important to us. The Millennial generation has grown up with technology, but older people are worried by it because they don’t understand it. This tool will be very useful as it’ll remove their fears‟.
Although there is not yet a genuine market for this, Alessandro Promutico thinks it is largely a matter of targeting and timing. “Today there are very few FinTech companies positioning themselves directly on this target group, that’s true. But it will happen. This target market isn’t all that different from the digital natives in the sense that they have no obligations, few constraints during the day, and their minds are focused on new horizons,” he points out, explaining: “The ‘Silver Economy’ as regards FinTech companies could therefore be all about finding services for the younger generation that are likely to have added value for older people as well. Especially as there is always a turning point in the knowledge-transfer process. Parents teach their skills to their children, then at a certain age the roles become reversed. The children and grandchildren pass on their knowhow on technology to their elders. Older people tend to look for someone who can explain the new tools in a traditional way. But once they’ve understood the explanation, and are aware of the time and money savings available, they become users in their own right. Moreover, seniors have a sense of loyalty that most Millennials do not. So while it’s true that there’s a business cost associated with targeting seniors, there’s also a very high return on investment, as the seniors market is very stable.‟
Asked how the market might move a bit further towards older people, and whether FinTech specialists might come up with innovative financial services designed for this specific clientele, Alessandro Promutico replies: “In my view, the key aspect for FinTech companies will be ease of use. Here they will focus hard on the interface, but the interface will not in itself be able to offer services such as loans to seniors. Traditional players will go on playing that role, because capital costs a lot in terms of management, in terms of risk, and in terms of regulatory compliance. On the other hand, a bank has the skill and the strength to take on this type of risk. Banks will remain the financial intermediaries of last resort.‟
Protecting older people from financial abuse
The other main question that arises when talking about elderly people is the inevitable decline in their intellectual and physical abilities once they move beyond 75. This may be due to specific diseases such as Alzheimer’s, which affect the memory and so place sufferers in a position of weakness, or simple aged-related cerebral degeneration. There is no denying that the elderly have always been targets for thieves, crafty tele-sales people and financial fraudsters, or even friends and family who dishonestly benefit from their gullibility. These people do not hesitate to use the new digital resources to help them pull off their schemes.
Phishing, fake viruses and fraudulent charity appeals are now replacing the traditional aggressive door-to-door touting. According to the WHO, one older person in ten is a victim of abuse every month somewhere in the world. And 9.2% of these abuses are financial.
According to Elizabeth Loewy, former Chief of the Elder Abuse Unit at the Manhattan District Attorney's Office: “Abuse of seniors is the great epidemic of our nation‟. This prompted Loewy to develop a new app-based service, Eversafe, which warns families of any suspect activity on the financial accounts of older family members in order to nip any problems in the bud. A bank account analysis is carried out daily and if necessary, the family will be sent an alert.
Alessandro Promutico argues that “once people have passed the age of 75, it should be the bank’s role to step in and anticipate people’s diminishing cognitive faculties. Not by imposing a cut-off date, but by detecting any anomalies and tracking how often these recur on their accounts. From that moment, the bank should establish a mentoring relationship, appointing an advisor, with whom the elderly person will sign a contract of trust. This is a role that bank advisors have so far not taken on. It’s not a matter of forcing a person, but of offering a real mentoring service. I believe that artificial intelligence has a role to play here as well. Banks capture a wide range of behavioural data. They will have been working with these people on their finances throughout their lives and will have a fingertip feel for their financial behaviour. Thirty years of banking history is very useful, and artificial intelligence will be able to analyse financial behaviour patterns and spot any deviation.”
However, quite aside from any mental disability, some older people start to become increasingly physically handicapped and this calls for a solution. Alessandro Promutico underlines: “With diseases such as Parkinson’s, some older people are no longer able to sign paper cheques or even manage an electronic signature. So they have to go through intermediaries, which creates feelings of shame and frustration. A service which would enable these people to make payment transfers using their fingerprints would solve both the basic financial problem and the social aspect and would allow them to regain some self-confidence.”
So will elderly people be sending their grandchildren their birthday treats online? Well, we’re still a long way from that. This is all still a future prospect rather than a current trend. But we cannot address the issues of population ageing without taking some account of the digital boom, which will, sooner or later, make the question of how to include older people and avoid a generational digital divide more acute. In this regard, both traditional banks and FinTech startups have a role to play in helping to educate and protect senior citizens, who carry the memory of past times and can help the young generation to see just how the world has changed and how fast it is still changing.