The economic buying power of the 50-plus population who are increasingly turning to alternative financial services due to feeling that traditional bank offerings are not meeting all of their financial needs is enormous. Fintech companies are hoping to tap into this market by offering digital tools to address the unprecedented financial stress and complexity faced by this demographic.
People aged 50-plus will generate $83 billion in revenue for the fast-emerging alternative financial services sector over the next five years, according to AARP’s Financial Innovation Frontiers report. The research also found that only one in four 50-plus consumers is highly confident they can meet their financial needs in the next five years.
The research found that the 50-plus segment will spend $15.3 billion in the alternative financial services sector by the end of 2017, and that number is expected to grow by a healthy 4.25% annually through 2021. In addition, this industry is expected to syphon off $1.6 billion from banking revenue on checking and savings, consumer credit card and lending products in the next four years in addition to $1.2 billion in organic growth.
Other key findings of the Financial Innovation Frontiers report include:
• 50+ consumers represent only 35% of the U.S. population but control more than half of the nation’s investible assets.
• Many 50+ consumers are financially exposed and ill-prepared In three critical areas:
◦ Financial fitness
◦ Healthcare emergencies
◦ Retirement readiness
• 50+ consumers are projected to lose multitrillion dollars in retirement savings by 2021 due to various burdens:
◦ $4.3 trillion due to career setbacks
◦ $4.1 trillion due to unplanned withdrawals
◦ $1.3 trillion due to student debt
• Financial innovators can help by focusing on the following:
◦ Removing friction in the customer journey and enabling consumers multi-channel access
◦ Delivering personalized service and connecting customers with advisers and a care circle at pivotal moments
◦ Helping Americans save for retirement and coping with ongoing healthcare costs
◦ Showing customers a comprehensive financial picture
• 41% of 50+ consumers faced a major medical event in the past five years, and 18% indicated they could not cover any out-of-pocket expenses from a healthcare emergency.
• 50+ consumers are active users of digital devices; with close to half of consumers saying they are comfortable with mobile commerce and mobile banking.