In early 2021, millions of ordinary people across the US started buying shares in the declining video game store GameStop - investing tens or even hundreds of thousands of dollars. Their investments were ridiculed by financial experts, but the collective action proved shockingly powerful - GameStop’s share price increased from under $3 to as high as $483 in late January 2021, causing the hedge funds that had bet against it to lose billions of dollars.
Now this true story has been turned into a film - “Dumb Money” and others like “Eat the Rich” and “How to Get Rich” are shining a light on a new wave of financial behaviour - but is it really so dumb?
In this article, Andy Payne, Global Chief Creative Officer at Interbrand, discusses the three key trends underlying the “Dumb Money” movement and what this means for brands within financial services and beyond.
Socio-economic events, such as the cost-of-living crisis, the fallout of the pandemic and (in the UK at least) the ongoing impact of Brexit, have led to prosperity feeling increasingly out of reach, especially for Gen Z. It feels like the traditional financial services (FS) sector isn’t working for these consumers anymore - savings aren't going to accrue as much money in the bank and pensions may no longer seem like a safe haven.
We also know from the Edelman Trust barometer that there is a lack of trust in societal institutions, including banks. In response to this, people's behaviour with and attitudes to money are changing. They are creating their own new experiences, which are shaping new money habits in unforeseen and exciting ways.
And as technology continues to advance, we are seeing more brands help serve these emerging behaviours and reap the potential benefits of this new movement. But where will we see these trends go in 2024?
Consumers will be more creative with financial self-empowerment
What these stories on “Dumb Money” tell us is that people are increasingly looking to empower themselves financially by whatever means they can - and they are doing so successfully. The rapid digital revolution has allowed for new and emerging platforms to be developed outside of the traditional financial services sector which are offering people greater agency over their financial decision making.
James Birks
People are joining online groups to make powerful investment moves aligned to their own values and emotional connections. They are also using subscription services for financial help and turning unused assets, like spare rooms or old clothes, into extra cash through innovative platforms.
For example, platforms like ClimateCoin and Kickstarter are enabling consumers to meaningfully invest in something they care about, such as community food waste initiatives or net zero-focussed start-ups, as opposed to putting the power in the hands of a traditional wealth manager, whose mandate is just to protect financial interests above all else. With self-empowerment on the rise, investment platforms like these now boast more money under management than many of the UK’s leading wealth managers.
Technology and AI will help financial services brands keep up with Gen Z expectations
Gen Z, as increasingly important market players, don’t have the same loyalty to these big financial institutions that older generations might have. Their values and priorities mean they are more open to new money trends and platforms. In fact, according to an IMB survey, almost two-thirds (64%) of Gen Zers said they’d move away from banks that did not meet their expectations on ethical or environmental standards.
So, when new(er) players such as Revolut and Monzo inevitably expand their offerings to things like mortgages, we could see a shift from Gen Z away from using heritage legacy banks for their big purchases. Take Monzo for example - a mobile-first bank created to fit around how customers actually live their lives rather than enforcing them to operate within a rigid framework.
Raellen Bonny
Monzo has already leveraged up-to-date technology to enable users to have greater control over their finances, including features to help users save, budget and invest, and even a ‘safety net’ setting where users can set a late-night spending embargo on their cards to prevent impulsive buys. Property website, Rightmove has recently announced its plans to allow access to mortgage advice through their website. This means they can help users find a house, help facilitate the move, and now also help people finance that move all in one place.
Now, with AI becoming easier and cheaper to integrate within digital products, and 70% of Gen Zers already using the technology, we will likely see more fintech companies double down on AI initiatives in 2024, in the hope of a wider pool of consumers, while increasing revenue streams. When it comes to AI applications, we could see the launch of robo-advisory services, more algorithmic trading, and better risk evaluations.
But regulation will pose continued challenges
Moving forward, the main challenge for brands within or on the edges of the financial services sector, will be regulation - an increase vs lack of. With the rise of disinformation, cybersecurity threats and a general fall in confidence in brands and businesses, it’ll be a tricky environment to navigate.
Some brands moving into this space are pushing the regulatory parameters, especially on the likes of security. They're having more security interfaces or checks on their platforms than the incumbent banks, because they have transcended those legacy systems that have continuously been tried and tested.
But on the other hand, AI safety is still being debated, with the UK not implementing an UK AI law in the short term - claiming being too premature with regulation would stifle innovation. This leaves an open door for more brands within and outside of the financial services space to get creative and offer greater power to consumers when it comes to money.
It would seem that ‘dumb money’ will be a smart bet for 2024.
