Financial literacy 2.0 coupled with digital innovation

Every economy encompasses the motion of production, consumption, trade and distribution of domestic and global resources in local interest. People belonging to that economy for their wellbeing surround the activity. A country considered advancing in economic dividends whose growth potential is in favourable shift. In 2021, the Asian Development Bank Institute (ADBI) in one of their working papers stated economic growth is insignificantly influenced by both digitisation and the demographic transition. Bangladesh is the eighth-most populous country in the world. According to UNFPA data, the demographic dividend represents two-thirds of its population and it will continue due to the momentum effect. Demographic inclination is one of the megatrends affecting sustainable development.
Bangladesh is enjoying the 1st Demographic Dividend (DD) to some extent which is expected to decline during 2035-2040. The country is now experiencing the momentum of transition through digital innovation and financial literacy. For advancing the transition, fintech firms, artificial intelligence, digital finance must roll out with their structural models. The prospective market presence and the future of banking require the exigency of innovation and literacy among the stakeholders such as organisations, people, policies, processes and strategies.
Digital innovation is a pivotal driver for the latter-day economy. An innovation comes up with newness, value creation, spreading ideas linked with creativity and invention. Digital innovation is the formation and strategic implementation of cutting-edge technology to develop new products, processes, ideas and models. The key factors for innovation is not only the idea generation but also includes the individual productivity, willingness, technological accessibility, supports etc. According to the Harvard Business School Online’s Business Insights, “Digital innovation involves leveraging technology to create meaningful change—streamlining processes, improving customer experiences, or building agility to strengthen business models”. The agility will be effective through initiating impactful transformation strategy establishing a digital-first work culture, analyzing performance gaps, intension to change, investment in tailored upskilling (i.e. creative abrasion, creative agility and creative resolution)and evolving own strategy. The present era of retail and small business financing run with advanced credit-scoring process, AI-driven credit scoring. It’s an example of digital innovation used worldwide. A great opportunity for Bangladesh to mention here is the demographic dividends, the mindset of whom sets the positive attitudes to accept the digital technology and to inspire innovation.
Despite this opportunity, there are some factors that affect the digital- innovation strategy. Following are the headwinds:
Digital divide comes first. Digital divide indicates the gap between the peoples having accessibility to technologies and those with no or restricted access. The factors behind the divide are availability of technology, affordability of digital technology, level of digital literacy etc.
Stands thereafter inadequate infrastructure. Every innovation requires infrastructural support to accelerate. Lack of adequate infrastructures such as physical resources like technically skilled workforce and digital resources like speed of internet, backdated hardware hinder the way of digital innovation.
Limited financial resources also pose roadblocks. Financial resources are the principal investment of any people, researchers and organisation. Limited resources impede advancing innovations. The people engaged in innovating always seek funding and the fund investors always seek the innovators. Here, lack of networking keeps both parties far off.
Security risk: Security risk is a big concern nowadays. Digital hack is one of the cyber-risks that can expose an organisation to data breaches and threat for advancing digital tools for innovation and operations.
In the fifth place lie less advancement of regulatory frameworks. Digital innovation as a parallel technological breakthrough needs regulatory support. The regulatory framework is encouraged to be innovation- friendly.
Lack of knowledge about Intellectual Property Rights (IPR) is a significant shortcoming in modern-day, updated financial literacy. The digital innovation will be recognized and accepted globally when it will have the patent facility along with IPR. The knowledge about IPR and patent is at the heart of innovation. Because of not being IPR-registered, the innovation loses its founder, and the outer firm can copy the innovation and sell this around the world with IPR facility.
Last, but not least by any means, is governance structure. The government structure influences the strategy of digital innovation through creating strategic vision, establishment of country capabilities to support innovators.
Financial Literacy2.0: Corporate Finance Institute defines financial literacy as a term that indicates cognitive understanding of financial components and skills such as budgeting, investing, borrowing, taxation, and personal financial management. This also brings to light the inclusive education as part of sustainable development goals (SDG-4, i.e., ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all) in broader sense as well. The transformation of financial literacy using digital platform and tools comes up with a new term styled ‘Financial Literacy 2.0’. The term as a more comprehensive approach focuses on behavioural change and system thinking rather than basic knowledge about financial education and plays significant spillover effect in Bangladesh’s economy.
The banking nowadays is rapidly transforming its structure, products and services, placing themselves under the digital ecosystem. So does the structure of financial literacy. Although the financial literacy given and accepted in the mode of face-to- face conversation, considering the limited circulation of this, the upgradation of digital tools and massive financial inclusion of unbanked people added some extra advantages in bringing inclusive and sustainable growth.
The connectivity between Digital Financial Literacy (DFL) or Financial Literacy 2.0 and digital innovation is for long. The understanding about financial services and requirements raised thereon makes an unbanked individual as a bankable potential. The breakthrough can bring the demographic dividends into the banking system in large volumes, the only path behind which is the DFL or Financial Literacy 2.0. The revolution connect the people with technology. The entire world is running after tech-based innovation. The idea of personal finance, necessity of this in daily life and managing financial expenditures of individuals are the key information here to spread out.
Presently, most banks in Bangladesh are conducting financial- literacy programmes face to face. To get access in serving the underserved Gen-Z population, there is little room for sharing financial knowledge physically. They are prone to utilizing the technology. Hence, to educate the youths and create the unfavourable demographic dynamics into economic dividends, massively and efficiently, there is no alternative to Financial Literacy 2.0(FL-2.0) for the economy of Bangladesh. Because, every knowledge generates some idea leading to innovation further.
A path to longlasting future for Bangladesh: Bangladesh stands at a crossroads of digital transformation with huge potential, where the debate between technological advancement and traditional approach has also found functional, although already minimized. A critical factor for success lies in the synergy between digital innovation and Financial Literacy 2.0. The digital platform is widely accepted as beneficial by the individuals falling under demographic dividends. As they will lead the future economy, they require the knowledge of doing research, idea generation and digital innovation. The area of opportunities exploring the scope and leveraging the technology can build a resilient and inclusive economy, the future of which depicts the following:
Inclusive digital ecosystem: To bring the unserved and under-served youths entitled to digital banking access.
Integration of FL-2.0 into educational system: To educate the next generation about managing personal finance from the very beginning of learning.
Fintech for youth empowerment: To target the young individuals and entrepreneurs to provide digital financial training and tailored financial tools.
Smart decentralized social economy: To decentralize the work area by initiating fintech mentorship programme to generate youth-and women-led MSMEs countrywide.
Model village: To prepare community-based information hub and data centers in rural areas and to make model village on pilot basis as an example of technological blessings to underserved individuals.
Policy framework and innovation: To encourage the regulators like the central bank, ICT Division, Planning Ministry and fintech firms to redesign the inclusive policy for all.
AI and data analytics: To enrich the country’s database as information hub to analyze the behavioral pattern of individuals and entrepreneurs and provide a social score to all.
Regenerative Finance: To incorporate finance into biodiversity, social livelihoods and economic circularity allowing guidance on digital asset for environmental credits, supports safeguards for all to regenerate the natural ecosystems and social structure.
The future of Bangladesh will be opportunity-based. The well-informed individual will get preferences on a ‘first- come, first-succeed’ basis to take hold of economic and social prospects. Now, to bridge the digital divide, the investment in digital innovation and financial literacy 2.0 seems exigent not only for knowledge gathering and educating the unserved and under-served youths, but also for making an inclusive, resilient and sustainable economy of Bangladesh.

Sanjoy Pal is a researcher, banker and visiting faculty of an institute affiliated with National University, Bangladesh.
pal.sanjoy25@gmail.com