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Financial education Act. 19 Nov 2020

The crisis has revealed the importance of financial literacy among the most vulnerable

Access to technology and financial education improvement for the entire population, especially the most vulnerable, is essential to achieving an inclusive recovery. These have been the main conclusions from the latest edition of EduFin Talks, a space for reflection and debate on financial education’s challenges organized by the BBVA Center for Financial Education and Capability in a 100 percent digital format.

José Manuel González-Páramo, chairman of the Advisory Council for BBVA´s Center for Financial Education and Capability, opened the event by discussing the economic and social challenges that the world is facing and their implications for the most vulnerable populations. “Without a doubt, the crisis has shown us the devastating consequences of economic and social inequality, which has revealed the financial fragility of so many households,” he said.

Financial education against crises

Faced with a context of growing uncertainty, González-Páramo advocated for financial literacy. “Financial education plays an important role in developing financial resilience and improving people’s well-being.” Among the issues that the chairman for the Center’s Advisory Council cited for improvement were the following three: Focusing on the most vulnerable sectors, turning digital literacy into an opportunity rather than an obstacle, and ensuring that inclusive recovery leads to inclusive growth.

González-Páramo announced that for the fifth anniversary celebration of the Center in 2021, the institution will publish a position paper that seeks to establish the role of financial education in the post-COVID era. Its launch is scheduled for Spring 2021 and its objectives are: to inspire discussion topics, promote research, to be a reference for experts and a basis for interaction with interest groups.

Full Edufin Talks 2020 video

The role of digitization

The participants for the roundtable ‘A new era for financial education‘ included Andrea Liesenfeld, Deputy Head of Unit Retail Financial Services at DG FISMA at the European Commission; Pablo Adrián Hardy, Head of Economy and Business at the Ibero-American General Secretariat (SEGIB); Mayada El-Zoghbi, Managing Director of the Center for Financial Inclusion (CFI), and Leora Klapper, Lead Economist at the World Bank’s Development Research Group, who moderated the panel.

The debate focused on the role of digitization during the COVID-19 crisis, in which the reduction of face-to-face interactions caused a drop in cash payments and an increase in operations with mobiles, cards and other means. Andrea Liesenfeld recalled that digitization should not leave anyone behind and stressed that “it is necessary to ensure that people have the necessary digital financial knowledge to facilitate the understanding and universal access to these new products and services. The complexity of certain financial products is aggravated by the digitization layer.”  For Pablo Adrián Hardy, “we are facing the most important moment in the last 30 years, to include financial education at all levels of training, not only for individuals, but for small businesses and entrepreneurs as well.”  In his opinion, this is a task not only for financial service providers, but fundamentally for governments as well.

The customer´s security

All participants agreed that the benefits of financial inclusion can only be achieved if people feel comfortable and safe using digital financial products. “Consumer protection must be introduced during the product´s design so that the most vulnerable people understand them,” said Mayada El-Zoghbi. Along these lines, the sector’s entities have also had to adapt and learn. For the European Commission representative Andrea Liesenfeld, “we must ensure that people can trust financial institutions.” In this sense, Liesenfeld mentioned that the Commission is exploring the creation of a financial competence framework, which would support and complement the tasks of member states and “create tools to facilitate change and guarantee competition.”

Andrea Liesenfeld, directora adjunta de la Unidad de Servicios Financieros Minoristas de la Dirección General de Estabilidad Financiera, Servicios Financieros y Unión de los Mercados de Capitales (DG FISMA) de la Comisión Europea; Pablo Adrián Hardy, responsable de Economía y Empresa en Secretaría General Iberoamericana (SEGIB); Mayada El-Zoghbi, directora del Centro para la Inclusión Financiera (CFI, en sus siglas en inglés) y Leora Klapper, economista principal del Grupo de Investigación para el Desarrollo del Banco Mundial,.

Left to right and top to bottom: Leora Klapper, Pablo Adrián Hardy, Andrea Liesenfeld and Mayada El-Zoghbi.

The role of governments in promoting digital skills and financial capabilities is also necessary, especially in the most vulnerable groups, such as women. According to Mayada El-Zoghbi, “Governments must implement protection systems to allow the gradual transition to a digital economy” and exercise caution when eliminating cash. This kind of protection would not be possible without the use of new technologies that guarantee the system´s transparency so that it is accessible to all. For this reason, Pablo Adrián Hardy emphasized the need to reach vulnerable groups with technology in regions such as Latin America. “In order for countries to return to the path of growth, financial information for citizens is of the utmost importance.”

In her final conclusions, Lidia del Pozo, the Director of Community Investment Programs at BBVA, summarized the most important points of the debate, concluding that “COVID-19 has provided an opportunity to reshape financial education and turn it into a element that allows people to have a financially healthy and secure future.”

She also stated that “financial education includes all parts of our society.” With the aim of reaching a wide range of participants, the Center launched a public survey to collect as much information as possible in order to define the role of financial education in the post-COVID era.

About Edufin Talks

EduFin Talks are spaces for debate that dynamically collect theoretical and practical responses to social challenges related to financial education so that they can act as a lever for action. 138 people from 13 countries have followed this year’s live online editions. Through these talks, the Center for Financial Education and Capability promotes a broad and inclusive concept of financial education based on its transformative value as a tool that contributes to achieving well-being and a more inclusive society.

These initiatives are developed within the framework of BBVA’s commitment to long-term financial education. Since 2008 this commitment has benefited 15.5 million people through programs developed in all the countries where BBVA is present. BBVA has invested €89 million in the 2008-2019 period.

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