" digitization of finance has generated a number of innovative products and channels and represents a new challenge for thefinancial education; at the same time, it offers new tools to make education more effective. Our common goal is to take up the challenge and make good use of the tools”. So the general manager of the Bank of Italy, Luigi Federico Signorini, opens the second day of the tenth conference of the International Federation of Finance Museums – organized by the Bank of Italy together with the Museo del Risparmio of Turin – dedicated precisely to the theme of the impact of digitization on financial disclosure.
While on the one hand innovation allows the financial and payments sector to offer new products, reduce costs and improve accessibility, on the other - warns Signorini - it also allows agents to create "complex and often opaque products, whose risk structure is difficult to understand and whose economic rationale is not always apparent”.
The purpose of science education
“Financial education should go beyond equipping people with the skills to make personal financial decisions. It should try to explain what the use of finance is and why it is necessary to achieve the common good”, continues Signorini adding, however, that “attempts to make economics more accessible or to introduce the study of economics in school curricula they have not been missed". In recent years, he points out, the great financial crisis of 2008 has further increased general awareness of the importance of a good financial education for non-experts. “Most central banks are now actively engaged in financial education and/or economics dissemination, with several objectives, including the protection of consumers of financial products”.
The complexity of finance
“Two things, beyond its sheer complexity, make finance a particularly tricky subject, and can ultimately reinforce public skepticism. One is the potential confusion or overlap between independent scientific opinion and the factual financial advice people get from people who are as much salespeople as they are advisers. The other is that academic or institutional economists also disagree on many things, therefore what is the truth?"
According to the director, financial education should: “recognize that being, and being perceived, free from even the slightest suspicion of a conflict of interest is a fundamental prerequisite for being credible; leverage synergies with conduct regulators to find ways to ensure minimum standards for professional advice; and focus on basic counterintuitive but solid 'round earth' concepts, such as the surprising effects of compound interest, the non-obvious benefits of diversification, and the oft-overlooked trade-off between risk and return.
How to explain yourself well
Anyone who wants to explain complex concepts must have two qualities: "be engaging", i.e. capable of capturing the public's attention, and "be clear", i.e. avoid using overly specialized language.
“These qualities, however difficult to teach or practice, are prerequisites. Failing to master them, or using them in an amateurish or "excessive" way, can cause collateral damage that outweighs the benefits of the educational effort.
But there are others two problems, one is the "lack of interest in economics and finance (not to mention the mistrust towards those who work in these sectors)”, the other “the dissemination of incorrect information within the scientific community”. Many are unable to distinguish between reliable scientific news and “fake news".
Does digitization help or hinder financial education?
“The greater ease in making payments, borrowing money or investing savings that technology offers is not in itself a blessing, as it can lead to hasty, imprudent or uninformed choices. Hence the need to improve all areas of consumer protection and to increase customers' ability to understand the risks and benefits, to evaluate the adequacy of products to their specific needs and, more generally, to exploit the undisputed advantages of innovation while avoiding its pitfalls”.
Financial education itself “can leverage new technologies that make it possible to reach a much wider audience, to adapt teaching content to specific needs, to use new teaching tools and to design efficient and effective surveys to verify the results obtained. On the other hand, must avoid the risk of turning the digital divide, geographical or generational, in another source of financial exclusion”.
Educational challenges in a digital environment
The general manager of Bankitalia identifies two challenges. First the web contains all kinds of information, but to make sense of the almost infinite amount of information available, "a finite mind needs criteria and filters." “Many web users receive information, whether authentic or false, that tends to reinforce their opinions and, conversely, they become relatively isolated from information that might challenge them.” What to do? For Signorini it would be necessary to "break the vicious circles generated by false or tendentious information for effective scientific communication".
The second challenge concerns, however, always greater complexity of what is offered on the market. “As products get more complex, simplification, the key to outreach or grassroots education campaigns, gets, if I may, more difficult. Connected to this is the growing invisibility and abstractness of innovation: in some cases, such as bio or nanotechnologies, this has generated suspicions, fueled conspiracy theories and made the various online information channels even more fervent". Even finance is no exception: innovations make it more efficient, but also further from being understood correctly by non-experts. Like, for example, the world of cryptocurrency.
With digitalisation, concludes Signorini, “the educational challenge becomes easier and more complex at the same time. Perhaps we need to cultivate teaching methods that, in addition to basic technical literacy, aim to increase the critical thinking which helps to select sensible theories and reliable sources, in finance as elsewhere”.
