2022 FINTECH REPORT

Balancing short-term needs withlong-term financial wellness
The Fintech Effect 2022 for wealth managers

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Overview// 2

In light of current macroeconomic challenges, over half of US consumers (53%)
are feeling more economic stress than they did last year. As a result, consumers

are concerned with meeting short-term needs and leaning more towards foundational
financial topics like spending and saving. To help consumers along the path to financial
wellness, wealth managers will first have to address consumers’ concerns. Additionally,
the growth of open finance will determine wealth managers’ ability to offer effective

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

advice as consumer holdings are spread across various brokerages, fintech apps, andcrypto exchanges and wallets.
Plaid’s third annual Fintech Effect report examines consumer attitudes toward and usageof fintech. The report is based on data collected by The Harris Poll between June and July of2022 from 2,000 participants in the US across a range of demographics.

Some of the report’s key findings include:•

Consumers are focused on day-to-day needs: Top consumer concerns include thecost of living, spending, and budgeting.

•

Short-term needs overshadow wealth building: Adoption rates suggest theseneeds impede longer-term financial goals like saving and investing. A much larger
proportion of consumers use payment tools (73%), compared to budgeting (17%)
and investing (31%).

Overview// 3•

Budgeting and investing app users are highly engaged: Once consumers can turntheir attention to budgeting and investing, they tend to have more fintech apps andcheck them more frequently. For example, budgeting app users have an average of
5.65 fintech apps, compared to 3.3 apps for overall consumers. Additionally, 61% ofinvesting app users check their apps daily.

•

Consumers want open finance and wealth managers need it: Consumers want

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

tools that integrate with the services they’re already using and wealth managers
need holistic views of consumers’ finances to give effective advice. For instance,
70% of consumers say they would switch banks if theirs did not connect to the tools
and services they need. Cryptocurrency is becoming a larger part of this equation as
younger generations are more confident in its future, with over 50% of Millennials
and Gen Z believing it’s how people will transact in the future.

Consumers are focused on day-to-day needs

Consumers are focused on day-to-day needs

Key takeaways• Consumers’ main
challenges are aroundspending and saving• The majority of consumers
want more financial education• Wealth managers canhelp consumers bridge their2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS// 4

knowledge gapsT

he three top concerns for consumers include the cost of living, gas prices, andrecession fears. Notably, a greater proportion of Gen X and Baby Boomers wereconcerned about the cost of living (74%) than overall consumers (69%). On the flip side,
unemployment is more of a concern for Gen Z (31%) and Millennials (23%) than for Gen X(12%) and Baby Boomers (3%). Understandably, consumers closer to retirement age arelikely more concerned with making existing wealth last than generating active income.

The biggest challenges consumers face are overspending (36%), not saving enough (34%),
and not saving enough for retirement (31%). Generational differences certainly exist, withGen Z much less concerned about retirement (17%) than Millennials (27%), Gen X (39%),
and Baby Boomers (32%). Overspending also plagues younger generations slightly morethan older generations — with 36% of Gen Z and 44% of Millennials concerned about thiscompared to 34% of Gen X and 27% of Baby Boomers.

79%

99% G EN Z
88% MILLEN NIA LS

of Americans areinterested in learning more
about financial topics

Consumers are focused on day-to-day needs// 5

To battle these challenges, 79% of consumers crave more financial knowledge. Their top
interest areas are emergency funds (29%), credit scores (29%), saving (27%), investing(26%), and budgeting (25%). Older generations in particular are interested in budgeting —52% of Baby Boomers and 40% of Gen X want to learn about budgets compared to 37%
of Millennials and only 24% of Gen Z.

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

Top financial topics
Building an emergency fund29%

Checking or improving my credit score

29%

Starting a savings habit or saving more of my income

27%

Traditional investment tools (e.g., stocks and bonds)

26%

Making and stick to a budget

25%

Wealth managers have an opportunity to help educate consumers about these foundational
financial habits. Without bridging this gap, consumers are unlikely to focus on longer-term
financial goals.

Short-term needs overshadow wealth-building

Key takeaways• Payment apps are a gateway
into fintech• Lower-income people knowsaving matters but struggle
to prioritize it• Wealth managers can help
2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

lower-income people assess// 6

Short-term needs overshadow wealth-buildingC

onsumer adoption is much higher for shorter-term solutions like payment tools thanfor budgeting and investing apps.

Payment and liquidity tools help meet immediate needs
Consumers use payment (73%) and payroll advance (19%) services to make ends meet,with payment tools being the most widely used fintech tool.

how much they can save

People with median and higher incomes are more likely to use payroll advance services:
21% of consumers making between $50K and $100K and 20% of consumers making over
$100K use these services. Meanwhile, only 12% of consumers making under $50K reportusing these services.

Overall, payment apps appear to be many people’s first exposure to fintech, andpeople with higher incomes are willing to adopt payroll advance services for short-term
liquidity struggles.

Short-term needs overshadow wealth-building// 7

Use case adoption remained remarkably consistent as the world changed
dramatically over the past three years
2022

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS(V EN M O, PAYPA L WA LLET,ZELLE, A PPLE PAY, ETC.)
Payment services

73%
70%
57%

Pay my bills through my bank website

53%
53%
56%

Programs to file my taxes

43%
41%
40%

Online-only banking services

34%
29%
30%

Investment tools

31%
31%
25%

Payroll advance services / early wage access

19%
16%
12%

Budgeting tools

17%
17%
17%

Lending services

16%
14%
10%

2021

2020

Short-term needs overshadow wealth-building// 8

Lower-income consumers know saving is important but struggle to prioritize it
A third of respondents across income groups are concerned about savings: 33% of thosemaking <$50K, 31% making $50–$100K, and 37% making $100K+.

But higher-income people are more likely to call savings a priority. Thirty percent of thosemaking <$50K said savings is a priority for them, compared to 39% of those making $50–

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS$100K and 41% of those making over $100K.

While lower-income consumers know saving is important, their shorter-term needs likely
limit their ability to save. For wealth managers, this means that consumers may needhelp assessing whether or not they have the ability to save on their current income andif so, how much. Wealth managers can also suggest automated savings tools that help
consumers save small amounts at a time.

Budgeting and investing app users are highly engaged// 9

Budgeting and investing app users are highly engaged
Key takeaways• Budgeting app users area small but highly engaged
portion of consumers• More consumers use
investing apps (31%) thanbudgeting (17%)

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS• Apps are lowering the barrier
to entry for investingConsumers using medium- to long-term tools have more apps and check their apps
more frequently.

Budgeting app users: small but mighty
Despite overspending being one of the top challenges consumers face, only 17% of
consumers report using budgeting tools. But 64% of consumers who use budgeting apps
report using digital finance apps every day. Plus, budgeting app users have an average of
5.65 finance apps, more than any other use case.

Budgeting can help consumers tackle some of their top challenges, like overspending
and not saving enough. Plus, 40% of Gen X and 52% of Baby Boomers want to learn
about budgeting. As budgeting app users tend to be highly engaged with their finances,it behooves wealth managers to educate consumers about budgeting.

Budgeting and investing app users are highly engaged

Investing apps are an on-ramp
While budgeting is typically thought of as a precursor to investing, investing apps are more
popular than budgeting at 31% adoption. Millennials represent a large portion of these
consumers, as the generation with the highest adoption rate at 40%. And apps seem to bepaving the way to investing: 53% of consumers who use investing apps didn’t invest before

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

using fintech.

Like budgeting app users, investment app users are highly engaged: 61% check their apps
daily, and another 31% check weekly. Plus, 58% of investment app users say setting aside
more for investing is their #1 goal.

With the higher adoption of investing apps, consumers are skirting the traditional routeof budgeting before investing. This could be because many consumers see investments
as savings: 38% of consumers concerned about saving have a digital investment app,while only 33% use a budgeting app. Either way, consumers who find themselves usingbudgeting or investing apps keep a close eye on their finances.

// 10

Consumers want open finance and wealth managers need it

Key takeaways• Consumers want integrated
experiences and tend to haveseveral fintech apps
• Younger generations are
more confident in the futureof crypto2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS• Open finance will be criticalfor wealth managers to offer
effective advice// 11

Consumers want open finance and wealthmanagers need itO

pen finance can create the experiences consumers want while also empowering
wealth managers with the kind of holistic view they need to support their clients.

Consumers seek to integrate tools
Consumers are clear on their desire to integrate fintech apps and may leave banks that
limit their ability to do so. Seventy-three percent of consumers agree that their bank must
connect to the services they want and 59% would like to see their bank partnering withmore fintech companies. Additionally, 70% would consider switching banks if theirs could
not connect to the financial accounts they want.

Splintered finances are a challenge for wealth managers
Gaining a complete picture of a client’s finances may be uphill as consumers adopt
more apps. Consumers now have an average of 3.3 fintech apps, up from three in 2021,
with budgeters having an average of almost six. This is not counting balances held in
nontraditional places like payment accounts, which 46% of consumers report having.

Consumers want open finance and wealth managers need it

The crypto piece of the puzzle
Crypto is becoming a larger part of younger generations’ and certain demographic groups’
financial realities. While 83% of Baby Boomers may feel that crypto is just a trend, 56%
of Gen Z and 52% of Millennials believe it’s how consumers will transact in the future.
Fifty-one percent of Hispanic people and 48% of heavy fintech users are also confident

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

in crypto’s future.

Plus, almost half (48%) of Americans would like to connect their crypto account to theirbank account to track their holdings side-by-side.

A growing need for open financeConsidering the growing number of apps consumers have and the confidence younger
generations have in crypto, aggregate financial views may be increasingly difficult to create.
But they are also necessary for wealth managers to be able to offer effective financial
advice. An open finance future could solve this challenge.

An open finance ecosystem is one in which consumers have more access to and controlof their financial data; it requires cooperation from financial institutions and fintech
applications. Open finance would not only give consumers control over their data and how
it’s shared but also create the connected experiences wealth managers need to help theirclients meet financial goals.

// 12Close the knowledge gap to help consumers achieve financial wellness

Close the knowledge gap to help consumers achievefinancial wellnessConsumers are concerned about day-to-day needs like the cost of living and want tolearn more about foundational habits like investing and saving. Wealth managers

should feel incentivized to help close this knowledge gap as short-term needs prevent

2022 | BALA N CIN G SH O RT-TER M N EEDS WITH LO N G-TER M FIN A N CIAL W ELLN ESS

consumers from thinking about long-term wealth building.

That said, consumers who can think about longer-term needs (budgeting and investing app
users) are highly engaged with fintech. Thus, closing these knowledge gaps and helping
consumers meet shorter-term needs can help them along the path to financial wellness.

Additionally, consumers are finding more benefits in fintech — 58% feel that it saves themtime and 48% feel more in control of their finances. The interconnectedness of an open
finance ecosystem will only amplify these benefits by giving consumers more power overtheir data and how it’s shared. Open finance not only helps consumers realize the full valueof fintech, but it also empowers wealth managers with the insights they need to further
improve the financial wellness of their clients.

Learn more about providing consumers with more holistic financial advice on plaid.com.

// 13

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