Financial education: what is the role of banking and the payments market in promoting it?

Published on May 12 2023.

reading time 12 minutes reading

In Latin America, the lack of financial education means there is a huge unexplored and excluded consumer market.

There are millions of potential clients who do not know the basic concepts for assessing their financial reality, or that there are solutions available in the market. Any sustainable growth strategy in that area therefore comes up against what is known as “financial illiteracy.” So what should the banking and means of payment market do to contribute to this transformation?

In this article we are going to go in-depth on the importance of promoting financial education in Latin America, and how it can impact the sector and society. After all, financial inclusion is much more than just being able to access the Internet and have digital accounts. So let’s dive in!


What is financial education?


According to the OECD’s definition (Organization for Economic Cooperation and Development), financial education is:

“the process by which consumers/financial investors improve their understanding about financial products, concepts, and risks, and through information, instruction and/or objective advice, develop the skills and the confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective measures to improve their financial well-being.”

Financial education, therefore, should not be limited to just raising public awareness. It should help each individual deepen their understanding of their specific situation, where they are in life, and their options.

This financial education, then, can only be achieved through the cooperation of all market actors. It is necessary to unify efforts of financial institution, regulators, researchers and education specialists, in addition to all other players that offer financial solutions through embedded finance, for instance.


Financial education in Latin America: there’s a long way to go


In Brazil, for example, nearly 40 million people opened bank accounts so they could receive emergency funds during the COVID-19 pandemic; other countries in Latin America also saw significant progress in the financial inclusion of their citizens during this period.

The necessity of social distancing ended up promoting the use of the internet for financial and commercial transactions, stimulating the emergence of new means of payment digital images.

However, offsetting the excellent results in financial inclusion the “financial illiteracy” of a significant portion of the population became even more obvious. After all, access to bank accounts in and of itself does not provide the knowledge necessary for correct use of the funds provided.


Financial illiteracy globally and in Latin America


The International Survey of Adult Financial Literacy conducted in 2020 by the Organization for Economic Cooperation and Development (OECD) analyzed financial education indexes in 26 countries.

The results showed that financial illiteracy is a global reality. Researchers analyzed a set of basic financial skills, behaviors, and attitudes. The maximum score (21) would indicate that an individual has a basic level of understanding of financial concepts, and applies some principles in their transactions.

The overall average was just 12,7 points, which is less than 61% of the maximum financial literacy score. The study therefore suggests that there is room – and in truth a need – to improve all elements of financial education.

The two Latin American countries that participated in the study were Colombia and Peru, which presented, respectively, financial literacy scores of 11.2 and 12.1, both of which are below the general average.

The challenge to be faced in the region is latent. although the banking in Latin America advanced, and many people already have access to the internet and smartphones, the lack of basic financial knowledge prevents the responsible use of services and the consequent true financial inclusion.


Why invest in financial education?  


Why is it necessary to collaborate to promote financial literacy in the region? There are three main reasons:


To promote economic growth


According to the document published by the OCDE/CVM, Recommendations on Principles and Good Practices of Education and Financial Awareness, financial education is an essential tool for promoting economic growth, trust, and the stability of a country.

It is necessary to have financially knowledgeable individuals to ensure sufficient levels of investor and consumer protection, as well as good operation of not only the financial market, but also the economy as a whole.

Thus the Center offers guidance that financial education should be considered a pillar in the regulatory and administrative framework of institutions.


To stimulate capture of extra income


One of the many lessons learned from the COVID-19 pandemic was the need to have a financial reserve to face unexpected events and market seasonality.

Although the enormous social inequality and the low income levels of a significant portion of the Latin American population pose obstacles to stimulating savings, financial education can help develop entrepreneurship to capture extra income.

It is necessary to promote greater awareness regarding personal budgets and useful financial tools, particularly to women, low-income sectors of the population, and those with low levels of education, to improve the relationship between these people and their money.


Read also | Financial inclusion and fraud prevention: How does security in payments contributes to new advances?


Improve the financial health of the population


To evaluate the index of Brazilians’ financial health, the Central Bank of Brazil and Febraban conducted a survey in 2021, in which they interviewed 5 people. The results were alarming.

Among the participants, 70% said they spend more than they earn. . Nearly 60% admitted that their finances are a constant stressor. Only 34% of those interviewed thought themselves capable of making good financial decisions.

Therefore, there is an enormous opportunity for regulators and institutions (both banks and fintechs or companies that offer financial services) to improve financial health and super-indebtedness of Latin Americans.


Accelerating inclusion: the role of the banking and payments market in promoting financial education


Several studies, entities and specialists recommend the involvement (and why not the protagonism?) of the businesses that offer financial products in encouraging financial education. But how can this happen in practice? See some examples cited in a panel held at the FEBRABAN TECH 2022:


Using data and artificial intelligence


The volume of data available to companies operating in the banking and means of payment is increasing. Movements like the Open Finance e Open Banking reduced the barrier to accessing key information for each consumer.

This informational advantage may be used strategically to educate the public. . The businesses in the sector have a much greater ability to identify the time of life of every client, much more than regulators and teaching institutions.

According to the financial education specialist, Eduardo Amuri, companies currently use artificial intelligence to gather information and to make personalized suggestions on their apps, mapping the needs of individuals during a specific period.


Use of the in-person attendance structure


Especially in the case of the lower-income and less educated sectors of the population, as well as among the elderly, the use of in-person attendance to simplify digital use of financial products and services is very important..

For example, one of the banks with the greatest reach in Brazil, Caixa, has used its physical facilities to provide services that focus on women. They are inclusive spaces where women can get financial advice.

Although internet access is popularized, it is undeniable that face-to-face service plays an important role in generating security in the pro-digital transition. This infrastructure can also be a differentiated resource for promoting the financial education of the population. Furthermore, with the advancement of 5G, there will be the possibility of taking to digital in a more concrete way the personality currently found by customers in the physical branch, with human service and in real time.


Use of transparent and personalized communication


Banks and means of payment companies can use the data on their consumers and investors to create a customized communication strategy according to each profile.

This communication, however, should not be geared towards sales. It is time that companies invest in the creation of a transparent, clear, and simplified information channel that contributes to financial literacy.

The digital public tends to reject complex information and unclear instructions on products and services. Therefore, creating a trusting relationship is essential for gaining the loyalty of new clients.


Watch the full panel on financial citizenship held during FEBRABAN TECH:


Impacts of financial education on financial inclusion


When we talk about financial education and inclusion, we also need to think about another term: the so-called “financial citizenship,” which is based on four main pillars:

  • financial inclusion
  • Consumer protection
  • Participation of the citizen in the evolution of the financial sector
  • financial education content

While the pandemic contributed to many people who had before been considered “invisible” finally initiating a relationship with a bank, simply becoming “banked” does not necessarily mean inclusion.

Most people, even if they have a digital accounts, do not have the basic tools to assess their financial health, prepare a personal budget, or use services responsibly.

Investing in financial education, therefore, means solidifying the bases of knowledge necessary to make financial decisions confidently, creating opportunities to generate income, and creating greater economic stability for the country.


Repercussions in the payments and banking market


The feeling of insecurity that currently dominates the decision-making of the “financially illiterate” ends up delaying their acceptance of more modern means of payment. The size of this obstacle mutes the positive impacts of the innovation brought by technological advances.

When there is no attempt to financially educate users, innovative financial services and products tend to be underused, or used incorrectly. The greater the public knowledge in the matter, the more prepared people will be to receive and use new market offerings.

At Dock we believe this is the ideal moment to educate consumers and investors, not only as a way to attract and keep new clients, but mainly as a way to contribute to a more prosperous and stable market.


Want to learn more about our vision? Watch an interview with our CEO, Antonio Soares, on democratizing access to financial services:



Financial Education: what did you see in this article?  


  • True financial education is not limited to raising the public’s awareness about financial products and services; it also helps people understand their financial situation, time of life, and challenges. For this to be successful, it is necessary to have the cooperation of all market agents.
  • Getting people “banked” is not synonymous with financial education. Even with access to banks and more modern means of payment, financial illiteracy is prevalent in Latin America, raising a significant obstacle to progress.
  • Investing in financial education means promoting growth and economic stability, stimulating the capture of extra income, and contributing to the financial health of the population.
  • The banking and payment means market can contribute to financial education on three principal fronts: use of in-person service for guidance, intensive use of data to understand a client’s situation, and customization of a communication strategy to provide clients with information.
  • Financial education impacts true financial inclusion, which goes far beyond simply “banking” the population. It also involves improving consumer protection mechanisms and their greater participation in market evolution. A financially educated public has greater ability to use new innovations in the banking and payment means market.


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