How AI is Addressing the UK’s Financial Literacy Gap with the Help of Fintech

Although more adults in the UK are embracing investing, with the number of Stocks and Shares ISA holders rising beyond 4 million for the first time since they were introduced, according to last year’s government statistics, there still appears to be a major shortfall when it comes to comprehension.

One of the biggest challenges that this financial literacy gap poses is that it can be more difficult for adults to make the decisions needed to grow their wealth in an effective way.

However, innovations in artificial intelligence, such as agentic assistants, gamified education tools, and micro-learning moments, may be able to help more adults and children alike learn about how to build their savings and investments with confidence.

With this in mind, let’s explore how AI is transforming financial literacy at scale in the United Kingdom:

The UK’s Financial Literacy Problem

The state of financial literacy in the UK is an issue because not only do insights show that adults lack the necessary knowledge to use financial services with confidence, but they’re also unaware of their comprehension shortfalls.

According to Pay.UK research, 78% of adults in the United Kingdom believe that they’re financially literate, but 71% don’t know how a savings account works.

Other survey findings underline a similar level of difficulty when it comes to understanding key financial concepts.

“We quizzed 2,250 Britons on their understanding of 10 frequently discussed financial topics – including inflation, taxes, pensions, and savings – to gauge knowledge across different age groups and regions,” explained a Wealthify article on financial knowledge in the UK.

“Despite needing to achieve a score of 6.5 or above, 73% fell below the new benchmark, and just 1 in 20 (5%) answered all 10 questions correctly. And it seems that young people are most lacking in financial knowledge, with the average 16–18-year-olds getting just 2 questions right.”

This difficulty in understanding money may be a cause for concern, but new technologies like AI are emerging to provide new learning experiences that can help more citizens to better understand the topic of finance.

Agentic AI to the Rescue

Thanks to innovations in natural language processing (NLP), we’re seeing a rise in agentic AI use cases throughout the financial sector.

Use cases are now emerging where personal customer accounts are being optimised with the help of agentic AI to integrate a form of hands-on financial assistance to users.

This means that artificial intelligence can assist customers in working towards specific savings goals, such as if a customer wants to save £1,000 by April next year, the agent can advise them on how much and how often to set money aside.

Financial assistants can also help with budget control, allowing customers to set up specific budgets for regular transactions like grocery shopping or recurring bills, with the ability to transfer money to each different account space on payday.

Acting as chatbots that are skilled in conversational comprehension, agentic AI can answer complex user queries about taxes, compounding savings, and more intensive investment terminology in an easy-to-understand language.

This can help more customers to improve their financial literacy as and when they need to quickly understand key industry processes.

Predictive Warnings

Artificial intelligence can also provide a proactive level of protection for bank account holders, incorporating predictive analytics tools to simulate future financial health and generate warnings for customers if they’re deemed to be at risk of entering their overdraft before it happens.

Using technologies like machine learning (ML), AI tools can keep track of customer spending to map out their overall financial outlook. This means understanding when a period of overspending could risk them falling into debt and creating an alert to ensure that the user is aware of the risk.

In this way, AI can promote good habits among users to help improve financial literacy in a more practical way.

Gamified Education

The great thing about AI is that it can monitor the behaviour of users to provide micro-learning opportunities that can improve financial literacy in a bitesize way.

Algorithms can also implement gamification tools to track user progress and introduce new challenges, rewarding positive habits like micro-saving with fresh offers or various other benefits.

Learning by playing games can help users to retain knowledge, allowing them to develop key financial skills in a fairly passive manner.

More financial institutions are using apps to develop learning processes for the use of digital financial tools, meaning that users can be rewarded in different ways for displaying various levels of competence when it comes to understanding financial processes.

Improving UK Financial Literacy

Importantly, AI is a tool that’s capable of providing financial literacy to UK adults in a subtle way, helping them to grow key skills even if the majority of the public are already highly confident in their ability to understand finance.

Through technologies like machine learning and gamification, educational experiences can be far more targeted and personalised than ever before, helping more users to retain important information on a level that hasn’t been possible before.