Academic proposes that FinTech and InsurTech can be a key enabler of new financial approaches for older people.
Ira Sobel is the founder of FinTech for Older Adults – a consultancy that seeks to understand how innovation and technology can be used bridge the gap between financial services and the aging population.
Longevity.Technology: In 2015, after an extensive career in accounting and financial services management, Sobel embarked on a new venture – a PhD at Tel Aviv University in her native Israel focused on exploring the social and economic aspects of aging. We caught up with her recently to talk about her views on the subject.
“For my PhD, I decided to focus on the economic and social inequality within midlife and older adults, which is much more severe than in the wider population,” says Sobel. “When you take two people aged 72, for example, you see very significant differences because of the accumulation of differences over time. There’s a big variation in health, in economic standing, in their marital status, and so on.”
The challenge that Sobel sought to address was how to methodologically capture this variation among people aged 50 and above due to the effect of accumulation. But Sobel was not only interested in understanding these differences between people with different life course experiences or accumulated advantages in health or employment at a specific point in time.
“I looked at the effect of health and retirement on wealth over a period of 11 years, and I made some interesting findings,” she explains. “And what was novel about my study was that I could show empirically that these differences actually exacerbate over time.”
“Innovation can bridge the gap between what we have accumulated, what is provided by the state, and what we really need to finance our longevity.”
Sobel points to the growing difference between the legal age of retirement and life expectancy, and that the proportion of healthy lifespan is also getting longer.
“So then I thought the biggest problem is how are we going to finance longevity, and what are the drivers and mechanisms that can help people finance their longevity?” she says.
“My proposition is that innovation can help every one of us, no matter in which context – gender, employment history, or health condition. Innovation can bridge the gap between what we have accumulated, what is provided by the state, and what we really need to finance our longevity.”
Sobel paints a picture of the future of aging, with more people needing to work in order to finance the growing number of retirees – the so-called dependency ratio.
“We see that retirement is essentially redefined, because it’s becoming much more flexible,” she says. “Combined with increasing marginalization of public pensions, increased out of pocket medical expenses, and increased aging-in-place.”
Based on trends in global financial systems, Sobel sees that there are key areas in which technology can play a role in serving the needs of older adults.
“They need to be able to leverage their life insurance, to be able to monitor their wealth, and to understand their rights – maybe they are eligible to receive a higher public pension or medical coverage than they currently do,” she says. “They also need to understand home equity and financial instruments like reverse mortgages, they need options to optimize or lower their healthcare costs, they need supplemental income, they need someone to help them with their payments, and they need help with estate planning.”
“There is a business case for aggregating all these services together through open API, as an aggregated platform to provide all the services all in one place.”
While this may be seen by some as the role of a financial planner, Sobel believes that technology is now reaching the point where a lot of this functionality could be brought together to provide solutions tailored to the needs of older people.
“There is a business case for aggregating all these services together through open API, as an aggregated platform to provide all the services all in one place,” she says. “Microservices architectures, for example, can provide a platform to gather all these services together and connect them to a bank who can can use it to improve the financial resilience of their older customers while also generating growth.
Imagine a digital family office for very high net worth individuals, but a family office for normal people who need these services, which are going to be more and more crucial as societies age.”
Sobel envisages financial solutions bringing together everything from bill payment, expense monitoring and estate planning, through to utilization of medical insurance rights and reverse mortgages.Through FinTech for Older Adults, Sobel is now focused on bringing together people from various backgrounds to make this happen.
“It’s in its infancy really,” she says. “For example, in Israel, we have more than 500 FinTechs, but you there are probably less than 10 that are focused on older adults. And this is the same all over the world, which is quite surprising, because this population has a very high potential – what we call the longevity market and the silver economy. I want to bridge this and show FinTechs the huge potential of addressing this population.”
Sobel is targeting both FinTech start-ups and financial institutions with her message on financial innovation for the aging population, which she delivers by lecturing, advising and building a community around the subject.
“I want to show start-ups an alternative or complimentary strategy to add this population to their roadmap and show them the potential of this market,” she says. “But I also want to increase awareness among financial institutions that overlooking this segment is a big loss for them. There are a lot of ways to unlock the opportunity of older adults through digital financial solutions.”
