June 03, 2024 | Read Online

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"You must promise me that when you step into the light, you will be worthy of the attention you command."

- Lady Danbury (Bridgerton)

The Knowledge You Have About Money

Dearest Gentle Reader,

The social season is upon us. The cherry blossoms are blooming, young couples are on the promenade, and we wait with bated breath for the latest crypto product designed "for the masses." While many esteemed families (ecosystems) may put forth a debutante, there is still only one diamond (and his name is Brian Armstrong).

Okay, you get it, I watch Bridgerton.

I saw a meme recently that went something to the effect of:

High School Students in America: What is a 401(k)?

Public School Systems: The diameter of a circle is d = 2r

It's an astute and correct statement about how woefully unprepared we leave our youth to actually debut in society.

It got me thinking: What are we really talking about when we talk about consumer adoption of financial services products? Traditional financial services face the same issues as everyone else in terms of vying for short attention spans in a crowded marketing arena, but they have two additional devastatingly difficult hurdles:

1) People are VERY sensitive and (rightfully) terrified to do anything new when it comes to their money.

2) Most people don't know what the heck they're talking about when it comes to money.

Let's take a look.

What is financial literacy?

MarketWatch defines financial literacy as: "The knowledge you have about money and the options you have for saving and investing it."

The Federal Reserve defines someone as financially literate if they can answer questions about interest, inflation, and risk diversification. Jeez, leave it to the Fed to be the biggest nerds about it.

I would define it as…can you consistently hang out with people over 30 who have money and not repeatedly look like a moron? Bonus points if they also come from money.

How financially literate are Americans?

According to Standard & Poor's (S&P), roughly 57% of adults in the United States are financially literate. That's…not that great.

To contextualize that further…let's take the most simple investment vehicle you can think of: the high yield savings account. According to MarketWatch, 40% of people have never heard of it; and of the 60% that have heard of it, only 12% actually have one. And this study was done in 2024, so rates were even more attractive back then.

The statistics within the demographics probably won't surprise you. Older and better educated people tend to know the most. Men tend to know more than women (or minimally are more likely to pretend they do on a survey). And White or Asian/Pacific Americans are more likely to have a retirement account than Black or Latino Americans.

What else can we look at?

I think the homepages of financial institutions are very telling.

Fidelity's homepage assumes you need help right off the bat. There is no presumption that you came to Fidelity.com and have any idea of what to do next.

E-Trade equally presumes that you are terrified at the prospect of trading equities, making this the first thing you see when you load their homepage:

What's my point?

I could rant and rave about the inequities of America but you haven't signed up to be my friend and this isn't a dive bar…so my point is this:

If traditional finance is for the presumed masses, then the acumen of those masses matter to crypto. It's relevant that the addressable audience does not start at 100%.

And it's relevant that the modern stock market originated in the late 1700s, but E-Trade is still trying to explain its service offering like the stock market is Tolstoy and you're at a Goodnight Moon reading level.

Marcus by Goldman Sachs has a TAM issue and they are giving away 4.40% APY. Anyone can create an account, connect their bank account with Plaid (we'll talk about the unbanked another day), put in dollars and make 4.40% risk free and fully liquid monies. And 88% of Americans are like…nah.

Further, if you look at the Coinbase user interface, it looks exactly like any equities trading app because they know that the bridge (no pun intended) between buying crypto as an investment is already knowing how to buy equities as an investment. They understand the true addressable market.

Coinbase has access to capital markets. There's a lesson here.

It does not matter how lavishly you design your social season ball. If no one knows how to get there, you'll still be dancing alone.

Yours truly,

Lady Alex Gray

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