China is among the most rapidly ageing societies in the world. While an ageing population poses various macro-level challenges, such as the overall infrastructure redesign, labour policy and the pension system, it also impacts individual lives. Impact on whether individuals receive their fair share of economic growth, whether technological society listens to their voices and how comfortable they are financially and non-financially to enjoy the rest of their lives.

Understanding and addressing the needs of the ageing and the elderly population is critical to achieving Sustainable Development Goals (SDGs). The financial aspect of later life is strongly linked to physical and mental health and longevity. Financial health provides a unique lens to examine a population’s financial security, resilience, control and freedom, such as retirement readiness and ensuring the present senior citizens are empowered and included. Financial health is particularly relevant as it examines the financial aspect and other factors such as culture, medical care, and caregiving to put human well-being in the spotlight.

With the support of the MetLife Foundation under the i3 Program, the UNCDF’s Centre for Financial Health is working with the Chinese financial service provider Guangdong Rural Credit Union (GDRCU) – Guangdong province’s largest financial service provider with 78 Rural Commercial Banks (RCB) – to understand better and improve the financial health of the ageing and elderly in China. With GDRCU, UNCDF conducted field research in three selected local RCBs and interviewed 48 RCB customers aged 45 to 81. The purpose of the field research was to examine their daily lives, understand their worldview, and how this potentially impacts their financial health outcomes. Their viewpoint is intended to contribute to the design of services and systems that are more relevant to them and better suited for their needs.

The conundrum of China's rapidly ageing population

Many people in China are surprised by the term "ageing society" when compared to the country's rapid economic growth and vibrant digital innovation environment. The 1980s one-child policy accelerated the transformation in population structure. The pension system, labour policy, medical care, and financial services industry are geared towards a young society and are unprepared for such a drastic shift. The pressures of a heavily enrolled public pension system, a relatively young retirement age, and inadequate medical insurance coverage for hospitalization and chronic diseases all pose challenges to ageing and the elderly’s longevity.

As life expectancy increases, the way individuals plan and live their lives after 50 changes, making the traditional social custom of living with and being supported by children less prevalent. With rising urbanization, the burden of caregiving has shifted from children to the elders’ shoulders. While traditional culture suggests that a multigenerational household is almost the only indicator of a fulfilling retirement life, current social change has shattered that expectation. The generation born in the 1980s largely migrated to bigger towns and cities, leaving numerous “empty-nest” families and villages to fend for themselves in their later 30s and 40s. It raises the question of how the elderly and ageing population might actively seek meaning in their lives over that long-isolated period and how they can maintain well-being on their own while keeping up with the technological advancements that might potentially empower them to be independent.

The vulnerability of the ageing and the elderly is not merely physical but also financial and mental. The majority of the Chinese population over the age of 60 live in rural areas marked by a lower literacy level, weaker welfare infrastructure and limited social protection mechanisms than those in urban areas. As a result, understanding how they make financial decisions is critical to address and empower a more secure retirement future.

Below are some of the key insights from the field study.

The diversities and commonalities

Although the population above the age of 50 is clustered as one group namely the “silver economy”, it is not homogenous in terms of financial health particularly income and asset allocation. At the same time, we observed mindsets rooted in culture and social norms that result in similar lifestyle perceptions and choices. Understanding both the diversities and commonalities within the population allows us to design products that meet their general demand while being tailored to their preferences.

Most interviewees reported to be satisfied with their current life and can meet their daily financial obligations either through pension, labour income or support from children. However, the extent to which they can fully support their leisure pursuits is entirely dependent on whether they have a sufficient independent income source.

According to past research, a stable income stream is highly correlated with financial health. It is no exception for the ageing and elderly population. The greatest differentiator of income among the retired interviewees is whether they are “in the formal system” or “out of the formal system”. A former state enterprise employee in Huizhou city could receive around 4,000 RMB/month (US$ 590/month) of pension which is enough to live comfortably in the city. Furthermore, this retired group with pension plans could have built their own houses when opportunities arose and rented them out to migrant workers. Rental income becomes a significant addition to their stable cash flow.

However, the majority of interviewees did not have a pension, making "retirement" a luxury for them. Social benefits are merely a few hundred RMB each month, barely enough to cover their daily expenses. For many in China, the answer to preparing for retirement is simply to save more or work longer years. They work in jobs such as cultivating vegetables and running small grocery stores until they are incapable to do so or have grandchildren to take care of, whichever is earlier.

“Many people in the village over the age of 80 are still growing vegetables. The government subsidies are not enough. What can I say, children are not earning enough money, so I can’t depend on them for support.”

The interviewees ranging in age from 45 to 81 demonstrated quite diverse demands and lifestyles based on age, level of education, previous work experience and geographic locations. Their needs are extremely complex and evolve as they age. For example, people in the 45-55 age group are more tech-savvy, usually have mortgages and are under pressure to provide for both children and parents; people in the 55-69 age group are more concerned with socialising within the community, taking care of grandchildren and maintaining health; people in 70+ age group require extra caregiving from children, obtaining daily life support is a priority, and children usually act as agents for their activities including financial ones. More granular customer segmentation is required to design various digital financial services (DFS) features and products to suit the exact need of the diverse customer base.

Paradoxically, the population above 50 has similar attitudes toward ageing and later life planning. For example, they all prioritise health and consider retirement as a time to further devote themselves to the broader family. In fact, practically every interviewee’s life revolves around the next generation. Family ties and values are strong, particularly for rural individuals and it’s a culture for children to be solely responsible for caregiving and supporting financially. Ms Zhang, aged 50 in Huizhou, has been raising her two grandchildren without any income source. When asked how she is sustaining herself, she smiled and replied, “Isn’t that the point of having a son to secure my later years?” Regardless of the diversities, we observed that the core financial and life decisions were centred on the family as a whole.

Ms.Zhang in Huizhou. Photo Credit: GDRCU/Ying Liu

While multigenerational households and family-based financial decision making dominate the samples, it is crucial to understand that the current social custom may not exist for the next generation of ageing populations. On the contrary, parents in the 45-55 age group must tap into their decades of savings to support their children purchase homes in larger towns and cities, where housing prices have been fast rising. It is their responsibility to rethink and explore an alternative retirement life, independent and autonomous than that of their forefathers as shown in Chinese history.

Can I Trust it? Technologically Included and Inclusive Technology

We also explored the relationship between age and technology throughout the field research. Perceived as the pioneer in digital financial service, China has made tremendous progress towards empowering financial access through digital tools. But do the tools work equally effectively for the ageing and the elderly?

Though smartphone ownership is high in China, rural elders, especially those over 70, do not have universal ownership. Smartphone ownership is strongly related to educational level and whether they have enough space to explore mobile phones. An 81-year-old teacher learned how to send money through WeChat using a smartphone, while a farmer of the same age had to use a hand-made picture manual to operate a regular cell phone. The digital divide still exists for the seniors, especially with the accelerated adoption of digitalization in daily activities after the pandemic. As a COVID control measure, it is mandatory in China to present a digital health code in any public place entrances, such as supermarkets, buses and restaurants. However, this prevented elderly people from being encouraged to go out because they were unable to operate a smartphone.

“I have to ask my child to get the health-code through his phone, go to the printing store, print it off and take it with me everywhere. This needs to be done every week as the code expires in 7 days.”

We are certain that the elderly interviewees can afford a smartphone with cost reduction. What are the underlying reasons for people over the age of 70 to use or not use digital technology? The answer is interestingly linked to family accessibility. Connecting with family and friends through WeChat is almost the only motivation for elderly people to use smartphones. One common reason for not needing a smartphone is proximity to family.

We see a substantially greater rate of smartphone ownership among people aged 55 to 69. We dived deeper to understand their digital financial service behaviours. Our previous assumption was that people still go to physical branches because they distrust technology. This is partially validated in the field research. Almost 80% of the interviewees still prefer going to a physical branch as it is considered the safest option. In China, banks symbolise government authorities, and RCBs played an essential role in the local setting. For RBC customers, walking to a bank branch is also considered a good form of exercise and an opportunity for community gathering. This reinforces the desire for a “community” element whether through digital or physical channels.

Interestingly, we discovered that people who don’t use mobile banking apps, on the other hand, do use WeChat payment. It turns out that the issue of trust may not necessarily come from the nature of the institution, but rather how they connect with their network within the system (i.e. are able to recognize familiar faces) and the user friendliness of the technology (i.e. how easy it is to use for them).

“I don’t fear sending money wrongly in WeChat, I can see their profile pictures and they are my friends there, so I feel safe. Banking app? How to say, I always feel I will click the wrong button and it looks too complicated.”

“Many elderly people will come to the branch and ask our staff to help them setup WeChat pay, they think WeChat is owned by our bank.”

Understanding the mobile banking adoption in Heshan RCB. Photo Credit: GDRCU/ Xuechen Li

Though many prior studies have suggested that the fear of cybercrime and digital exploitation is a big reason for people distrusting technology, our field research revealed that how we design digital products from the perspective of the elderly may be equally important. Resistance to using technology can also stem from a sense of exclusion. Though digital products were adapted to larger fonts, they were not originally designed for the ageing and elderly. Seniors are vulnerable to physical decline, which leads to physiological discomfort when confronted with unfamiliarity. True empowerment entails understanding their perspective rather than forcing them to learn how the current system works. Many of the demands and requirements appear to be quite counter-intuitive.

“Can it be slower? I need double confirmation to make sure I didn’t do it wrong.”

“I like deposit book; I want visibility of my account ins and outs in a simple book. I can’t see anything from a bank card.”

As enablers, digital tools provide more secure, convenient, and smart solutions to make better financial decisions. There are enormous opportunities now for financial service providers to rethink what inclusive technology for the ageing and the elderly looks like beyond financial inclusion. Utilizing technologies such as visualization, conversational AI, as well as digital communities will help create a space for the seniors to genuinely view technology as an empowering tool rather than a fearful alienator.

I cannot plan: the mindset towards financial planning

We investigated the interviewees' attitudes and behaviours toward financial planning and retirement savings during the field research. We assumed, both culturally and statistically, that because China is a big saving country, the ageing and elderly population would demonstrate diligent planning and saving for retirement. Yet we observed a converging “I cannot plan” pattern among the interviewees. It raises the question of whether the ageing and elderly population have adequate awareness of retirement readiness to plan and save intentionally.

The interviewees were much more “carpe diem” than we expected. When asked why they don’t intentionally save or plan, most of the answers were “things change all the time”, “it’s better to seize the current opportunity”, and “even if I plan, things always go wrong”, “I cannot choose what kind of life to live”. Regardless of age and education level, none of the interviewees, business owners or farmers, women or men, have a clear or comprehensive plan for managing income and expenses, allocating funds and forecasting cash flow during or after retirement.

This could be explained by looking at both the supply and demand sides. The awareness of retirement planning and intentional saving is not a social custom. Historically, either the government or the next generation bears the burden of financial support. This mindset has also been shaped and strengthened by their experiences over the last 50 years, which have been full of unexpected events. Wealth comes from seizing the current opportunity instead of careful planning for the current population who went through dramatic changes such as the war, the planned economy, and the open economy and reform period. Compared to the relative stability and maturity of social mobility in developed countries, the last 30 years of China’s economic growth seems to have taught everyone to place more faith in luck.

However, we also observed that the ageing population around 45-55, typically born in the 1970s grew up in the 1990s, expressed anxiety over retirement income due to limited caregiving and financial support from their children adding to the fact that the belief in luck has gradually faded away. As the economic opportunity in the society has gradually stabilised and with the rapid urbanisation, the dividend of time has faded away. The lifestyle of the 45-55 generation in China is increasingly similar to that in developed countries in terms of mortgage debt, self-supported caregiving and unreliable government pension income.

“Oh, I’m anxious. Can you recommend some good financial products for me” Mr Li, a young school headmaster, replied when we asked about his retirement plan. Photo credit: GDRCU, Maoming RCB

The supply side appears to be a hindrance for this group. While seeking advice on how to plan and invest, they find that financial institutions' current products and services do not satisfy their needs. Even though the banking system in China has evolved over the years, it still follows a rather traditional model that does not adapt to customer needs. In the eyes of many bankers, product innovations also seem to pose a risk. GDRCU employees expressed similar concerns, stating that while they understand logically that diverse and more comprehensive financial products should be launched, credit products are always considered more profitable and comfortable, as innovation does sometimes bring risks if not equipped with a highly experienced team.

Most ageing and elderly people prefer low-risk, high liquidity products with specific return requirements. This makes it quite complex to design a suitable product. Most financial service providers have not conducted thorough customer-centric research to segment customers and provide bundled products. Unlike in developed countries where wealth management and retirement planning have grown into a mature market, China’s new middle-class has yet to become acquainted with all those financial terms. Fixed deposits are always the default choice even for customers we interviewed with comparatively higher education levels. According to the interviewees, “Other products appear nice but they don’t understand them and fear that the banks could be defrauding them”.

At the end of each interview, we would ask, “what if you won a lottery and suddenly had an extra 0.5million-1million RMB (US$74K –148K) (depending on the interviewees’ financial circumstances)?” The responses converged. 90% of those interviewed laughed at the question and said they had no plans for the money other than to deposit in the bank after spending on travelling and good food. The remaining 10% of interviewees would invest in children and the housing market, as housing has historically been regarded as the best investment option, though this is now questionable.

The relationship between money and the interviewees seems to be passive. Money seems to be a grace from above that you can only catch by luck instead of something proactively pursued and created through the various tools available. A change of mindset to money is something that can be managed is a much-needed shift.

The awareness of retirement planning and inclusive products designed for the ageing and elderly are increasing in demand, which will undoubtedly impact the seniors’ financial freedom and control.

Closing the Gap

The field research lays an important foundation for UNCDF to understand the current financial health status of the population between the ages of 45 and 55 and the elderly and to uncover the existing gaps in better serving them for more secure and free retirement life.

Working with GDRCU, UNCDF will further explore the interventions addressing the challenges and the specific needs of this population: designing inclusive digital financial services, especially the elderly-friendly mobile banking app, and curating innovative products and services.

According to the qualitative interviews, technology itself is not a hindrance to usage, but how we design digital financial services is the issue. Financial institutions should thus focus on how technological products are designed to be enablers. Visualisation tools and conversational AI assisting the elderly to onboard, navigate and understand their financial status are among the critical interventions to be developed. Building digital communities to increase trust and create a sense of familiarity and belonging is also crucial.

Innovative products and services tailored to the ageing population are critical for preparing them for retirement and fostering financial control and resilience. The ageing population needs financial planning tools and products to fulfil their short- and long-term goals, whether through savings or investments. UNCDF will collaborate with GDRCU to create products that will help them control their finances and make it easier. Apart from that, creating awareness about planning and the future, connecting with other ageing ecosystem providers such as insurers and healthcare start-ups, and analysing factors to understand the complex set of archetypes for customer segmentation are all critical.

Ageing is frequently associated with vulnerability and dependence. It is critical to transcend beyond stereotypes to establish a healthy and happy later life for the growing percentage of the population. Closing the financial health gap by empowering the elderly and the ageing with the tools they need to make informed and conscious financial decisions will pave the path for a more enjoyable later life in which they not only survive but thrive.