The potential for change from boosting financial literacy is almost limitless

More than 800 years ago, the young son of an Italian diplomat published a book that changed the course of Western civilisation. Leonardo of Pisa was raised in Bugia, Algeria, by his father, a Pisan customs official and merchant. During his scholarship in the North African coastal town, roughly opposite Sardinia, Leonardo was taught by Arab scholars who introduced him to a new concept that had largely failed to penetrate Europe: algebra.

The concept was founded on the revolutionary importance of zero. At its mathematical essence, zero enables us to transition from positive numbers to negative numbers, allowing creditors (those who have money) and debtors (those who owe money) to be easily defined. Zero also allows us to represent large numbers, such as 1,000,000, unlocking our ability to subtract, add, divide and multiply them – a revelation with seismic implications for trade and commerce.

The concept of zero had been dismissed by early European civilisations. Greek philosophers such as Aristotle, Plato and Pythagoras were not keen on the void. But over in India, a primary objective for ancient Hindus was to attain a form of nothingness, which seems to have led to advances in their understanding of mathematics. When Arabs conquered the Persian empire in the seventh century, they learned ancient Hindu numerals that opened their eyes to a wondrous technology of ones, tens and hundreds.

These new insights led the Arabs to a step-change in commercial activity, establishing trade networks that stretched from the western Mediterranean across the Islamic world to the Indian Ocean. Travelling with his father through Arab-dominated ports, Leonardo of Pisa witnessed the power of their knowledge first-hand, watching traders calculate weight, ratios and prices at lightning speed. While Europeans struggled with the awkward abacus, Arabs were creating balance sheets in their heads, running rings around even the most experienced merchants from Venice.

Having cracked the Arabs’ mysterious code, Leonardo of Pisa – who we know today as Fibonacci – published Liber Abaci, the Book of Calculations, in 1202. Using the concept of zero, the book taught Europeans how to calculate interest rates and profits or assess revenue and costs.

Fibonacci’s magical maths helped to awaken Europe from its Dark Age slumbers. His book became the bible of European commerce and fired the starting gun on centuries of new financial innovations across the continent, from double-entry accounting to reserve currencies, paper money to modern-day mortgages. The reinvention of financial systems not only facilitated an explosion in trade and economic growth. It was also pivotal in enabling scientific and technological progress, reducing poverty, and even mitigating conflict.

Fibonacci’s story stands as a shining historical monument to a conundrum that governments today are increasingly fixated on: how can we improve financial literacy? Only one-third of the world’s adult population can perform basic financial tasks. In the US, around one-third of employees run out of money before their next pay date, which can trigger depression and anxiety. A recent UK survey showed that nearly half the adult population suffers from money worries, with younger adults and ethnic minorities more severely affected. The situation is even starker in developing countries.

In the next few months, the UK government is set to publish its long-awaited financial inclusion strategy. Key areas of focus include digital inclusion, access to banking and savings, affordable credit, insurance, debt advice, and financial education.

This is a subject that my company is also exploring. Our mission has always been to help people make better financial decisions by giving them the tools and education they need to save, invest and trade with confidence. It is why we have partnered with the University of Oxford’s Saïd Business School to launch a new research programme fusing research from world-leading experts in the fields of behavioural finance and corporate social responsibility to find solutions that improve decision-making.

The need could not be more urgent. We live in an increasingly fragmented and dangerous world, with trust hard to come by. One of the fundamental principles of financial literacy – universal value, understood and accepted by everyone – is an expression of trust, a cornerstone of all civilised societies. We could do with a fresh injection of trust today, just as Fibonnaci’s work fostered trust by boosting transparency and providing more efficient and reliable systems in the emerging capitalist enterprises of Europe.

The potential for change is almost limitless. In 1900, only around 15 to 20 per cent of the world’s adult population could read and write. I doubt very much that anyone from that era would have predicted the dramatic surge in global literacy rates that today stands at 87 per cent for adults aged 15 and older. Imagine if we could summon the same focus and determination to solve the pressing challenge of financial literacy in the 21st century.

Viktor Prokopenya is the founder of Capital.com and a visiting professor in Innovation and Entrepreneurship at the University of Leeds.