The words ‘fintech for good’ get thrown around a lot. But does the phrase have any legs – or is it just a collective industry pipe dream? Polly Jean Harrison, features editor at The Fintech Times, shares more views from across the industry following part one.
Fintech for good ‘needs support’
Rupert Brown, CTO at regtech company Evidology Systems, highlights the potential of fintech for good, specifically in streamlining KYC onboarding for SMEs, but emphasises the need for support from adopters and regulatory intervention to overcome fragmentation.
“Fintech has existed long before the term was formally coined – it came about a few years after the ‘Big Bang’ in London in 1987 when banks shifted from aggressively investing in IT to supporting business opportunities.
“Financial institutions treated business opportunities as cost centres that were ripe for savings and outsourcing. This shift ended up creating balkanisation and stalemate in IT departments with development groups and business units relying on a mantra of ‘my budget, my server’.
“Many CIOs have come and gone at a rate similar to that of football managers, desperately trying to both save BAU costs and maintain a veneer of ‘innovation’ while, in reality, failing both the business and their teams.
“It has, therefore, been left to third parties under the banner of ‘fintech’ to solve the problems that cannot be addressed in-house, especially in the post-crash regulatory environment and the democratisation of processing new asset classes. Cloud technology has been a key enabler of this as banks have been slow and wary to utilise capabilities outside their physical datacentre estate.
“Fintech can be a force for good amid this hubris, but it requires support and momentum from its adopters – the gleaming example is within the payments sector. Perhaps the best untapped opportunity is rationalising the KYC onboarding space, especially for SMEs, both outwards to their customers and onwards to their banking service providers. Sadly, however, this domain has become a random ‘app fest’ and it really needs significant intervention from regulators with subsequent rationalisation to a number of trusted shared utilities.”
Transforming transactions and inclusion
Innovations like mobile-based cash transfer apps demonstrate the positive impact of fintech, argues Lacey Hunter, CEO and co-founder of TechAid, a venture envisioned at the World Economic Forum (2022) that enables a data-driven approach to humanitarian aid as well as infrastructure to facilitate economic resilience.
“Those looking for proof points of the positive impact possible via fintech need look no further than innovations like PayTM, a mobile-based cash transfer application that facilitates transactions between individual actors, employers/employees or consumers and businesses in India.
“Users can transact in the absence of paper currency, the importance of which I witnessed while working in India in Q4 2016 after 500 and 1,000 rupee bills were devalued overnight without warning as an effort to combat corruption, smuggling and the avoidance of tax payments within the country.
“Although progress towards these aims was eventually achieved, in the short run, the sudden cash shortage rippling throughout the economy left workers, mostly in the informal sector, who earned their daily wages in cash, with no source of income.
“New types of informal work popped up, some of which included standing in line at the bank for hours in hopes of making a cash withdrawal on behalf of an employer – a poor use of time and resources that often as not ended fruitlessly if the bank ran out of hard currency before a withdrawal could be made.
“The existence of PayTM, which grew rapidly during the aftermath of the devaluation, made it possible for employers to pay employees and employees to continue to purchase goods and services as they went about their lives.
“The additional benefits were and continue to be far-reaching, resulting in the inclusion of the underserved into the mainstream economy, as well previously unattainable transparency and traceability both from both a taxation and a fair payment of wages standpoint. These are the types of benefits one should expect to see from a fintech solution that truly enables ‘good’ in society – simply digitising an existing financial vehicle isn’t enough.”
‘Fintech has the potential to make a positive impact’
Fintech platforms, built intentionally by mission-driven humans, have the power to democratise access to investment opportunities, argues Sundip Patel, CEO and co-founder of AVANA Companies, a provider of socially-driven investment opportunities.
“Technology is colour blind and sees in dots and dashes, so when technology is applied to finance, it could further drive economic inequalities, or it could be used for good to try to eliminate them,” he says.
“Fintech for my company emanated because of our purpose. We were seeking to provide capital for a better tomorrow and to do so we had to think about being inclusive, being transparent, focusing on impact and making sure purpose was in lockstep with profit.
“So we created a fintech platform for democratising investments and fintech platform that allows us to originate the types of loans we want to make. Today our technology can be moulded to do a variety of loans types from renewable energy to micro-loans.
“The key here is combining technology with the human touch and our values. Technology is not the solution, but it is part of the solution. Fintech can open the doors for more lending options for small business owners who might be turned away by traditional banks. By funding these small businesses, the fintech industry has the power to keep more businesses running, creating more jobs in the community, as well as helping to create generational wealth.”
Fintech empowering financial education for good
Fintech has the potential to achieve good by providing financial education and empowering parents to teach their kids personal finance, enabling them to make decisions that benefit their community. That’s the view of Stuart C. Harvey, Jr, chairman of the board of advisors at Rego Payments Architectures.
“As with any tool, it is all about education and experience. Studies show that a lack of financial education can cost 15 per cent of adults at least $10,000 in 2022. Fintech services like ours are closing the gap, giving parents’ resources to teach their kids personal finance at home before they reach adulthood.
“With REGO, we have created a solution that allows banks and credit unions to create a family digital wallet platform that lets their customers’ reward their kids for learning about financial concepts like saving, spending, donating and investing.
“Is ‘fintech for good’ just an idealistic dream, or a box-ticking marketing exercise? Doing good has to start with our children. As a parent, I hope my kids are not just smart with their money, but also generous. At an early age, kids want to help. That’s why I believe that fintech companies, like REGO, can make ‘fintech for good’ a reality if we give parents tools to reward their kids for making financial decisions that benefit their community”