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 views from across the industry.
‘Driven by a higher purpose’
Fintech has the potential to be a force for good but companies must have a higher purpose, suggests James Galassi, digital, product and marketing director at Acuity Knowledge Partners, provider of bespoke research, analytics and technology solutions to the financial services sector, including asset managers, corporate and investment banks, private equity and venture capital firms, hedge funds and consulting firms.
“From providing people with easy access to their credit scores so they can make more informed financial decisions, to using new payment rails to slash the cost of cross border payments, fintech has a history of being a force for good and putting more power into the hands of customers,” he said. “This, however, is not a given.”
“Companies must be driven by a higher purpose. One that seeks to create a positive and lasting change with both customers and the wider world. Fintechs can only do this if they act with humility and a genuine desire to understand the motivations of their customers. This will enable them to see the world through their customers’ eyes, and create products and services that authentically connect with them.
“At Acuity, we are increasingly focusing our efforts in the ESG space. We believe it’s ripe for the delivery of fintech products that can have a significant positive impact. Take the example of the asset manager, who has sustainability products in their portfolio but who struggles to access the data that would allow them to stay on top of their ESG inclusion criteria.
“We believe a fintech product can provide a neat solution to this, saving asset managers time, enabling them to make better decisions about their portfolios and, in the process, driving greater investment in those organisations with a positive ESG impact.”
‘A real concept’
Laura Pommer, CEO at online investment marketplace EnergyFunders, believes that fintech can do good by democratising investments and distributing wealth more equitably.
“As with all areas of business, good can be achieved through fintech with the right purpose and plan behind it. At EnergyFunders we’ve leveraged technology to democratise investing in oil and gas, a sector that we felt was ripe for disruption.
“Creating access to asset classes previously reserved for the elite allows us to distribute wealth more equitably in society, so to us ‘fintech for good’ is very much a real concept that is in action as we speak.
“Our partnerships with other fintech platforms such as tZERO have further accelerated that plan, and we are anxiously looking ahead to the future of fintech for good.”
‘Align with ESG’
Gabby Kusz is CEO of the Global Digital Asset & Cryptocurrency Association, a global voluntary self-regulatory association for the industry where she supports awareness building and education. She says that for any business vertical to achieve its positive impact it is crucial to align with and implement ESG principles.
“Just as there are good and bad applications of any type of business vertical the same holds true for fintech,” says Kusz. “The most important measure and pathway for any business vertical to achieve its own ‘____ for good’ will be its ability to align with, embody and action on ESG (environmental, social and governance).
“ESG standards, measurements and communication continues to grow and develop. As it does so will the ability of all business verticals – fintechs included – to contribute towards the concept of ‘____ for good.’”
A ‘tectonic change’
The opportunity for fintechs to create positive outcomes “has never been greater”, according to Elizabeth Lyons, chief operating officer at T-REX, a SaaS platform designed for risk analysis and portfolio management.
“There are so many incredible stories for consumers, from free access to financial services to enhanced decision-making thanks to digital products. What doesn’t always make headline news is the impact fintechs, particularly enterprise fintechs, are having on the institutional side.
“For example, we’re working with institutional investors, trustees and asset originators to embed better sustainability metrics in some of the most complex asset classes. It’s one thing to get a climate impact rating on a plane ticket at the point of sale and be able to choose the best airline or route, it’s another thing for asset managers and institutional investors to have actionable data on the airline’s carbon emissions when financing their fleet of aircrafts over the next 20+ years. It’s a harder story to tell. But the accountability and impact at scale is unprecedented. We’re talking trillions, not billions.
“Ultimately, better foundational data in the hands of enterprise fintechs has the potential to direct more capital to sustainable ends. At T-REX, we’re excited to be part of this tectonic change. And we’re not alone. Innovation and collaboration are the very fabric of fintech DNA; this partnership mindset for established fintechs and new entrants alike is propelling sustainable growth forward at a pace we’ve never seen before.”
Fintech for good ‘is possible’
VamosVentures invests in diverse founding tech teams and mission-oriented companies, with 100 per cent of their portfolio diverse led, over 40 per cent of portfolio companies are women led, and 88 per cent of their portfolio companies are Latinx led.
Ashley Aydin, principal at VamosVentures, says the company “strongly believes” that it is possible to invest in impactful, innovative technologies and achieve financial returns at the same time.
“This is what makes the fintech space so interesting to us. Fintech companies have the potential to be real businesses and do good at the same time. Companies can streamline inefficient status quo financial experiences and democratise financial knowledge for those who would not have access to it otherwise.
“With financial technology, we can, in new ways, help individuals grow their wealth, make payments more seamlessly, have the right infrastructure to grow their businesses, and more.”
‘Improving lives remains intact’
“While the buzz around the term ‘fintech’ may be waning, the potential to leverage technology in order to innovate new financial solutions that improves the lives of many remains intact,” says Sylvain Mansier, GM of payments at Inmar Intelligence, a data intelligence company.
“There are still millions of consumers in the US and many hundreds of millions globally who are unbanked or under-banked. For example, consumers must have credit scores in order to access at the most favourable terms or sometimes even at all. Yet, many consumers have limited credit history profiles under traditional approaches.
“This is, in part, due to inherent biases in legacy practices: e.g. consumers can ‘build’ credit by making mortgage payments, but not by being very responsible tenants who always pay rent on time.
“While many government sponsored eligibility programmes have parameters such as means testing, the vast majority of retail incentives (e.g. coupons, etc.) are still one-size fits all. As a result some consumers benefit from ‘over-subsidisation’ while others still cannot take advantage of discounts. Promotional investments could be better targeted and personalised to better account for the relative price elasticity of various consumer segments.”