This August at The Fintech Times, we’re looking to highlight some of the amazing things fintechs are doing around the world. We are always hearing about the “latest groundbreaking innovation doing good for the community”, but are these innovations doing good for those in an already advantageous position, or are they helping make the financial world more accessible? To us at The Fintech Times, fintech for good means companies looking to help people who desperately need it, prioritising financial inclusion and sustainability.
So far this month, The Fintech Times has focused on what sets “fintech for good” companies apart and what this means for people around the world. It is also important to also focus on how companies can be commercial and profitable at the same time. Without the ability to appeal to customers and make a profit, it is much harder for a ‘fintech for good’ to exist. To understand how companies can achieve both at the same time, we hear from Business Growth Mechanics, BondLink, Lockstep.io, Hubble, Fairown, Revival, Fairplay, Chargebacks911 and Highline Technologies.
Being a genuine ‘fintech for good’ company is now a commercial necessity
Steve Sanders, go-to-market strategist and business advisor to market strategy service provider Business Growth Mechanics said: “Until now ‘being good’ has best been represented as pleasant sounding taglines on CSR or ESG websites, which, let’s face it, has often presented a façade with relatively little cost or disruption, and in doing so business may continue largely unchanged. The Great Shift that is occurring results in employees, consumers, B2B clients, and investors becoming more highly tuned to the genuine purpose and principles of all the businesses they support.
“Through the 2020’s, the age of Stakeholder Capitalism will become firmly rooted in the employment and buying choices of whole generations. Therefore, ‘being good’ becomes a competitive necessity, and not merely nice-to-have. Indeed, those companies that lack a believable strategy, will be deemed to be profit-focused and bound to a culture of greed that excludes the interests of stakeholders.
“It is therefore quite reasonable to ask which avenues can provide fintech with a new source of competitive differentiation, evidencing greater positive impact that their competitors cannot. Thereby, commercial profit and ‘being good’ are entirely compatible.”
Being commercial is possible by realising the full potential of your offerings
Colin MacNaught, the CEO and co-founder of municipal bond platform BondLink said: “Communities across the United States depend on the capital they raise through municipal bond sales for critical public works like schools, healthcare, and local infrastructure. Too often municipalities struggle to realise the full potential of their muni bond offerings because their limited resources don’t enable them to provide sufficient details or drive optimal demand for their bond sales.
“BondLink was founded to help municipalities improve their bond offerings and earn every dollar possible for public works. BondLink helps issuers enhance their transparency and provide actionable insights to investors through its cloud-based investor relations and debt management platform.
“Issuers create public, investor-facing websites that help them market their bond sales and improve transparency with BondLink. Its internal debt management tools help municipalities track and manage their outstanding debt liabilities to further improve internal processes and introduce time-saving efficiencies.
“Commercially, BondLink succeeds by optimising muni bond sales, since we earn a small percentage of each successful bond sale.”
‘Good’ can be as simple as saving a company money
Matthew Shanahan, co-founder and chief strategy officer at accounting data platform Lockstep.io said: “Good is a loaded term. If ‘good’ is defined as providing a benefit that is in excess of the price, there are many ways that a fintech can be commercial while being good. Fintechs open the access and reduce the cost of capital which is a huge good.
“Fintechs make their revenue by replacing previously manual processes with cloud-based automation so they can provide services at a lower cost but still make money. An example of this is asset-based lending which have been primarily used by enterprise companies.
“Unpaid invoices are a huge asset for SMB companies, but to borrow against the invoices requires a massive amount of reporting and tracking. As a consequence, most SMBs cannot afford an asset-based loan. As technology eliminates the need for manual reporting and tracking, asset-based loans become democratised.”
All parties need to profit for ‘fintech for good’ to work
Hendrik Roosna, CEO at payment platform Fairown said: “A definition of commercial is when everyone participating in a transaction benefits – buyers get what they want, and sellers get remunerated. A market economy is not sustainable if one side is forced to participate and loses out. This is true for any market economy, whether linear or circular. An economy is only sustainable if all participants win. Fairown’s subscription model, which allows offering products for a monthly subscription, is used by environmentally conscious brands like Apple and ensures that all parties benefit from the circular economy. The products are manufactured, consumed and then reused either by being refurbished and resold on a secondary market or repurposed.
“Our model’s ‘everyone’ includes banks, brands, retailers, consumers and Fairown itself. Banks get reliable and predictable interest and payment flows from existing customers; consumers get lower price points and sustainable offerings; retailers get loyal customers and recurring sales; brands get another revenue stream by selling returned and repurposed products or recycling the materials to produce new ones, taking a big step towards sustainability.
“By enabling various parties to work together in a self-sustaining circular economy, Fairown benefits through its facilitator role. The concept is similar to how Chinese tech powerhouse Alibaba’s initial success derived from using its e-commerce platform to connect small Chinese merchants, with no access to the international market, to Western businesses looking to offer products at more affordable prices. It comes down to connecting the dots in a new way, but in Fairown’s case, we’re making sure there’ll be responsible consumption – the products and materials will be reused or repurposed, not ending up in a landfill. Our win-win approach delivers consumers what they want – sustainable offerings at affordable prices – and companies get an additional reliable revenue stream through their innovative offering.
“There is a final factor that enables a fintech to be commercial while being ‘good’ – timing. Sustainability is rapidly moving up the agenda of governments, companies, and consumers, partially driven by the industrial aspect – poor availability of raw materials and components and shortages in the supply chain. Fairown is just in the right place and benefits from a business model and a highly relevant product offering that appeals to environmentally conscious brands and consumers today.”
The importance of building a product will be useful for everyone
Daryl Holman Jr., founder of Revival said: “When we think about this at our company, we ask two main questions, is this a product or service that we would use ourselves? If it isn’t we, build something that we would. The second question is does this product or service make consumers more money or help them save what they would otherwise be spending?
“A lot of what you see in the fintech for good space is mostly products undoing harms or removing barriers that the current financial industry has already been doing. We aren’t too dissimilar in that regard. The commercial opportunity is charging for a portion of the value you create; whether it be in the form of saved money or additional income.”
Fintechs need to ensure financial inclusion despite lack of representative data
Kareem Saleh, founder and CEO of AI fairness solution FairPlay said: “A lot of people have been historically left out of the financial system because there is not good data about them, or the data is not representative. Fintechs can be commercial while also being ‘good’ by accepting the fact that there are populations that are not well represented in the data, and that reaching those communities requires better math and alternative data.
“One technique we see showing a lot of promise at FairPlay is fairness through awareness, where models trained with protected status information are able to be more predictive of outcomes for borrowers from historically disadvantaged groups. This technique allows lenders to reach customers that they couldn’t before, at acceptable levels of risk.”
Being equally ecologically and fiscally sustainable is key
Monica Eaton-Cardone, founder of chargeback management solution Chargebacks911 said: “We need to stop acting as though being ‘good’ and being ‘commercial’ are mutually exclusive. Instead, we need to recognise that fintech is more of a balancing act.
“Being ‘good’ doesn’t mean exhausting all revenue to make a solution eco-friendly. After all, what’s the point of building a company’s that’s ecologically sustainable if it’s not fiscally sustainable? It’s more about gauging trade-offs, and determining which trade-offs are worth it. What actions will ultimately benefit the most people in the end?
“Basically, we need to flip the script. We’re accustomed to seeing things only from one perspective, whether that’s from the boardroom, or from the total outsider. We need to examine every situation holistically, consider every available viewpoint, and make them equal parts of the equation.”
Identifying and solving customer problems
Geoff Brown, cofounder and CEO of payments platform, Highline Technologies commented: “Any fintech with plans to do good must also include plans to be commercial, and having a commercial service or product purposely designed to do good will always be better than a copycat. Companies can start by identifying a specific problem for their customers, one that can be dramatically improved to offer a better customer experience and/or reduced cost.
“Additionally, as the adage goes, we are often judged by the company we keep, so collaborating with other, likeminded fintechs that are focused on serving similar interests and customer segments is important, too.”