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.
Having already heard from a range of companies from the industry about what fintech for good means to them, today, The Fintech Times looks to further explore this. We now hear from the Vulnerability Registration Service, Republic, SoftServe, Cushon, BlocPal International, Relay Payments and Autonomy Network about what sets a ‘fintech for good’ company apart.
Practical solutions for real social impact
Helen Lord, CEO of the Vulnerability Registration Service (VRS) said: “What sets ‘fintech for good’ companies apart from the rest is action and real, practical solutions. They don’t just talk about better financial inclusion, they have prioritised and already taken the steps to make it happen. They go beyond meeting the basic requirements for customer care, communication and inclusion, and are working with real social impact in mind. The customer is at the heart of what they do.
“Fintech for good companies have the opportunity to lead the charge among many of the consumer-based issues we’re seeing in the financial services industry today, including the need for better identification and fair treatment of vulnerable customers. For far too long there has been lots of talk and no action and regulators are losing patience especially as the cost of living crisis bites.
“With the introduction of the FCA’s ‘Consumer Duty’, the onus is on the financial services industry to better identify and provide appropriate services to their vulnerable customers, thus avoiding unnecessary harm to individuals in vulnerable situations – financial or otherwise. While many financial services organisations and fintech’s are struggling to come to terms with what the new guidance demands, fintech for good companies are already taking a proactive stance on the matter. They’ve seen what others have yet to realise – that the treatment of vulnerable customers is not a competitive issue, but rather, we need all our resources brought together to tackle this problem and help the individuals in need.
“By taking on the challenge through integration, collaboration and data sharing, fintech for good companies are open to partnership and working with data providers like VRS and others to help the financial services industry better serve and support vulnerable customers right now. Collaboration and partnership is what sets them apart and will ensure change happens.”
Measuring ‘good’ by impact
Kyle McCormick, chief of staff at Republic commented: “Peter Thiel’s ‘atoms or bits’ framework is similar to how I think about discerning whether or not a fintech is truly ‘for good’. I ask myself – if the company succeeds in its mission, what would the world look like? Would the result be truly transformative? Or would it be derivative—driving slight efficiency or incremental impact?
“Republic, for example, is an atom. If we succeed, you could invest in everything around you, perhaps even on a tokenised basis. Your go-to coffee shop, a new game you’ve become addicted to, the pre-IPO space company you follow in the news, or even your favorite artist’s new song—all investable, on Republic.”
Now is the time for ‘fintech for good’ companies to take action
Nick Mellios, chief executive officer of BlocPal International explained how people’s attitudes towards societal issues makes this the time to take action: “We’re in a pivotal time in society where people care much more deeply about societal issues and expect companies to step up to support these causes and lift the global economy. Currently, systems are broken; what makes a difference is when companies lead with purpose. There’s a solid opportunity to create a market supporting the ‘good’ and not just taking a piece of the existing market. This creates a win for both the business and society.
“An example of this is that currently, there are 1.7 billion adults who are excluded from the formal financial system and don’t have access to proper banking services. Affordable access to financial services offer communities and small business owners the ability to generate income, manage irregular cash flow, invest in opportunities, and work out of poverty. BlocPal’s mission is to unlock accessible and affordable financial services for all and is the driving force behind our business, product, and investment decisions.
“BlocPal is seamlessly addressing the issue of financial accessibility head-on by helping the developing world create technology and services that focus on the communities that need it most. BlocPal is taking financial services out of bank branches and into local shops and businesses with a merchant-centric model. Consumers can now easily and affordably access and move their money, invest and save, top-up phone plans, borrow funds, and much more. Ultimately, these services will drive financial inclusion and uplift the developing world.
“Companies must reimagine the possibilities of how people transact, invest, and thrive in the digital economy. By promoting financial inclusion, businesses can ensure that customers are empowered to communicate and transact more conveniently and engagingly.”
Fintech for good must be clearly communicated
Anton Kaidorin, financial services practice lead, North America, at SoftServe said: “Fintech for good companies offer clear messages with their business models that allow people to understand how they operate. It communicates how their way of handling business improves financial inclusiveness, equality, diversity, or climate factors for a specific community or country.
“For example, many fintech buy-now-pay-later companies play significant roles for the unbanked. The same goes for fintech banking services provided through telecom services. You hear ‘Mobile as a POS’, and you understand that a company offers financial inclusiveness for unbanked people by introducing cashless operations to the community.
“Such services were vital during the covid-19 lockdown in India, for example, when people struggled with the lack of cash in many regions. Elsewhere, we have social-driven programs in the microfinance sector which help millions of people resist poverty and create new businesses.
“Integration with a community’s specific values is an essential differentiation factor for ‘fintech for good’ companies. It means they share and respect the traditions and culture of the community; they don’t try to transform them but adjust their products accordingly.
“Another vital differentiation is the creation of new opportunities for the people they serve. Your fintech service should not just support consumption; it should create new ways for people to realise themselves in economic activities that have not been accessible to them. If, in addition, you educate and guide people, your fintech company truly is ‘fintech for good’.”
Recognising the problem and creating change
Steve Watson, director of policy and research at Cushon said: “From bringing millions of financially underserved people into the financial system, to sparking economic growth and creating jobs, fintech as an industry has been a force for good in the world. But aside from the collective success of the industry, what really sets a fintech company apart as ‘good’ is the ability to recognise issues that exist within society, and to then take actionable steps towards changing them for the better.
“As a workplace pension and savings fintech, with sustainability at our core, we recognised that there are two fundamental issues with pensions. Firstly, pensions have a detrimental impact on the environment – on average, a UK pension pot finances 23 tonnes of CO2 emissions every year. To put that into context the average Brit produces between six and ten tonnes of CO2 a year. Secondly, engagement with pensions is extremely low which leads to many not saving enough for a secure financial future and being unaware that their money is having a negative impact on the environment.
“Our research shows more than two-thirds (68.6 per cent) of employees are concerned that their company pension could be investing in businesses that are contributing to climate change and that people would engage more with their pensions if they knew their money was invested in issues they cared about. In January 2021, we joined the dots and created an environmentally friendly pension that members can feel proud of. Through our app, members can engage with and learn about their pension, which in turn increases the likelihood of members bumping up their contributions and saving more for retirement. We even enable members to vote on ESG issues they care about in the companies they have investments with.
“Enhanced engagement will lead to more environmentally-conscious members, increased savings for retirement, and ultimately a greener pension industry.”
The importance of transparency and building trust
Spencer Barkoff, co-founder and president of Relay Payments said: “A ‘fintech for good’ company, at the core, cares about doing right by its customers. It develops technology and employs ethical business practices to build trust and best serve its customers, and works to make the world a better place in the process.
“Transparency is essential. For Relay Payments, that means no hidden fees or long, confusing contracts. Unfortunately, this hasn’t been the norm in the freight and logistics sector. In fact, hidden fees, surcharges and misleading marketing have led to governmental scrutiny and lawsuits.
“Similarly, a ‘fintech for good’ company builds trust with customers and partner organisations by taking cybersecurity and privacy protection seriously. Being SOC1 and SOC2 compliant assures the companies we work with that we are committed to reduce the risks of exposing sensitive information to bad actors to mitigate risk.
“Technology deployed smartly can increase efficiency throughout the economy. In our sector, we are helping to make the supply chain more efficient, speeding products to store shelves while reducing transportation costs. A more efficient supply chain will help to curb inflationary pressures while reducing energy waste.”
Providing permanent and sustainable benefits
James Key, CEO and founder of Autonomy Network said: “A true ‘fintech for good’ company sets itself apart by not just providing benefits to the target group of people, but the very best of them provide a permanent and sustainable financial benefit to the group that the group has a say in.”
“This is where blockchain technology and decentralisation really shines – typically the group owns tokens in some system, where the token both provides a financial benefit and allows for voting how the system behaves or changes (similar to voting by shareholders in a company). The fintech company that creates this system is not in control of the system, since the token holders are the ultimate controllers, and removes all middlemen, allowing the group to receive the full benefits of the system.”
“For example, there are many people in parts of Africa that don’t have access to electricity grids, but have solar panels and can provide electricity to each other in a peer-to-peer way, where the electricity is represented by tokens that the participants generate with the solar panels and are then able to vote on how the peer-to-peer electrical system evolves, such as setting prices or determining how the network will expand.”