FinTech as a force for good

Kids, they say, grow up quickly and nowhere is this more true than in FinTech. Barely five years ago, the phrase wasn’t even invented. Now it is the collective noun for billion dollar enterprises, a principal theme of government and central bank agendas, and a topic responsible for millions of column inches of news print.

One of the most encouraging signs of the industry’s maturation is the direction the conversation is now taking. At this year’s Innovate Finance Global Summit, held at Guildhall 10-11 May, amongst all the talk of open banking, blockchain and AI, a recurring theme of the keynote addresses and panel discussions was the role FinTech needs to play in distributing wealth and creating a fairer global society. There was none of the brutal capitalism that has defined the growth of the financial services industry over the last two hundred years, and which ultimately led to its near downfall in 2008.

Tim Berners-Lee, who has the honourable sobriquet of ‘inventor of the internet', summed up the challenge very well when he said: “Every time we make an advance with the internet, we widen the gap between those that have access to it and those that don’t. This is an ethical responsibility that the developed world needs to address and FinTech, which links together finance and technology, can be at the heart of the solution”.

According to Berners-Lee: “the challenge is now to build a society on top of the web rather than a web on top of society”.

Across the globe, 50.4% of the population are without internet access and more than two billion people are without access to bank accounts. This leaves them compelled to operate in a cash based system that makes them prone to exploitation by employers who disregard minimum wage legislation, national insurance contributions and tax. They are forced to pay high payment charges for services that are engineered to be slow when sending money back to desperately needy families and access to credit is, of course, a non-starter from anything other than predatory lenders. While we have seen the problems that occur in the developed world when access to credit becomes too easy, the absence of a credit system entirely is not desirable either. And as for insurance, no chance.

Chandrin Nair, CEO of the Hong Kong based The Global Institute for Tomorrow, challenged delegates to think beyond how we can order and pay for pizza in nano-seconds and address how we can build homes for 50m people at a cost of ￡5,000-￡10,000 each. “We need to ask how finance and technology can challenge our economic model and merge to serve the world at large” he said. In Nair’s view, challenges around lowering costs and improving productivity are secondary as they only affect 15% of the world’s population, when the majority haven’t had their basic needs met.

To dismiss such thoughts as the dreams of an idealist is easy, but the theme was in action all around the conference. I particularly enjoyed conversations with Ian Dillon, co-founder of Now Money, which is creating current accounts for migrant workers in the Middle East and Chiwete John-Njokanma, CEO of Fint, that is bringing peer-to-peer lending to millions of cash starved micro-businesses in Nigeria.

The mighty Mastercard was talking of its goal of bringing financial inclusion to 500m people rather than global domination. Mark Barnett, president UK and Ireland division, said: “No longer is it good enough to just serve shareholders and existing customers. We have to make a contribution and do good in the world”.

FinTech has the potential to improve financial literacy and widen access to financial services for low-income families and communities across the globe because the emerging technologies allow services to be delivered at very low cost and, therefore, profitably. Capitalism isn’t completely dead. To realise that potential, however, it needs the right hard and soft infrastructure to be in place, which was the theme of Mark Carney’s, speech to the International FinTech Conference at Old Billingsgate on 12 April. Hard infrastructure refers to things like internet access and broadband; while soft infrastructure is the rule of law and regulation.

Which brings us back to Berners-Lee’s point about access to the internet being at the heart of the problem. Absence of competition, out-moded codes of market conduct and inadequate payment infrastructures all contributed to the global financial crisis and similarly stand in the way of financial inclusion, but without the basic plumbing in place, billions of people will remain left behind. Central governments therefore need to work with corporations to make global internet access a reality; central banks need to open up access to settlement architectures and encourage innovation by their approach to regulation, and FinTech’s need to evolve solutions with lower transaction costs, faster speed of delivery, more choice and keener pricing.

That this seems to be the collective will of all concerned is truly encouraging.