FinTech and the slippery slope

I was having a conversation with a friend recently about where we are with fintech innovation today, how far we have come, but yet, how much further we still have to go. And a question came up that got me thinking: Has fintech gone to the dark side?

Allow me to explain for a minute.

A friend or foe?

“Fintech has reached mass adoption”, as declared by Plaid in their report last year. The sector is on fire, at least from a funding perspective, from payments, personal finance to lending and beyond. According to CB Insights , 2021 was a record year for fintech funding, mega-rounds, unicorns, exits, and more, so much so that fintech accounted for $1 in every $5 of global venture funding.

The fintech ecosystem has certainly created an enormous amount of wealth and a vast innovation economy, at least for some. Dig deeper though and the reality is far more nuanced. Who are the true beneficiaries??

One would argue, fintech has advanced financial inclusion and enabled more people to get access to financial products, which is especially useful for consumers with thin credit files or those living paycheck to paycheck and need quick access to short term credit.?

True. But at what cost??

We have all read about the rise in popularity of Buy Now, Pay Later (BNPL), and the concerns around consumer debt it has sparked. According to the Centre for Financial Capability , almost 25% of UK adults who had used BNPL had failed to pay on time, rising to 35% for people aged between 18 and 34. It now makes up ￡6.4 billion , or 5%, of all ecommerce transitions in the UK, up at least 60% from a year prior. And it shows no signs of slowing: Klarna recently announced a partnership with Chevron and Texaco in the U.S. that would allow users to pay for gasoline in installments.

The increased adoption of BNPL also comes at a time when some incumbents are eliminating bank overdraft fees, and the three major U.S. credit bureaus have announced plans to add information concerning consumers’ BNPL loans on credit reports.

As the saying goes, there ain't no such thing as a free lunch, especially in the world of money.

According to a recent Wired article, companies such as Argyle build the tech stack that allows fintech companies to extract data from payroll accounts — in this case, up to 140 data points, including reputational markers such as “on-time rate or a gig worker’s star rating and deactivation history”, providing not only the financial profile of the consumer, but also additional behavioral and identity information that can be furnished to providers for underwriting or income verification purposes. Such payroll data is a goldmine, with Protocol calling it “fintech’s $10 billion holy grail”.?

Just how much are consumers giving up in the name of convenience (or in some cases, necessity)? How much transparency do we have with regards to what data is collected and how it is being used? What choices do we truly have over our own destiny in this digital world — one that is seemingly controlled by algorithms dictated by humans behind faceless machines??

Behind every credit profile and every social score, is a human story. Can we truly be defined by clicks and digital exhaust??

Is this the best, the best of you?

History doesn't repeat itself, but it often rhymes. When the past becomes the present, are we merely passive observers witnessing the all too familiar tug of war between purpose and profits, indulging ourselves in the false promise of progress, awash in our own arrogance and perceived superiority? Or will we be willing to step up and serve, for a chance to rewrite the narrative, before it’s too late??

As technology plays an increasingly bigger role in the new world of finance, I can’t help but wonder, will things get worse before it gets better??

Perhaps, the true question isn’t about what fintech is, but rather, what it will become; an introspective moment that urges us to look at the roles we play and the values that guide us. It is not about the metaverse or the rise of virtual worlds and NFTs. It is about the soul of our industry. It is about what we enable and the people that we empower.?

Before we dash off to the wondrous world of Web 3, let’s pause for a moment and ask ourselves: What can we do to make sure that we don’t repeat the same mistakes this time around?

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On this week’s episode of One Vision …

A significant amount of money has been invested in FinTech in the past decade; according to CFTE, the FinTech sector is now equivalent to 38% of the banking sector in terms of market capitalization. If FinTech was considered a city, it would rank 3rd as an employer in financial services, after New York and London.?

In a world where we are playing buzzword bingo on a seemingly daily basis, how do we stay on top of the real innovation trends in this fast developing world? And how can we facilitate pathways to these new opportunities and make sure that no one is left behind? As the saying goes, talent is equally distributed; opportunities are not.?

In this episode of One Vision , available via Apple , Spotify , and all other players , Theo chats with Tram Anh Nguyen , co-founder of CFTE , whose mission is to leverage the power of education to create a more inclusive and welcoming new world of financial services. That’s certainly a purpose we can all get behind.?

Give this a listen and let us know what you think by dropping us a review.

“Betting on people: Bridging the gap between fintech and innovation”

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