Fintech Trends of 2021 Part 3
“64 percent of Americans say that a company’s primary purpose should be making the world better” - McKinsey & Company
Our third and final instalment speaks to the larger sense of purpose consumers are demanding from the marketplace. There are uncanny parallels between the social universality being embraced (particularly) by younger generations and the increasing technological universality or connectivity that we’re achieving.
For equality and injustice, it’s a holistic approach; the demand that all people and entities should play their part in symbiotic progress. For tech like the IoT, it’s strikingly similar; all things playing a part in a symbiotic process, the sum of the parts enriching the whole.
In the sector of Fintech, this gives us both greater expectation, as well as greater tools to meet that expectation. Financial service providers need to balance the need to meet the objectives of a business; namely, profit, while honoring these calls. Importantly, technology can help to complete this aim. As we mentioned last week, RPA is becoming more widespread; not only does it truly give clients curated support in navigating finances, ticking the first box, it does so with minimal bottom line impact for the company, ticking the second.
With only 27 percent of customers viewing their financial services institution as being fully customer-centric, it’s about time to take advantage of all Fintech has to offer. Whether it’s through investment or ingenuity, you’re going to want to jump on this train.
Inclusion & Community Reinvestment
According to the World Bank Group’s Global Findex Database, 1.7 billion adults don’t have a traditional banking account, whether from a financial institution or a mobile money provider. Cue an ingenious solution from IDEMIA, the largest provider of driver licenses in the US, at 75% of coverage. It’s called Converged Card, and it integrates a payment card, underwritten by Mastercard, with a state-issued license or credential. This means that access to financial services will finally be immediate for most citizens. As a huge plus, it’s going to be a more convenient, quick and secure way for the government to disburse benefits and funds to those who need it most.
This technology could be a more widely adopted solution by different providers in different countries to provide access and service to those so used to being excluded.
Beyond economic disparity is the sharply apparent racial disparity. A stark demonstration of inequity is from McKinsey, which states that “as of 2016, the [median] black American family had total wealth of $17,600—about one-tenth the wealth of the median white American family, which stands at $171,000.” When you stop to really let that soak in, it’s appalling. Access to financial services that are robust for savings, security and investment are essential for bridging this gap.
A heavyweight statistic for you? The top six banks have never had a Black or female CEO.
Smart and conscientious entrepreneurs are aware of this major gap. Greenwood is a start-up backed by angel investors to help bolster and give back to Black and Latinx communities in the United States. Every sign up means that five meals are given to a family in need; you can donate to nonprofits through small-change round ups, and each month, Greenwood endows a Black or Latinx small business owner with a $10,000 grant. It’s the perfect product for those who want to be socially responsible, contribute and escape the opaque communication of traditional big banks.
On April 20th of this year, they announced a partnership with Mastercard, which provides not only a payment processing provider, but a partnership for reinvestment in education. Together with Greenwood, they’ll launch a daily podcast addressing gaps in financial literacy, with the objective of empowering communities of color beyond systemic barriers. When word starts to spread, just like with Monzo, it’s going to be pretty hard to steal back the competition they’ll win with integrity. Monzo incentivized with transparency and customer respect; Greenwood is doing it with empowerment and contribution. As long as they get their customer-first process right, it’s already a superior choice.
These kinds of solutions are the way of the future; their values reflected in the choices younger generations are already making today. Consumers know how to see through ad campaigns now; we’ve gotten used to the narrative. Big banks haven’t proved safe; they’ve proved disloyal, out of touch. Consumers are learning to trust each other again; grassroots-style. It’s quality and equality of access which will serve as success markers for this sector of Fintech in the future.
Slower to rise, but sure to have a longer-term growth and impact in Fintech, are solutions for sustainable investment. Consumers are demanding ever more social and environmental conscientiousness from their providers. A Dentsu Aegis Network study, found “92% of global customers stated they thought their bank should actively contribute to preserving the environment, and 87% said they wanted credit and debit cards made out of eco-friendly materials.”
Many ventures are already pursuing environmental impact outcomes through diverse models. Yova, an AI-driven financial system, helps customers develop and maintain sustainable investment portfolios. Their vision is to make contributions that have positive impacts, without compromising client returns. Founded in 1995, Globalance was the first asset manager for sustainable investments. They’re still going strong today, stressing that this kind of money management is not only responsible, it’s logical.
The truth is that the statistics on global warming are not set. The Intergovernmental Panel for Climate Change (IPCC), effectively the most respected global authority on climate change, has six different outcome scenarios for sustained levels of carbon emissions. Some are disastrous, some are not. However, it’s a huge and common mistake to appropriate the data to say that climate disaster is not certain, and that everyone is making a big fuss. Because once emitted, the greenhouse gases at the heart of the concern can’t be taken back. We don’t have a globally adaptable solution for carbon storage just yet. So even if it’s a wildcard best case scenario, it’s best to mitigate now something that can’t be taken back later.
The smartest businesses in Fintech will realize that investments in impactful solutions can be hugely profitable in the years to come, as awareness and care spreads, the younger generations come of age and green solutions are pursued in the biggest way yet.
The concept of third-party applications having open access to your data, across your financial service providers, with your consent. Immediately, this sounds like a risky, unnecessary and bad idea. However, the premise is that with data shared across institutions, you will be able to have curated, specific recommendations in one place. We’re not talking about your bank being better able to peddle you a credit card because they’ve seen your other statements. We’re talking about one app being able to consider all of your income and expense streams, and tell you what your ideal budget should be for a property purchase.
Open banking relies on blockchain technology; encoded data which is one unbroken chain of information. It’s built upon, not changed. As such, if anyone tries to corrupt or change the data, the entire chain is affected and it’s immediately rendered invalid. Through Application Processing Interfaces being opened to third parties (APIs), data is shared without needing to share account credentials, which renders the exchanges more robust. Advocates believe that open banking will lead to better information, literacy and deals for consumers in a more competitive market. Others believe it would lead to a concentrated market, with room for insider threats.
Either way, the thought that you could have an app which tells you where you should open a savings account based on your needs and the interest rate, then effects the change for you, hassle-free, sounds pretty good to me. And it will sound pretty good to consumers, too. Once trust begins to build further in this sector, the convenience and integrative aspects will woo many a client to tick that little T & C box.
Thanks for checking out our Fintech Trends for 2021! If you’ve got a hot idea for something special to enter the market, don’t hesitate to reach out to our team at Synic. We’re experts in building robust and design-driven software for businesses.