There is billions of pounds being funnelled into fintech and it is usually this that makes the headlines. But sometimes I feel like I lose track of what fintech actually offers.
It sometimes feels that the fintech industry is just a sector designed to make money, when actually it is democratising money.
Fintech is providing financial services that are out of the control of the big banks that used to dominate the sector. As a result it is opening financial services up to more people, some of which would have had no access via traditional channels.
Charlotte Crosswell has contributed an opinion article to the blog on the very subject.
Look beyond the headlines – fintech is about tackling every day challenges
By Charlotte Crosswell is CEO of Innovate Finance
Much has been made about the dramatic rise of fintech in the last few years. Record-breaking investment, strong employment figures and trailblazing expertise has enabled the UK to become a world leading hub at the heart of the innovation revolution changing the face of financial services.
But beyond the excitement around investment figures, it is clear the rise of purpose driven fintech solutions has wider ramifications for society as whole.
At times, this impact has been overlooked, but scratch beneath the surface and there are numerous examples of businesses building innovative products that solve some of the most challenging problems facing consumers and businesses today.
At its core, fintech is transforming the way in which we exchange and allocate resources. This is about improving our ability to cooperate and coordinate at scale, which relies on monetary systems that govern commerce, exchange and value. The start-ups which appeal to investors have a clear vision of how they want to change the world, reaching across society to provide real opportunities for people to improve their lives.
As a result, fintech is a sector driven by innovation and inspiring leaders who are helping solve the most pressing issues facing us all, using innovation to fix our financial system and open it up to more people.
Fintech is making a big impact in three key areas: inclusion, choice and transparency.
There are currently 1.5 million adults in the UK who are unbanked, with 40% of the working age population with less than £100 in savings. At present, reliance on payday loans is a reality for many, as are the astronomical interest rates that can often mean borrowers remain in a poverty cycle.
The knock-on effect is that a significant portion of the population is financially excluded from a process that most of us take for granted. This in turn creates poverty premiums, with service providers putting the most financial strain on those who can afford it the least.
This is just one area where fintech is creating workable solutions. Some fintechs have built products which help companies provide affordable, salary-deducted loans for their employees. Other fintechs provide salary-advance services, which enable workers to access their pay as they earn, diminishing the risk of falling into a high-cost debt like a payday loan.
Elsewhere, fintechs are helping consumers build their credit history and credit score, giving people access to a range of financial products and entry to the formal financial system in a way they never had before.
Similarly, fintechs who are utilising open banking are looking to transform the future of financial services, increase competition and create a better consumer experience.
But beyond increased flexibility, fintech is democratising access, increasing transparency and enabling fair finance. Innovation can be used to empower those at the fringes of our economy and society, or those who believe financial wellness and stability is an unreachable goal.
It is also enabling safer and cheaper cross-border transfers, allowing those supporting their families abroad to do so with fewer limitations and red tape. Consumers have been losing millions in hidden exchange mark-ups due to non-transparent pricing models. Digital peer-to-peer lending services eliminate this risk by connecting consumers directly with lenders, giving consumers a clearer view of pricing without expensive overheads, saving them money and empowering them in the transaction.
The UK is at the heart of it all and we are in a strong – and unique – position to continue leading the way. Fintech has so much more to offer the world and we are only just starting to realise its full potential.
Let’s not lose sight of this purpose and its capacity as a powerful force for good.