This month [October 2024], I had the pleasure of attending Innovate Finance’s conference, ‘FinTech as a Force for Good’ in Westminster, London.
The day consisted almost entirely of a continuous stream of panel sessions – most of which I attended. I walked away with too many factoids and interesting opinions to possibly detail in one article. I’ve shortlisted five key areas where fintech can promote positive social and environmental initiatives.
(Many thanks to Innovate Finance for hosting the event and the various panellists for sharing their thoughts).
Before the event, I thought ‘financial resilience’ just meant an individual’s ability to withstand economic disruption – sort of synonymous with being ‘fiscally responsible’.
Financial resilience is a far more complex topic that the panellists did a great job unpacking. Though they never defined the term, an article in the Journal of Social and Economic Development describes what determines financial resilience. They said, ‘The three main determinants of financial resilience considered are financial knowledge, financial inclusion and socio-demographic characteristics’.
The panellists argued that banks are duty-bound to help their customers gain and maintain financial resilience. When banks provide accessible and good-value products (such as savings accounts), consumers can choose the products that match their diverse needs – rather than being forced to select ill-fitting, opaque financial products.
The investment session was a non-stop encouragement fest for those wishing to invest. UK attitudes towards money management are changing, with fewer moves towards saving and a stronger inclination towards investing. ‘Confidence’ was a word that came up a lot in the context of leaping into the investment world.
Understanding the risks and benefits of investing online is a key part of digital financial literacy. Spearheaded by Innovate Finance, the new UK government faces calls to maintain our competitive fintech landscape. A core strategy is inclusion, or recognising that digital skills and access to investment are no longer for the wealthy alone.
One insight from the session is the panellist’s conviction that most people have the same two financial goals – retirement and buying a house. They argued that inclusion in financial services means making investment accessible to everyone, as it can be a powerful tool to achieve these goals.
We’ve written about credit decisioning extensively and were grateful to see our insights reflected – that AI can be an efficient tool for bolstering social inclusion in credit sources. AI can navigate alternative data sources to verify creditworthiness for underrepresented groups traditionally denied credit. The main setback is maintaining explainability. It’s not enough to approve or deny a loan application: AI-powered decisioning engines must be able to provide the data on why they have made that decision.
For machine learning developers, shortcutting around AI’s ‘black box’ nature provides what could be politely deemed an interesting challenge. As modern AI models have millions and billions of parameters (or training variables), deducing how they arrive at specific decisions can be daunting and complex. For lenders, however, maintaining explainability is a necessity.
That’s where the panellists introduced the phrase ‘information genetics’, which is not a common phrase. The panellists used the concept of information genetics to refer to how decision-making can be traced back through credit risk assessment systems.
If AI indicates that an applicant will fall into arrears, its reasoning process must be traceable. During this session, the panellists discussed the importance of transparency, but no concrete solutions were proposed – until the panel session on blockchain, anyway.
Blockchain is one of the most exciting yet misunderstood technologies of the future.
To many – myself included – blockchain, crypto and open banking co-exist in a conceptual tangle. Seeing a strong attendance with an audience eager to untangle those terms was gratifying.
An initial enthusiastic discussion about crypto evolved into a more nuanced conversation about the relationship between blockchain and AI. Where AI’s transparency and explainability fail, blockchain’s secure and decentralised architecture makes it a viable solution.
Of course, the discussion was theoretical. There are very limited case studies on how blockchain and AI might collaborate. However, with UK-based blockchain fintechs like Bitfinity and Pimlico receiving significant funding, we anticipate blockchain becoming more ubiquitous and widely understood in fintech spaces over the next few years.
What I particularly appreciated about this panel (called ‘Leading the Fight Against Financial Fraud’) is that none of the panellists held back about the devastating consequences of fraud. Each panellist offered alarming fraud statistics (see the list below). I would argue that it was one of the most compelling panel sessions at the conference.
Some of the facts and research the panellists discussed about fraud include:
The panellists framed financial fraud as an epidemic, with technology needing to evolve quickly enough to fend it off. Of course, preventing fraud with tech is potentially a Sisyphean task, considering that technological advances also fuel financial fraud.
Perhaps the best aspect of ‘Fintech as a Force for Good’ was how consumer-focused it was. The panellists and moderators were careful to lead back to real use consumer cases. One investor even asked, “And how does this benefit the consumer?” after the startup Driverly pitched their insurtech solution.
Furthermore, seeing so many pitches focused on green technology in the ever-fascinating Pitch360 was refreshing. Most of the ‘forces for good’ in the panel discussions focused on governance and social inclusion. Sustainability initiatives may seem less glamorous than the mystique of blockchain or the buzz surrounding AI – but no less important for ambitious global climate change goals such as Net Zero 50 (which did not go unmentioned).
One positive social change we've always advocated for is social inclusivity. Underrepresented groups, lacking access to traditional banking services like bank accounts, are being isolated within our increasingly cashless society. Well-trained AI can be foundational in building technologies that can automatically review alternative factors of creditworthiness (e.g. the history of rental payments). Enterprises with the resources to build these AI-powered technology stacks can gain plentiful returns as they can widen their customer base, improve the performance of their decision-making mechanisms and, most importantly, fight marginalisation. In essence, powerful AI, when embedded into meaningful financial projects, can have a permanent positive impact on individuals and communities.
Overall, ‘Fintech as a Force for Good’ was an interesting blend of the practical and theoretical, financiers and fintechs, and corporate and consumer perspectives. My only real complaint? It would have been nice if the coffee had been left out between sessions – caffeine would have been a great renewable energy source.
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