While technology has yet again been a central topic of discussion at this year’s World Economic Forum in Davos, Switzerland, there has also been a determined focus on fintech and how financial inclusion is key to meeting the UN’s Sustainable Development Goals by 2030.
In conversation with Finextra, Haus of Fintech founder Misha Rao highlights that the recent formation of the Digital Financing Task Force by the UN Secretary General, as well as the need to ensure the financing of the SDGs – which has a $2.5 trillion annual financing gap – “it is time to actively question how we catalyse the fintech ecosystem globally and build coalitions and strategic partnerships that come up with practical solutions and ensure prosperity is widely shared on a local and an international level.”
Rao continues: “We know that digital finance initiatives could add $3.7 trillion to the GDP of emerging economies and organisations including the United Nations, the World Bank, and the World Economic Forum have invested in fintech, believing that it has the potential to create a better world.
“We believe that core areas like the need for resilient financial market infrastructures, enhanced distribution of foreign aid, eradicating poverty, economic and individual rights, and remittances are areas where fintech can contribute most meaningfully.”
40 leading banks from across five continents and representing $16 trillion in assets, are collectively redefining the role played by banks in order to align the sector with the UN SDGs, which have set ambitious targets to deliver a sustainable future for all. As two thirds of worldwide finance is provided by banks, the global banking system will be instrumental in achieving these goals, Rao explains.
“Fintech companies are innovating through new value propositions, including flexible products and better ways to address the financial challenges faced by low-income customers. They are also building the groundwork—including easier digital identity verification, alternative lending platforms, data sharing, and new payment systems— that has resulted to a set of new financial services,” she adds.
With Haus of Fintech, Rao’s mission is “to bridge the gap between the worlds of fintech and organisations that are dedicated to making a difference in the lives of the most vulnerable and underserved communities. By harnessing the resources of the private sector, the reach of the public sector, the expertise of academia and the disruption and innovation of fintech, we are able to work together to bring financial services and products to those who need it most, which drive greater economic opportunity, access to new capital, the creation of new jobs and most importantly give them the opportunity to live a life of dignity and access to economic opportunity.”
Rao will be returning to Davos 2020 to host Innovation for Good: Empowering a Generation of Changemakers, an event on 23rd January hosted by Haus of Fintech and the Financial Innovation Lab at UNICEF, promoting open exchange of ideas and shining a spotlight on those dedicated to determining actionable ways fintech can make a significant impact.
Charlotte Crosswell, CEO of Innovate Finance and speaker at the event, says that the fintech industry is only starting to realise the potential of ‘doing good’ and “we need to continue to help those who believe financial wellness and stability is an unattainable goal.”
Crosswell adds: “This is key to meeting the UN’s Sustainable Development Goals, and ensuring social wellbeing is part of the financial decision-making process.”
Dr. Jemilah Mahmood, under secretary general partnerships at the International Federation of Red Cross & Red Crescent Societies, a Haus of Fintech partner, tells Finextra that fintech “has helped evolve financial inclusion beyond the simplistic idea of having a bank account.
“It has placed financial services literally in the palms of those who were previously marginalised and underserved. But questions remain on the ethics of experimentation and shared value collaboration between humanitarian actors and private partners.”
In 2020, the fintech industry will need to engage an entire system of approaches and reduce the number of siloed innovations that are emerging. “Fintech will also drive the significance of having sovereign digital identities for undocumented populations,” – providing a legal identity for all was promised as part of Goal 16 of the UN SDGs.
Focusing on Dr. Mahmood’s point on “the ethics of experimentation”, while data is increasingly prevalent in the digital world of today, the threat of data breaches, identity theft and fake news is resulting in consumer distrust.
On a similar note, Crosswell also believes that the impact of data bias will remain at the forefront in 2020 and the coming years, but for fintech to thrive as a sustainable sector, this issue needs to be addressed. “The rapid growth and adoption of fintech is uncovering issues around biased data that algorithms are amplifying and multiplying, resulting in discrimination on certain groups of people.
“There is a common misconception that algorithms using computational logic are free of bias. If the base data set used contains flaws, these are replicated repeatedly, potentially having an extremely detrimental impact on the users.”
The solution: ensuring diversity within the developer teams who create algorithms, which will help avoid the discriminatory effects of AI on certain groups of people.
“Financial services firms have always been heavy users of data and this is only set to increase as they get smarter at interpreting the richness of data at their fingertips. We believe companies need to equip themselves with a workforce from diverse backgrounds, nationalities and ages, and ensure their leadership teams (including boards) are aware and ready for the change,” Crosswell concludes.
Haus of FinTech is partnering with the Financial Innovation Lab at UNICEF to host an interactive session at Davos 2020 featuring Henrietta Fore, executive at UNICEF; Marina Krawszk, lead at UNICEF’s Financial Innovation Lab; Gunner Lovelace, founder and CEO of Good Money; Léon Wijnands, global head of sustainability at ING; François de Borchgrave, CEO, KOIS; Charlotte Crosswell and Misha Rao, founder of Haus of FinTech.