I’m writing this on a plane to Geneva, Switzerland. This week I’ll be participating in three separate but intermingled events:
- A United Nations Data Innovation Lab, organized by the UN Innovation Network (UNIN). This is the fifth workshop in a series, and is focused on data visualization.
- The Artificial Intelligence for Good Global Summit, hosted by the International Telecommunication Union (ITU) and the XPrize.
- Co-facilitating a small workshop with the Global Humanitarian Lab, focused on creating an open source system for Monitoring, Evaluation, Accountability, Learning (or MEAL, because as you’ve seen, we love our acronyms) for use in “community-enabling spaces” like makerspaces, libraries, and community centers.
I’ll be wearing a few hats this week:
- A friend, supporter, and a former member of the UN Innovation Network. The UNIN is a collective of many of the innovation units working across the UN system.
- Co-Chair of Greece Communitere, a project that is creating resource centers for refugee families and Greek residents in economic crisis.
- And, of course, Co-Founder and Chief Design Officer of Trabian.
You might be asking, “How do these connect back to Trabian’s work? What does any of this have to do with new product development in the land of financial technology?” (I suspect even some of my team members might be asking the same question.)
Working across these different spaces (and often bouncing back and forth between roles throughout the same day) has helped me see that our community of brilliant financial tech practitioners have an opportunity — some might even say a responsibility — to use our resources and creativity to make a positive, systemic impact on some of humanity’s greatest current challenges.
If you scan conference agendas across the mainstream fintech space, you’ll likely see sessions focused on convenience, scale, lean methodology, automation, risk-management, operational efficiency, user experience, consumer behavior, new architectures and tools for systems integration, and a range of fascinating disruptive technologies like blockchain, artificial intelligence, emerging payments platforms, and more. You will likely see far less conversations, especially in the private sector, focusing on the impact financial tech can have in areas like social justice and sustainable development.
The Global Goals for Sustainable Development
Last year the United Nations released the 17 Sustainable Development Goals(SDGs). The SDGs are a set of high-level goals, each grounded in a series of underlying performance indicators. The SDGs are designed for integration and participation at every level of society and industry across the globe. Where the Millennium Development Goals largely failed to engage the world(because they were pointed at governments, not people), the Sustainable Development Goals have been translated into performance guides for businesses, curricula for schools, games, activities, workshops, and on and on. They were designed with a diverse set of on-ramps, to be a common language and measurement system for everyone.
All of this spun out from a major moment of truth: the only way to achieve complex, global goals — like ending poverty, abolishing hunger, moving to renewable energy, and reducing inequality — is through a shared, world-wide, cooperative effort where everyone is invited, has a role, and participates.
Financial Services Design = Systemic Architecture
The consumer financial system has an especially important role to play here. The flow of capital — our relationship with money and the systems that govern it — affects every part of our lives and the lives of our global community. As builders in this space, we are architecting the new systems, metaphors, incentives and behaviors, and, in turn, the range of possible outcomes.
Last year Stefanos Fatiou, Chief of Environment and Development Division at the United Nations Economic and Social Commission for Asia and the Pacific, argued that the financial sector, above all, should be leading the charge:
“If there is one sector we should ask more from, it’s the finance sector.”
Even so, very few financial services organizations have operationalized a commitment to sustainability by creating programs, products, and policies that address environmental and social risks.
Why? Both the question and the answers are complex. But I’ll submit a few potential reasons:
- There’s a perception that the economics of a business driven by social impact aren’t as good as one that is only focused on the financial bottom line.
- Many of the business models, strategies, products, and technologies that can drive this sort of operating model are still emerging. Becoming a social-impact-driven business requires experimentation and innovation, and that comes with its own set of perceived risk and political baggage.
- Even with a clear vision and plan, adapting existing business models is challenging, especially in a highly regulated environment like consumer finance.
- Apathy, myopia, and/or fear from current leadership are real: If retirement is on my horizon, and things seem to be going just fine as they are, I am less likely to try something new that could ruin my outgoing legacy.
Enter: The Non-Institutional Set
Most of the issues we’ve discussed so far have been focused on institutions. And this is where many of the challenges can become interesting opportunitiesfor financial tech providers and new product development teams. We have the opportunity to think systemically, but work incrementally: one piece at a time. This is where the “Unbundling of Financial Services” and the power of open APIs double down as major assets in our ability to drive financial services into an impact-driven space.
But we have to pick up the torch, which means:
- Establishing peer groups and communities of practice focused more on causes and desired outcomes than sectors and tools.
- Celebrating and studying the examples of projects getting it right. And — whenever it’s possible and responsible — using open standards, open data, open source, and open innovation so that others can learn from and build on those successes.
- In the same way that we work to understand our competitive advantage, understanding the specific ways in which we are uniquely positioned to create a type of meaningful social impact in the world through our work.
Is Sustainable Development encoded in FinTech?
In the inquiry report, “Fintech and Sustainable Development: Assessing the Implications,” the United Nations Environment Programme (UNEP) engage in some metaphor-making acrobatics and describe what they call “The Double Helix DNA of FT4SD”…I know, but stay with me. The report compares the fundamental attributes of fintech and sustainable development to DNA bases, each encoded with value, and each having a connected and complimentary base-pair. Visualized, this related set of fundamentals looks like this:
These attributes individually create stronger conditions for disruption and impact. When connected the FT and SD pairs open up new sustainable business models.
Some hypotheticals: [Example 1] by enabling more access (to services) and decentralizing (out of institutions), communities can benefit from more financial inclusion. [Example 2] AI-driven efficiency and automation can reduce cost and increase speed of international money transfer.
In practical terms: [Example 1] could create economic access for thousands of refugees and migrants. [Example 2] could lead to a remittance system that redistributes wealth across the world more quickly and cheaply than anything on the market right now.
And it should be said that each innovation comes with potential risks in cyber security, job loss, and reduced oversight. But nevertheless, the space to experiment, refine, and create alternative futures is here, ready.
Four Immediate Opportunities for Impact
What are the major opportunities right now? The SDG Matrix for Financial Services — a tool put together in 2015 by the UN Global Compact and KPMG International — identified four areas for financial service companies “to create value for their business while creating a more sustainable and inclusive path to economic growth, prosperity, and well-being” (emphasis: mine).
The four opportunities include:
- Initiatives increasing financial inclusion,
- Investing in, financing, and insuring renewable energy and infrastructure projects,
- Leveraging risk expertise to influence consumer behavior, and
- Positively influencing environmental, social, and governance practices of corporate clients (and SEG groups for some credit unions) and investments companies.
We can see these manifesting in many innovative fintech companies on the market today: M-Pesa and Bit-Pesa both make payments more accessible and secure; LearnVest provides protection and control of finances with scalable planning and advice services; Peer-to-peer lending platforms like Diangongand alternative risk assessment tech like ZestCash have created new and efficient ways to distribute capital that break free of the black box of traditional credit agencies.
We see examples of leveraging risk to incentivize more sustainable behaviors: through solidarity-based systems like the Mission Asset Fund’s lending circles, or in Walkmore (acquired in 2014 by GTE Financial) connecting financial rewards — like better rates and access to credit — to healthy behaviors tracked through wearable electronics.
The SDG Matrix also echoes the value in open data, open standards, and open innovation by recommending financial tech companies (and institutions) “share non-proprietary risk data, risk analysis and risk management expertise to inform public policy and practice.”
And in case it’s not already clear: This is not a conversation about financial providers doing charity work, operating at a loss, or becoming non-profits. These are differentiated and profitable strategies. We have to throw out the tired old notion that doing good and making a profit are in opposition. Social enterprises like Vancity, lending platforms like Moeda cooperative crypto bank, and user-owner (not institution-owned) financial identity systems like BanQu all understand that the core of their social mission is also key to their profitability.
The future of fintech is business models where scale, profitability, and social impact are symbiotic and feed each other.
A blended lens
And so I’m walking into this week’s series of events with a hybrid perspective. One where the principles of sustainable development, market drivers like product differentiation and innovation, the dynamic playground of exponentially-growing technology, and the unique ability of the consumer finance to effect systems and behaviors on many levels simultaneously, all blend together into the big exciting question: “So what are we going to do about it?”
Author: Brent Dixon