Fintech for good: Purpose, profit or both?

Of Mike Peplow, CEO of Paynetics

The UK has found itself on the brink of another recession, it has been 15 years since the last one and the news is hitting consumers hard. Banks are on the back foot as consumers are now more than ever ready to move their finances elsewhere to find financial institutions with products that will meet their changing needs.

With this in mind, we must ask ourselves how fintech led banks to re-engage with consumers after the 2008 financial crisis, and can they do so again?

By 2021, Accenture found that two-thirds (63%) of consumers want to introduce more sustainable products and services across all aspects of life, including financial institutions. With social impact and responsibility becoming increasingly important to consumers, should all fintechs consider being a “force for good”?

How do we define “doing well” in the fintech world?

Generally, we can assume that a fintech has a few specific characteristics, including agility, capability

to adapt, focus on collaboration and interest in challenging the status quo. Fintechs are

often set up to focus on the individual rather than being ‘one for all’. Having all these

attributes usually mean they are “good” at being a fintech, and potentially a fintech that can

do “good” too.

It has been found that over half of consumers are more likely to buy financial products from

providers who demonstrate sustainable values. Therefore fintechs that are ready and

willing to demonstrate sustainable, ethical and targeted products with an end goal

greater than mere profit will correspond to consumers’ wishes, and be more attractive to

current market.

To be targeted and profitable

Putting purpose above profit requires fintechs to have a social purpose other than that

make money and just be a “good” fintech, and we know consumers are now

actively looking for this purpose when choosing their financial institution.

At the same time, modern consumers value experience over things and want fintech

be more human-centered. Fintechs often create competitive advantage by being able to tailor

offers for niche markets. Consumers appreciate the personal approach, feel that they are

supports positive change, and is increasingly looking for companies that coordinate better

with their values. If another financial institution does this in a better way, they will not hesitate

to change supplier.

In short, Fintech thrives on providing services and a way to deliver those services

is attractive to its target customer therefore out performing its competitors who offer a more

generalized proposal.

Fintech frontrunners

Fintechs tailor an offer to meet a customer’s financial needs, and some already have

started to make a bigger difference.

A current example of a fintech setup with more than just money in mind is Sibstar. Their app

and cards are designed to help you manage your money on a day-to-day basis. The extra support

given enables those living with dementia to maintain their financial independence, while

give those around them security. Not only is this a financial service, but also

supports an underserved community that needs help with their money.

Paynetikk is also part of this group. Recently, with Phyre, we have developed a mobile

payment application for IOS and Android that allows charities easily

deliver funds to those displaced as a result of the Russian invasion of Ukraine.

Fintechs are also already known for promoting financial inclusion via services such as buy now

pay later (BNPL). The short-term financing opens up credit lines for those who did not want to

usually have access to it. Having access to credit allows consumers to build their credit

credit score and qualify for more traditional types of financing. BNPL must be

brought under regulatory oversight to better protect users, but what can’t be

rejected is that BNPL has made access to short-term, affordable credit much more available.

When is a fintech truly a force for good?

We know what makes a ‘good’ fintech, but a fintech that is a force for good must be

now wider than the immediate financial communities need. Fintechs can be innovative

in their approaches and therefore have the ability and potential to help people in need.

We are already seeing examples of this where fintechs have encouraged financial inclusion,

launched sustainability measures and helped customers in times of crisis.

It’s a “double whammy” here! I would argue that fintechs only have what it takes to be fintechs

had a very beneficial effect. By entering the market with new products and services

fintechs have caused the big banks to respond with new ways of working, improved customer care and a much faster approach to introducing new products. Even the biggest one

Bank wants to be seen as fintech!

The fintech landscape of the future

We’ve seen many fintechs already start to showcase their ability to create financial products that aren’t just about money, but are designed to serve a greater purpose for the wider community. This will soon be the norm, as fintechs search for innovative approaches to stay competitive.

Purpose and profit in unison will be front of mind for banks and fintechs. Focusing on customers and their needs and wants has never been more important. Any organization that loses this focus will risk seeing an increasing number of consumers move to suppliers that can better align with their values.