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From Cary SpringfieldInternational banker

It’s fair to say that today’s global financial landscape is very different from that of, say, 20 years ago. There are several reasons for this, but few are as serious in 2024 as the attention the financial world is now paying to issues that go beyond the profits from financial decisions such as investing and lending. And that ultimately means considering the impact that the activities of banks, fintech (financial technology) companies, investors, customers and all other financial actors have on the world. Fintech for Good (F4G), an emerging segment of the global fintech industry, focuses on integrating social and environmental factors into the structure of fintech strategies to encourage and accelerate the development of sustainable financial solutions.

According to a definition of a relevant organizationFintech for Good “is a global movement for change in financial services that promotes accountability, responsibility and sustainability,” with networking events, “hack” days, workshops, company searches and accelerator programs for young fintech companies organized to support and advance this goal. “Our vision is one where finance is used for more than just profit; a world where finance is also used to deliver environmental, social and governance benefits for a sustainable future.”

This decade has seen a strong focus on existential threats to the planet, including climate change, and social issues such as rising poverty and inequality, financial exclusion and human rights violations. Companies, financial institutions, governments and individuals are doing much to prioritize these issues, often within the framework of environmental, social and governance (ESG) factors. The connection between fintech and ESG is now also attracting a lot of interest from stakeholders: companies are increasingly opting for environmentally friendly, socially responsible options, lenders prefer to support clean energy projects and reduce their dependence on fossil fuels, and consumers are more inclined to make positive and responsible purchasing decisions.

For fintechs, this is perfectly understandable. After all, the development of the industry was largely driven by the ruthlessness of the traditional banking sector, which was seen as overly greedy for profit – and invariably did so at the expense of ordinary consumers, the well-being of society as a whole and the health of the planet. This ultimately led to a massive financial crash that destroyed global economic prosperity, exacerbated poverty, dramatically increased existing inequality and significantly slowed sustainable development in much of the world. In response to the crisis, flexible financial startups emerged, attempting to use technology not only to improve people’s lives but also to address social and environmental problems by promoting financial inclusion of the vast unbanked populations around the world and improving access to affordable clean energy technologies.

Since supporting the world’s poor and marginalized communities is one of the most fundamental goals of the global fintech industry, it seems only a logical step for this sector to formally embrace the principles of ESG, sustainable finance, responsible investing and lending, and impact finance. And it seems that in 2024, investors are increasingly willing to deploy their capital to support the development of this young movement.

Solarise Africa is just one example of a sustainability-focused fintech company working for the common good. With a pan-African Energy-as-a-Service (EaaS) model, the Kenya-based company’s distributed energy services not only offer various types of financing solutions for solar and other renewable energy plants, but also full-service solutions, including the design, construction and maintenance of solar plants, in close collaboration with key strategic partners across the continent.

One such project involves installing a 1.3 megawatt peak solar array with an annual generation capacity of 2 gigawatt hours (GWh) for a recycling plant in South Africa. The goal is to reduce the plant’s carbon emissions by 1,800 tonnes per year – equivalent to the carbon sequestered by almost 31,000 tree seedlings in 10 years. Another venture aims to provide a university in Rwanda with clean electricity for its teaching buildings, making “smart classrooms” a viable outcome. The project also aims to provide electricity to the adjacent sports facility, reaching up to 22,000 students daily.

Another pensions-focused fintech for good is London-based Jarvis, which recently raised £1.8 million in a seed funding round led by venture capital firms Ascension VC and Cornerstone Venture Partners, with additional participation from Tokio Marine Future Fund. The company aims to provide workers with clear plans for retirement. “At the heart of Jarvis is a movement to revolutionise employee pension planning and provide innovative pension solutions for modern employers, contractors and individuals,” Jarvis explained. “Our core is to provide clear, actionable insights into the retirement process. Rather than navigating the maze of pension jargon and abstract numbers, we focus on the tangible, the personal: ‘When can you really retire based on the life you want to lead?’”

Through Fintech for Good, the industry has the potential to transform the financial sector while providing opportunities that benefit society as a whole. Deloitte’s “Fintech for All, Fintech for Good” report, produced in collaboration with Tiresia-Politecnico di Milano, Fintech District and FTS Group, expects the movement to enable a “democratization of finance” that promotes access and engagement by a greater number and diversity of people who can ultimately inspire a more sustainable and inclusive definition of finance.

“In addition, fintech could catalyze emerging ‘green’ finance and address current and relevant concerns about social and environmental issues,” the report says. “The potential that fintech can bring to sustainability and the intersection between fintech and sustainability and related issues deserves attention and further exploration. As a result, there are many opportunities for financial services providers to be a driving force for change.”

The study also provides a comprehensive overview of exactly how Fintech for Good can be integrated into the financial sector to increase social value. It highlights five key innovation opportunities in this context:

1. 1. By developing a taxonomy for the Fintech for Good movement, fintech companies can leverage “the combination of the intrinsic value that comes from using technology to meet a social need and the additional targeting of underserved people and markets” to create more social value. Fintech companies can also address the inefficiencies and flaws of financial markets to create value and bring innovation in areas such as services, internal operations, access to new consumers and untapped markets.
   2. Fintechs can use technology to break the trade-off between profitability and impact, especially by using technology to develop profitable business models while addressing critical societal problems. “It is recognized that technology is inherently diffuse and can help reach larger audiences and thus more beneficiaries more efficiently,” the study says.
   3. Fintechs can also collaborate with established companies in the financial sector, making themselves more attractive as partners as they look to expand their influence. This requires established companies to look at fintechs from a fresh perspective and work with suitable fintechs in various business functions such as sustainability and innovation to achieve partnerships.
   4. To create social value for local beneficiaries, fintechs that aim to do good through context-specific applications should leverage the technology – this is especially important considering the key differences between developed and emerging markets. While fintechs doing good in developed markets largely focus on the specific needs of certain population groups or less creditworthy individuals, they often enable “people at the bottom of the pyramid” to access essential services and promote development opportunities in emerging markets, such as education or credit.
   5. By analyzing Fintech for Good’s technology deployment over several years, the study found that advanced technologies such as artificial intelligence (AI), biometric recognition and blockchain are increasingly being used. This means that these fintechs are increasingly able to use these technologies to create positive impact. Their mastery of these technologies makes these fintechs attractive to established financial market participants interested in collaborating, as well as impact investors and venture capitalists. “In fact, they promise to combine the generation of positive impact with scalability and profitability over time, a combination that has not yet been achieved,” the study says.

The knock-on effects of a thriving fintech-for-good movement with viable business models could be significant, inspiring the banking industry to develop its banking-for-good model. “In the context of the last 50 years or so, tech for good, ethical banking and ethical fintech are still in their infancy, but they represent an opportunity to capture (at least some of) the enormous upside potential of technology to dramatically improve the lives of everyone on Earth,” explains Brian Harkin, lecturer at Bayes Business School and founder of the Galapagos Framework (a digital transformation framework) that helps leaders and organizations transform the way they manage digital transformation. “Ethical banks may not currently be making the huge profits of their more traditional counterparts, but given the increasing number of banks and financial institutions that describe themselves as ethical, sustainable or socially responsible, and the significant growth in assets under management (AUM) of these firms, it may not be long before they are seen as genuine competitors.”

According to FintechCashier, Fintech for Good is the future of finance. “As the world becomes more connected, the need for sustainable and inclusive financial services will only continue to grow. Fintech has the potential to address these challenges and create opportunities for social impact and sustainable development,” the UK-based payment gateway company wrote in a February 2023 LinkedIn post. “However, to realize this potential, we must ensure that Fintech For Good is based on ethical principles, transparency and accountability. We must also develop regulatory frameworks that balance innovation and risk management and ensure that Fintech For Good serves the interests of society.”