Historically, the ethics of traditional banking have been be murky to say the best. Its modern image has been striving for a more ethical leaning, but modern audiences are finely tuned to the scramblings of latecomers. This is where fintech has the advantage. Banking ethics, our own personal ethics, modern changes in ethics, all of these have an impact on day to day running of fintech companies and can be used to strive for a truly ethical industry. And they should be at the heart of every one that enters the big bad world of business. So what does the modern world of ethics look like for the fintech industry?
Changing ethics in society
According to a recent CB Insights report: ‘More than any other generation, millennials are interested in the idea that their investments will have a positive global impact when it comes to sustainability and climate change’.
Ethical impact investing has become more popular year on year and millennials entering the world of money have a lot to do with that. And with fintech on the rise, the two will inevitably go hand in hand. That means that the more ethical fintech companies are, the more attractive they will be to the next generation.
Ethics change generation by generation. Not so dramatically that we are horrified by the ones that came before us, but certainly enough to feel differently about certain subjects. It’s clear that millennials are going to feel differently about the way their banks operate than older generations. This is the perfect opportunity for fintech brands to show off how they are different. Or, as CB Insights put it, ‘Fintech companies should…begin preparing for a reality in which millennials are the dominant spenders in society.’
Ethics as a starting point
Every fintech has the opportunity to build on ethics, but there are fintechs who have sprouted totally from a desire for ethical behaviour itself. These fintech companies are not just adding ethics as part of a wider structure, they come from ethics itself. MoneeMint, for example, has the high aspiration of being ‘the UK and Europe’s first completely digital ethical bank’, which aims to deliver financial services to its customers ‘which are ethical, transparent and service the need of the end-customer’. The British bank Triodos Bank offers the country’s first biodegradable plastic debit card.
There are many other examples, but this is where fintech companies have the jump on traditional banks. To start from the beginning means being able to centre ethics at the heart of what the industry does.
Ethics as a legal point
So what are the authorities doing to cement ethics in fintech? There are codes of ethics being created throughout the world and throughout different groups in the fintech ecosystem. There’s the Association of Indonesian Financial Technology (Aftech) who has launched a code of conduct for fintechs in peer-to-peer lending. An Australian AFIA Online Small Business Lenders Code of Lending Practice has created a code to improve transparency and ethical behaviour in small business lending fintechs. UK Finance, in partnership with Linklaters, has created an ‘Ethics in Banking and Finance’ online guide for banks that it hopes is taken up by fintech companies as well as traditional banking.
The legality of ethics is, again, a whole different debate, but it’s interesting to note that official bodies are creating ethical guidelines for fintech companies to follow. It’s clear governments and industry leaders would prefer fintechs in their regions to be singing off the same ethical hymn sheet.
Is fintech more ethical?
In the nicest way possible, banking does not come to mind if one is asked to think of a list of the most ethical industries. Its long-standing presence in our history makes it inevitable that everyone — from the newly banking generation all the way back to when our ancestors started leaving their earnings with an institution for safekeeping — has had a bad story to tell about banking. Whether that’s a risky investment gone wrong, a bank going under, a watch of The Wolf of Wall Street, a crooked insider trader, or a single incorrect digit in a bank transfer meaning money goes missing, there’s something bad about banking out there for everyone to discuss.
This is where we ask the thorny question: is fintech more ethical than traditional banking?
Fintech is not ‘inherently’ more ethical than traditional banking, it’s all to do with the people and the structures that make it up. Of course people are still culpable of being, well, people. But its entire existence as a new industry relies on the trust earned from its customers. Fintechs want to do better than those that came before. Fintechs want to be there for people who have been left behind by banking’s shortcomings.
Fintech also has one big anvil hanging over its head: its customers can go elsewhere. It’s an industry that requires its customers to get on board, and if they decide to leave because of bad practices and unethical behaviour, they can’t really get around that. Customers will leave and take their money elsewhere. Investors will take their funds to less difficult opportunities. That combined with the upcoming generation of ethically minded millennials, there just isn’t as much of a legacy for fintech companies to fall back on. If they don’t behave in the expected way, they might simply just die.
The great thing about fintech is that it’s a clean slate. Legacy banks are weighed down with a history and a structure that proliferated and incentivised bad behaviour — to an extent they still do. Fintech has a perfect opportunity for better ethics right from the beginning.