Fintech and the fight for digital inclusion

Writing in the Financial Times, Siddharth Venkataramakrishnan, highlights the challenge of fintech, online banking and digital payments for those who are digitally excluded.

The Covid pandemic and lockdown accelerated an existing trend towards mobile banking. Mass adoption demonstrates both the potential value of fintech as well as the problems for those who are unable, or unwilling, to bank online or make digital payments.

Siddharth spoke to various experts including Natalie Ceeney who conducted an Access to Cash Review for the Government. Recommendations from the Review have been adopted as policy and incorporated into legislation, including the Financial Services and Markets Bill.

One of the recommendations of the Review was to change the law to allow cashback without purchase. Chris tabled this as an amendment to the previous Financial Services Bill, now Act, with Chris’s amendment as a welcome change to the law. Natalie reiterated the point that “the current digital services available don’t work for everyone.”

Inspired by the Access to Cash Review, Chris has campaigned for something similar focused on digital payments. As Chris says, it is important to avoid thinking one solution will serve all individuals and an ‘Access to Digital Payments Review’ could potentially set up a situation in which you could have financial inclusion driving digital inclusion.

Currently, digital exclusion and financial exclusion, all too often, walk hand in hand. Those struggling to get online are also more likely to be socio-economically deprived.

In the same article Jamie Evans a researcher at the University of Bristol’s Personal Finance Research Centre said, “fintech has the potential to help a lot of people who are financially squeezed, but we have to fund investment in these firms in the right way.”

Fintech is having a hard time in 2022, especially those firms that don’t have the runway of cashflow to see through 2023. With the end of the easy money era, many fintechs are looking carefully at their runways. Supporting individuals who are digitally and financially excluded may be too costly a project for firms looking to prove their worth to investors.

Mick McAteer, founder of the UK’s Financial Inclusion Centre, makes another incredibly important and related point — fintechs serving the digitally excluded should not follow the examples of Big Tech and turn to data harvesting practices for revenues. As Mick said, “whenever you get segmentation and profiling, you get exclusion and discrimination.”

Chris firmly believes this adds up to a role for the Government, both in terms of stimulating innovation and improving regulation. To this end he supports the addition of a ‘must have regard to financial inclusion’ duty to the remit of the Financial Conduct Authority (FCA) and will be tabling other amendments to the bill when it gets to the House of Lords.

Fintech for good needs careful handling Future of Money, Financial Times, October 31st 2022.