How fintechs and banks can build inclusive and sustainable growth together
Access to funds is a key component of development, and fintechs are a tool of economic inclusion.
More equitable access to funds and banking is key to development, reducing inequalities both within and among countries, and supporting the UN’s Sustainable Development Goals. Fintech disruptors can rapidly expand access to capital and may therefore be seen as the world’s sustainability accelerators.
“In a lot of emerging markets, the infrastructure doesn’t necessarily exist to distribute value,” explains Cat Rüst, Global Head, Technology at Standard Chartered.
“I think a key role fintechs can play is to digitally transfer value to different places. It’s about being able to bring people and things into the financial ecosystem in ways that weren’t possible before.”
The levelling effect of fintech includes bringing financial services to a bigger proportion of the global population, helping smaller businesses to access funds and channelling capital towards efforts to tackle climate change.
Driving financial inclusion
The Philippines-based mobile payments firm GCash1 is one example of a fintech helping the unbanked and underserved to participate in the financial ecosystem. Its CEO and President Martha Sazon says that the convenience of fintech allows people to experience what financial empowerment and inclusivity truly means.2
The GCash app allows users to domestically remit money, pay bills and shop online. However, the fastest rising use of the app is for access to financial services. And that means many more Filipinos are not only banked, but are also insured and can access credit more easily.
According to GCash, its microinsurance offering GInsure now accounts for a third of all new insurance policies issued in the Philippines, while the GCredit service is disbursing an average of almost USD20 million per month.3
Financial services in the Philippines have typically required multiple physical documents, minimum balances, fees and a credit history, excluding many first-time applicants for bank accounts, loans or insurance.
Now, more SMEs have access to funds and can also protect their core business, while the digital data collated by fintechs can also help inform the development organisations looking to responsibly offer more microfinance opportunities.
Standard Chartered has supported GCash by providing credit, cash management services and bridge financing, as well as access to its banking infrastructure.
It has also been involved in some more technical projects, for example being a partner bank for blockchain cross-border remittance solutions offered through a partnership between AlipayHK and GCash.
“Through combined efforts towards more automated ways of working, to the extent allowed by regulation, Standard Chartered has been a key partner of GCash’s operations. The support through various lines, including credit lines, bills purchase lines and stand-by letter of credit, assists GCash in its day-to-day operations,” says Martha Sazon.
Reinventing trade finance
Innovation around trade and trade finance is another way that fintechs can help drive sustainability and inclusivity.
One example is the fintech firm Linklogis4, which is a leading supply chain finance technology solution provider in China.
Standard Chartered has partnered with Linklogis through the creation of the joint venture Olea, a digital blockchain-enabled trade finance platform which aims to bring together institutional investors and businesses requiring supply chain financing.
“Olea aims to disrupt today’s trade finance model by matching suppliers’ financing needs with alternative liquidity from investors seeking a compelling asset class linked to the real economy,” explains Amelia Ng, who is heading up Olea for the SC Ventures division of Standard Chartered.
“It is uniquely positioned to reinvent trade finance and be a force for good,” she says, highlighting the importance of trade to economic growth and poverty alleviation, especially in the aftermath of the COVID-19 pandemic.
Capital for carbon removal
As with trade finance, the internet is key to making sure that sustainable growth is spread more evenly. For example, payments technology firm Stripe not only helps established businesses to enter new markets, but supports new internet companies and entrepreneurs to get started and grow their revenues.
Alongside this economic levelling up, the Stripe Climate initiative is enabling businesses to channel funding into emerging carbon removal technologies. Stripe recently launched its climate removal tool – Stripe Climate – which lets online businesses redirect some of their proceeds towards ten emerging technologies focused on reducing carbon footprints. The kit also lets companies tout their climate credentials to customers – something that may become increasingly important in shopping habits.
With the value of environmental, social and governance (ESG) assets forecast to exceed USD53 trillion5 by 2025, policymakers and investors are now taking note of the sustainable finance capabilities of fintechs. For example, Singapore’s government has this year announced its intention to become Asia’s leading ‘green fintech’ hub.6
“Financial institutions have an enormous role to play in this effort. In addition to purchasing carbon removal as part of their own corporate sustainability programmes, they can be a major distributor of carbon removal to institutional and retail clients,” Nan Ransohoff, Head of Climate at Stripe explains.
“Large financial institutions, like Standard Chartered, have an enormous opportunity to collaborate with organisations like Stripe Climate on shared climate goals,” says Ransohoff.
Asia has a particularly strong stake in efforts to tackle climate change, with 19 of the 25 cities most at risk of rising sea levels being located in the region – seven in the Philippines alone7.
Supporting the disruptors
While fintechs have huge potential to help the world to become more inclusive, progress can sometimes be hampered by necessary safeguards such as compliance and cybersecurity. The transition of fintechs from growth-focused disruptors to sustainability-first global actors can be complex and requires additional support from the established banking sector and its infrastructure.
Banks can lend a hand by leaning on their existing global networks. For example, Standard Chartered has many years of experience in complying with regulations across the globe and is now partnering with industry bodies, payment systems and technology companies in order to make sure transactions are more transparent. It has also joined the Enterprise Ethereum Alliance to help agree best practice and standards for blockchain.
In addition, Standard Chartered can help fintechs align or improve their ESG objectives within their own processes or raise the right forms of capital by drawing on its expertise in in green or sustainable markets. This could include, for example, brokering agreements to use renewable energy companies, raise a green loan for onward distribution or execute a sustainable supply chain.
“There is so much value to be gained from leveraging the brilliance of disruptive new fintechs. Our combined strength makes a much bigger impact,” explains Rüst. “Whether it’s compliance, local market or banking expertise or disruptive models and energy, the whole is greater than the sum of the parts.”
It is these sorts of partnerships that will allow the full sustainability potential of fintechs to be realised.
As existing fintechs mature, and new ones emerge, the next step will be to make sure their much-needed innovation is harnessed for good, so that the world can address the immense challenges it faces – economic, social and environmental.
1 https://www.gcash.com/business
2 https://www.prnewswire.com/news-releases/financial-services-are-experiencing-massive-adoption-in-the-philippines-through-gcash-301386344.html
3 https://www.prnewswire.com/news-releases/financial-services-are-experiencing-massive-adoption-in-the-philippines-through-gcash-301386344.html
4 https://linklogis.com.hk/#/
5 https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/
6 https://fintechnews.sg/49672/fintech/behind-singapores-ambitions-to-be-asias-leading-centre-for-green-fintech/
7 https://www.weforum.org/agenda/2021/08/southeast-asi-weather-extremes-global-warming-2030-ipcc-report/