Finding a Purpose – Fintech’s Midlife Crisis

Author: Krzysztof Grzeszczuk, Senior Innovation Consultant, NetGuru
Krzysztof Grzeszczuk

Fintech is going through a midlife crisis and needs a new manifesto. This was the opinion expressed by Ghela Boskovich, founder of FemTechGlobal, at FinovateEurope 2022 recently – an opinion that struck a chord with me. Having spent 30 years working in financial services, I’ve seen many transformations taking place, and feel the current one might be the most interesting yet.

Held in London in March, FinovateEurope 2022 was the first “non-virtual” conference I’ve attended in more than two years, and it felt good to be back. As ever, the highlight of the event for me was the demo section, with participants given seven minutes to present their latest products – everything from portfolio tracking and wealth management tools to visualization and AI analytics solutions.

In addition to these, I attended several panel discussions, one of which in particular stood out for me. Entitled, “What do we all need to go away and think about?”, the panel took a hard look at the state of the industry, asking searching questions such as “What is the purpose of what we’re doing?” and “What have we done that matters?”

“Most banks had a purpose when they started, three hundred years ago, but they have lost this on their way,” suggested the Finanser.com’s Chris Skinner. “How,” he asked, “can we deliver to stakeholders, not just shareholders?”

Jamie Broadbent, Head of Digital Banking and Innovation at RBS International, claimed that the banking industry was changing, arguing that, while banks need to make profit, they have had a genuine transformation around purpose.

A transformation taking place

Throughout my career in banking, I’ve witnessed the birth and growth of fintechs, and I’ve seen innovation from established institutions. It’s all about looking to the future.

Some say, for example, that decentralized finance (DeFi) and Web3 will change everything, while others will point to the metaverse as the way forward. Personally, I think time will tell. What I do believe, however, is that many people are currently rethinking the way they live their lives – particularly in light of the pandemic. The last couple of years has seen a rise in the number of people leaving their jobs to seek something more meaningful.

This search for “meaning” or “purpose” is omnipresent. While profit will always be a key objective, we’ve seen in other industries how values such as a business’s impact on the environment or the local community can become an equally important driver.

This is nothing new, of course. These themes have been discussed for some time, but was this genuine self-reflection by businesses concerned about their impact on the world? Or was it simply PR and marketing – the result of wanting to attract younger, more socially aware consumers?

Though PR stunts are not uncommon, there has been a visible shift in attitudes in recent years, and not only among consumers. Founders of companies – especially younger founders – think about the world they’ll be living in in ten or 15 years’ time, and they want to have a positive impact on that world. It’s one of the reasons for the growing popularity of ESG (Environmental, Social, and Corporate Governance) reporting among businesses across most industries, although it’s not the only reason.

A necessary shift

At FinovateEurope, a panel of VCs said they were making the shift toward ESG performance and investing in startups based on their potential impact rather than promises of future growth. However, despite directives such as the EU’s Sustainable Finance Disclosure Regulation (SFDR) making it mandatory for financial institutions to disclose their ESG credentials, there are, as yet, no common standards for ESG reporting.

That’s no reason for companies not to focus on their impact, though. It’s a necessary shift. Increasingly concerned with issues such as climate change and diversity, customers will choose to buy from vendors based on how sustainable they are and what their impact is. What’s more, with $649 billion pouring into ESG-focused funds worldwide in 2021 – up from the $542 billion and $285 billion in 2020 and 2019 respectively – it’s clear that a company’s purpose matters more than ever before.

Even if some don’t yet believe it, the market will soon force companies to move in that direction. Indeed, tenders and RFPs often now contain questions relating to sustainability and impact, demonstrating that such issues are no longer just the concern of a few dedicated enthusiasts.

They’re no longer a PR stunt either – greenwashing simply doesn’t wash with consumers. They ask questions, they look for information. And that information is very easily found. It’s vital, therefore, that fintechs are transparent about their purpose and their ESG credentials – they have to practice what they preach.

Concerned with the future

The pandemic was a revolutionary moment for society. Many of us believed we were going to change the way we lived. Has the financial industry undergone a similar revolution? Does it now understand its purpose?

Profit will always be the number one goal for a business, but it’s time now to make strategic decisions influenced by other KPIs. We must shift our focus from shareholders to stakeholders. Those who don’t will either be eliminated by their competitors, or forced to change by their customers, their investors, the regulators, or the media. It’s time to look at the real potential, not just the promise, and put sustainability and social awareness at the heart of what we do.

While vizualization solutions, advanced AI analytics, and big data may be key when discussing the present, and the future of the sector, so too is purpose. There’s a definite shift underway toward greater concern about the ethical aspects, social responsibility, and sustainability of what banks and fintechs do – about the impact they have on society and the environment.

In hindsight, my decision to leave a career in banking and join Netguru – a Certified B Corporation – fits with this trend. Being still closely tied to fintech and banking, I now have the opportunity to build both on my past experience and on projects related directly to sustainability, as well as other sectors. This gives me a whole different perspective and… a purpose in my everyday work. Whether you call it a midlife crisis or something else, taking the time to ask “why?” is usually a good thing, both on a personal and professional level. Wouldn’t you agree?

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