Rediscovering the Value System of Fintech: Charting a Course Forward

In the world of financial technology, fintech, innovation has the power to empower individuals, promote transparency, and enhance efficiency. However, recent years have witnessed a disconnect between fintech’s potential and the actions of its prominent players. As we navigate an era filled with economic challenges, it is imperative for fintech innovators and investors to realign with the core values of their technologies, rekindling the industry’s promise and rebuilding trust. Below is the path to reclaiming fintech’s value system, highlighted by Yuval Brisker at TechCrunch.

A glance at recent fintech controversies, from crypto fluctuations to meme trades and the FTX debacle, reveals a frustrating truth. Many of these incidents involved applications and business models that held immense potential to make a positive impact. The rise of cryptocurrencies and blockchain technology, designed to usher in transparency, trust, and resilience in financial transactions, suffered a significant reputational hit due to the actions of a company, FTX, which subverted these very ideals.

In today’s landscape, the term «social finance,» synonymous with financial empowerment through innovation, has become intertwined with Reddit traders, Robinhood, and the GameStop short squeeze. Meanwhile, fintech founders receive little recognition for enabling young people to open retirement accounts. The irony reached its peak when Silicon Valley Bank, known for backing over 70% of fintech IPOs between 2020 and 2022, fell victim to America’s first-ever fintech-enabled bank run, raising questions about the efficiency of markets.

Given these challenges, it is no surprise that federal bank regulators have made it exceptionally difficult for fintech companies to obtain a bank charter.

To revive the industry’s tarnished reputation, fintech companies must seize the opportunity presented by the current economic climate and focus on applications that mitigate the impact of inflation and financial uncertainty on workers and consumers. Here are three crucial areas where financial technology can lead the way:

• Empowering Individuals through Smart Financial Choices

One innovative approach is the concept of «buy now, pay later» (BNPL), which enhances consumers’ purchasing power during online transactions. Some companies are reimagining the traditional «layaway plan.» Consumers can set aside funds for desired purchases, accumulating the full purchase price over time. This technology also enables employers to offer their workers higher interest rates, allowing them to allocate a portion of their salary, which they may not immediately require, into an account yielding 4% or more.

For individuals lacking high-yield accounts, this service can make a substantial difference. Importantly, if they find they cannot proceed with the purchase, they will have saved money and avoided the predatory terms often associated with BNPL services.

• Fostering Financial Literacy through Technology

The social finance backlash has highlighted the importance of coupling empowerment with education. Fintech companies, often operating in the hybrid fintech/edtech space, are pioneering improved financial literacy and education models and technologies—a subject frequently overlooked in traditional education systems.

Innovative incentive models are central to these emerging players. Companies like Austin-based Zogo collaborate with financial institutions to deliver short-form financial education content, offering tangible incentives to make learning accessible and rewarding. Furthermore, organizations like the School of New Africa (SONA) are developing gamified learning platforms, combining African history, culture, language education with financial literacy instruction.

Fintech has the potential to be a powerful force for good in the financial world, promoting empowerment, transparency, and efficiency. To realize this potential, fintech innovators and investors must return to the fundamental values that underpin their technologies. By refocusing on applications that address the pressing economic challenges faced by individuals and emphasizing financial education, the fintech industry can regain the trust it needs to fulfill its promise.

In this endeavor, fintech leaders should remember that their actions today will shape the financial landscape of tomorrow, creating a world where everyone can access the benefits of modern financial technology.