How FinTech firms are moving towards an ethical future

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Whether it is the widespread economic turbulence that has given rise to problems with the cost of living and rising interest rates or the fact that the eyes of the world are now on sustainability and better business practices, ESG is one of the biggest concerns for every consumer. faces the brand in 2023. According to a 2021 report by Deloitte, one in three consumers have stopped buying from specific brands due to ethical and sustainability-related concerns.

However, it is not just consumer brands that are joining in recognizing the importance of environmental, social and governance; it is also becoming a top priority in global financial markets. And it is the Fintech sector that is leading the charge for a more ethical financial industry.

Fintech breakthrough

Fintech, a portmanteau of financial technology, is a sector that integrates innovative technology within financial services, essentially to make the sector more efficient, accessible and user-friendly. Everything from digital wallets to online trading platforms and even blockchain and cryptocurrency fall under the financial technology banner. What unites companies and startups operating in the space is that they are leveraging the latest advances in technology, from artificial intelligence to big data, to disrupt traditional banking and financial institutions.

Meanwhile, the massive success of blockchain and cryptocurrency has in turn spawned new offshoots of fintech. Blockchain powers the DeFi sector, of which many fintech startups are also members, while cryptocurrencies have spawned GameFi. This digital gaming sector includes everything from online casino games to NFTs and the metaverse.

As a predominantly digital sector, fintech is well positioned to have a positive impact on environmental and social issues. It wouldn’t actually be too much of a stretch to say that fintech has the potential to create significant social and economic breakthroughs, especially since a number of new start-ups have built ESG practices into their business models.

We have already witnessed the meaningful changes that the sector has been able to create in recent years to “the global without banks” with innovations such as inclusive financial services and mobile payments. Now fintech can unlock all the more complex aspects of ESG and set a plan for the future of ethical finance.

Fintech companies at the top

Fintech will play a leading role in promoting ESG principles in a number of ways, not least including the implementation of ethical and sustainable practices, the use of green technology and collaboration with similar ESG-focused partners. Several companies and start-ups have already started setting up the changes they want to see in finance and beyond. Here are three fintech firms at the head of the ESG masthead:

Algbra, the ethical challenger

To Algbra, the “ethical challenger” startup, the concept of ethical finance is more than just end products; it is the way a company operates as an organization. Algbra has instilled a value and ethics policy in its brand, which ensures that customer funds are used and invested in a positive way. Fizel Nejabat, co-founder and COO, has confirmed that the firm “gets all our key partners to join this policy of values ​​and ethics”, to ensure that the end consumer knows that their money is not contributing to industries that can negatively affect society.

The challenger bank was launched at the end of 2022 after 18 months of development and has already received widespread attention for how it conducts business and values ​​customers. A London-based start-up, Algbra is also helping to mobilize new banking demographics by complying with Shariah regulations – ensuring that the UK’s Muslim community is no longer an underserved market. Furthermore, it offers carbon offsets on its mobile app and recently launched a donation feature that allows customers to donate to multiple charities right from the app.

Clim8, Green Investment

In 2023, not all traditional investment platforms and methods will be aligned with ESG. For example, portfolios that include large technology companies such as Apple or Amazon may not necessarily appeal to users who want to feel like they are influencing their investments. For fintech investment platform Clim8, for fintech to make a difference, it needs to offer users specialist, active investment options.

This “green investment” startup takes an active role in addressing climate change by allowing users to invest in a portfolio of companies that are already tackling the problem. The sectors that users can invest in via the platform include clean energy, sustainable food, clean technology and smart mobility.

Ophelos, Debt solution with a social purpose

Ethical financial technology also extends to the opposite end of the spectrum of investment and banking opportunities. Ophelos, a London-based startup founded in 2019, has positioned itself as a debt resolution company with “a social purpose”.

According to CEO and co-founder Amon Guaiumy, there has really been little innovation in the debt collection sector in recent years, leading to “under-invested and under-developed” departments and agencies as well as strained clients. Ophelos aims to provide a more socially focused experience for customers, while at the same time making the process of bringing together financial areas more efficient for the businesses involved. The firm uses machine learning to determine the most effective communication method, ensuring an ethical and individualized approach.