Moving Fintech forward: With Fenergo, F10, ForwardAI, Mojaloop and AAZZUR

Fintech is at an inflection point amid rumblings that the industry is “losing its luster”. We have seen companies struggling to raise new funds, reports of falling valuations, fire sales, layoffs and hiring freezes. Some fintechs have closed abruptly, while others have said goodbye before they’ve even had a chance to say hello.

Throughout January Fintech Times, we’re asking industry experts to share how we can move “fintech forward” over the next 12 months.

Today we share the views of Fenergo, F10, ForwardAI, Mojaloop and AAZZUR.

“We need crypto cooperation”

This year, as the authorities come to grips with how to regulate the industry, we must see a shift in approach, warns Rory Doyle, senior economic crime manager in regtech Phenergo.

“This year, we expect global regulators to explore the benefits of blockchain technology in AML regimes,” says Doyle. “It can be a powerful tool for tracking criminal activity, as it can provide transparency and accountability at a scale and speed not seen before. Ironically, the technology that underpins the crypto industry is likely to make strides this year in regulating it. As as the saying goes, if you can’t beat ’em, join ’em.

“Furthermore, if we have learned anything from the past year, it is that governments, law enforcement agencies and financial institutions must work together. This collaborative approach, leveraging technology and data that informs and is actionable, will create a solid foundation for detecting and, crucially, preventing financial crime across the industry.

“However, data privacy requirements are increasing in the EU and the US, which means it will become increasingly difficult for regulators to share information across jurisdictions. These unintended – and problematic – consequences of measures such as GDPR run counter to the regulators’ aim to crack down on organized crime that continues to exploit weak AML regimes. Especially as the financial ecosystem becomes more globalized and AML concerns cross-border, it has never been more important for frictionless data sharing.

“The United States’ proposed establishment of its own beneficial ownership register under the Corporate Treasury Act (CTA) should help with this goal. The recent decision by the European Court of Justice against registries under data protection means that the EU has some transparency issues that may need to be addressed in the future.”

“Climate fintech must prioritize risk management”

Andreas ItenCEO and co-founder of F10, a global innovation ecosystem for fintech and insurtech, expect to see more innovation for ESG-related activity. Especially as firms look to comply with global regulatory standards, and ensure their investment activity is fully supported in terms of sustainability.

“At the global level, there are significant steps to take to tackle the interconnected climate and biodiversity crises,” says Iten. “Significant gaps in reporting and a lack of standardization across the industry have been a consistent problem. Just as the TCFD focused on climate-related action, a Task Force for Nature-Related Financial Disclosures (TNFD) is in the pipeline, with a reporting framework that seeks to identify and assess nature-related risks and opportunities.

“As funding in climate fintech reached a record high in 2022, against a difficult economic backdrop, startups in the space are increasingly coming into the spotlight. As a key priority for 2023, companies will need to take steps to integrate these risk considerations into their strategies, operations and risk management processes.And this is where greater cooperation across the climate fintech industry and larger players is necessary.

“Collaboration can allow innovation to reach the scale required to navigate these regulatory challenges and provide the greatest benefits for businesses in terms of cutting costs and maximizing efficiency.”

“We need to educate SMEs”

Financial institutions and fintech must jointly educate small and medium-sized enterprises (SMEs) about the benefits of what fintech can do for them, suggests Nick Chandymanaging director of fintech ForwardAI.

“Nearly nine out of ten American consumers already use fintech apps and services, but there has not been the same level of products, services and usage in the SMB space due to the complexity of the market. Many studies show that small and medium-sized companies exhibit consumer-like behavior and are still a severely underserved market.

“They have enjoyed better services and products as consumers from the accelerated digitization caused by the global pandemic, and the same level of products is now finally just catching on in the SME space as well. By educating SMEs about the value of fintech and by closing the “expected experience” gap, we can drive more usage, more revenue, and more innovation. This positive loop can ultimately drive technological and economic progress for SMEs and fintechs.”

“The core of any fintech should be to provide value-added solutions for the businesses or consumers they serve. To effectively achieve the latter, the fintech solution must solve a pain point or eliminate points of friction.

“Take 2022 as an example, and the movement towards digital embedded solutions such as money movement combined with a period of market turmoil, I believe that continued use of such solutions in the B2B world will provide businesses with valuable solutions to eliminate unnecessary costs and provide real-time information for to help them effectively manage their working capital cycles, which will deliver immediate results to the bottom line. We achieve the latter through integrated solutions that fintech will play a central role in achieving.”

“Let’s better balance AI capabilities”

Philip Buschmann, founder and CEO of embedded finance company AAZZUR, talks about the importance of regulating AI algorithms.

“AI algorithms have been widely used to make decisions about loans, insurance packages and fraud detection, and by 2023 they will play an even bigger role in the development of financial software that determines who has access to various financial services and how much access is granted .

“When it comes to AI algorithms, fintech firms will need to balance the opportunities that the algorithms provide with the ethics of protecting end users by developing new robust systems.

“In addition, fintech must learn to withstand the shocks and disruptions of 2022 and the upcoming 2023. Fintech aggregators must work effectively within a context by combining location, with product and insight. They also need to be adopted by the mainstream, which requires direct-to-consumer embedded components. Finally, the fintech industry needs to consolidate and serve the mid-to-upper corporate market more holistically and better overall.”

“Fintechs must continue to innovate”

Next year we must continue to move forward with market expansion and product differentiation, says Paula Hunter, managing director i Mojaloop Foundation.

“There are many underserved people around the world who will benefit from the disruptive actions of fintech providers. So instead of the traditional banks and credit card companies being the gateway to the developing world, we will see fintechs being an ongoing disruptive force.”

“The advantage for fintechs is that they will be able to capture market share where other ‘legacy’ companies have not been as nimble or willing to adjust their profits and margins on their services to meet the needs of the unbanked and underserved.

“We will also see increased acceptance and use of open source tools and technologies. Startups understand that instead of building everything themselves, they can leverage open source technology and get off the ground very quickly with products that are already available to them at no cost. They can differentiate on top of that, so it’s an accelerator for people trying to develop new products and services for the market.”