Building Ethical Practices Into FinTech
With current regulation of the financial industry currently not fit for purpose let alone for FinTech; and increased prevalence of big data, the FinTech sector has a wide range of potential ethical dilemmas on global society. FinTech may be able to manage compliance better than the traditional financial infrastructure. It is rising from the aftermath of consumer dissatisfaction over such matters. However, the sector is still vulnerable to the development of unfair services regarding interest rates, loans, credit, and even insurance. Ultimately, it is up to those in the FinTech sector to responsibly enhance these services while taking advantage of simplified compliance. But, how can we ensure this compliance prevails and stop the previous greed that occurred from suffocating it.
Recently, companies have paid millions, if not billions, in legal fees, outside investigators, compliance consultants, and fines. BNP Paribas has paid $8.9 billion in United States sanction-related charges. This is drastic compared to most other global companies, but many fall into such situations. Unfortunately, the trend may continue with globalisation and the growing need to prevent fraud and laundering. This is particularly pertinent for FinTech firms that become global so quickly that their infrastructures and compliance procedures might not be able to keep up with the pace. Even FinTech giants like MoneyGram have fallen victim unethical players prying on their size and hiding just out of reach. But, we have to mention that the company handled the situation expertly.
Banks are adapting by improving upon reporting through increased data collection and organisation. But, these solutions create more bureaucracy and were a problem to occur, slows down effective means of tackling it. The burden is ultimately on the representatives of the FinTech industry to handle such issues responsibly. FinTech can aid in globalising business by helping companies reduce compliance costs. It can also have benefits such as simplified fundraising and real-time transactions. However, it is crucial that the capabilities of FinTech are channeled according to strict ethical standards. How these are created and standardised is another matter. For now, it will rest in the hands of each firm in embedding ethical practices – this is both exciting and worrying to realise. Will they be innovative? Or will they go the way of the old-guard in financial services?