Fintech is the future of financial services but there is a certain amount of worries regarding its effects in the banking sector. It is for this reason people are more concerned about the ethics of Fintech. Over the years, Fintech has rapidly become the backbone of the buying and investing habits of the consumers. There are several reasons to it.
- It has been progressively entrenching diverse technologies for everyday use especially in the financial sector which is now more revamped.
- More and more banks and other financial services are now using Fintech in their financial functions and have found innovative and cost effective ways to reach to their beneficiaries faster and in a better way.
- Fintech has increased the avenues of access to these financial services. It has also made the personal information of the customers much more accessible.
- The open Banking APIs has made thing much easier than before as this has also made it easy for Fintech to work with more efficacy especially in the traditional banking data.
- With the help of Fintech it is also very easy for the banks and other financial services and even debt relief sites such as com and others to mine more unstructured data available on the internet could to gain more insights about the new customers.
The banks and other institutions are now more aware of the variances between B2B and B2C perceptions.
The growing concerns
Experts and economists are however worried of the dark sides of digital technologies that are often underrepresented given the current rhetoric regarding the digitization of financial services and products.
There is an ongoing debate in this context that appears to be skewed towards the turf wars between new and old technologies, other competitive factors as well as the obligatory banks and the challenging Fintech. However, they feel that there is less focus on the other aspects that are more important such as ownership and consumer rights on the data.
The Economist raises such ownership issues that are related to the increased digital content used in everyday technology. This includes washing machines, cars, and even sex toys! They opine that:
- If the producers of these items gradually digitized these machines and devices it will embed the rights to the personal data of the consumers in their products and services.
- The symbolic power of the consumer rights and their abilities will be reduced significantly.
- This situation will make the consumers incapable of claiming their rights over their personal data that they are forced to share when they consume and use the products or services that they have paid for righteously.
Since financial services require a lot of security and sensitivity considerations, these topics becomes highly important for this specific sector. This raises concern and calls for a debate for the requirement of proper scrutiny on ownership denouncing that though it is not about to go away but the meaning of it is changing.
It is from this specific vantage point that several ethical considerations for Financial Technology services need to go through a public debate.
Regulations versus ethics
In order to have proper control in the use or exploitation rather of the personal information, there are a few specific regulations in place. The primary intent of these regulations it to prevent the companies to follow any procedure that are unauthorized and exploitative when used to mine sensitive customer data. However, it is interesting to see how the Fintech companies ordain these preventive processes and to what extent.
- Right at the outset, it is required to see how and if at all the current regulations are good enough to exercise the desired control on the Fintech services or is there any need for new ones to be put in place of it to ensure better control.
- Some recent objections have been truly raised against these inert institutional and legal regimes due to their incapability so far for effective regulation. Economists are also concerned about the limited scope of intrusion and activity of the disruptive digital technologies that may affect the consumer as well as the Intellectual Property rights.
- As of now, the traditional banking system is being increasingly regulated that provides security to the consumers of the financial services to some point and to a certain degree. However, the concern is whether or not PSD2 will be able to bring about the significant and desired reforms in this front.
- Fintech services on the other hand are still very poorly regulated and therefore involving this service in the banking and financial services sector will pose significant risk of misuse and exploitation of consumers’ data by the Fintech solutions to affect the society at large.
Fintechs therefore must be fully regulated by these laws.It is seen that elements and regulations of control such as Know Your Customer, Anti-Money Laundering, and Anti-terrorist financing has made the traditional banks much less motivated to provide financial services to specific parts of the market.
The ethical considerations
As the Fintech firms develop their technologies the customers can now easily change their user profiles online. However, according to the suggestions of the Financial Industry Regulatory Authority such changes should be legitimately questioned by the Fintechs. This will help to remove the concerns over the ethical practices over Fintech.
- First, Fintech should advance the practice of different sites that trade online to offer the customers a repository that contains historical purchase data. This will help them to know how this personal data is being used.
- Second, customers should be allowed to disable specific personal data form being used along a sensitivity scale. This will limit the Fintech’s to use only specific data that is allowed and prohibit them to use any other type of data.
- Third, Fintech firms should introduce logs that will allow the customers to know about the sources to who their data has been shared or sold. This will prevent the online traders to take asymmetrical advantage vis-à-vis customers providing a certain level of transparency.
Lastly, the Fintech firms must allow the customers to choose freely the platform, the person, the type and purpose of data sharing.
Ethics in the Early Stages
Fintech Weekly noted that although conventional finance and banking have been controlled for years (and therefore are under closer scrutiny in the aftermath of the 2008 catastrophe and following Good Recession), regulations for electronic financing, mobile payments along with other large fintech sections are modest or nonprofit. Therefore, there are definite fears about how fintech operators may treat their clients”’ private data ” if they will accentuate data solitude, keep it stable, or discuss it with their third parties without asking for individuals” approval. Other folks wonder if fintechs are going to have the ability to safeguard clients from breaches and fraud. On the opposite end of this spectrum, fintechs that function completely above-board might fear that fictitious users, such as the criminals using cryptocurrencies along with other electronic money-management tools for nefarious intentions, may induce regulators to enforce requirements too tricky to meet.
THE MILLENNIAL FACTOR
If searching for details to counter pressures regarding unethical fintech usage, think about the function millennials play in the area. Based on CB Insights, individuals from this production have (or will have) $30 trillion in investing electricity. Their priorities concerning social and sustainability philanthropy are pushing against several fintech startups from the management of impact-based ecological, social, and governance investment. Larger organizations from the fintech world find out the writing on the walls in this regard and shift their approaches to better adapt with the times. And serve the needs of possible clients.