September 24, 2022

Steps & Stages

Let's Talk Technology

Technology and collaboration as a catalyst for good

In fact and fiction alike, the future is often depicted by the evolution of technology. We’re shown varying degrees of two future states; one, where humankind is dominant, or the other, where we’re governed by AI. Meanwhile academics and futurists debate Kurzweil’s ‘law of accelerating returns’ – the exponential rate of technological developments – and the point at which it will reach “technological singularity” – the tipping point where technology becomes smarter than us.

Remaining sceptical on these future states

Why? Because today, 1.7 billion adults around the world remain underbanked – around a third of the adult population. Why? Because around half of the world’s formal M/SMEs have little or no access to formal trade finance, relying instead on ‘friends and family’. Why? Because we are yet to develop a technology that flags to us when we make a decision based on unconscious bias and yet, the figures speak for themselves.

  • Only 2 percent of venture capital goes to women-led startups
  • Just 1.2 percent of the US’ US$137 billion funding went to black entrepreneurs in the first half of 2021
  • In the US, just 1.8 percent and 2.8 percent respectively went to Latino and Middle Eastern entrepreneurs

If technology really is evolving at the pace that we hear, why are these global societal inefficiencies and imbalances still yet to be overcome?

Delving deeper into technology’s potential

Technology in isolation is not the panacea to global issues such as inequity, exclusion and bias. It does not, alone, create an equal world. But it does have the power to contribute to a better world in many ways; from flexible working to allow anyone to work from anywhere, through to predictive analytics in health, security and catastrophic events.

And in the world of financial services, its power can be harnessed for good when combined with the right mindset – open and collaborative – to improve access to affordable, fair banking for individuals, businesses and communities.

Beyond technology: collaborative use cases in action

Let’s look at just three of the ways technology and collaboration combined act as a catalyst for good.

Embedded, inclusive finance

We saw, during the pandemic, the speed at which the world had to pivot to digital banking. And, as people became more comfortable with online financial services, we saw an enormous surge in contextual or embedded finance, integrating banking services into non-banking customer journeys and experiences.

The implications for financial inclusion are tremendous when you consider how underserved communities or businesses can be served financial and educational tools, such as personal financial management (PFM), credit and insurance, each of which encourages a more long-term financial decision-making lens. Furthermore, financial products can be embedded into the online platforms and places that underserved communities or sectors congregate – such as networking sites for women- or minority-owned businesses.

Banks no longer have to try to target customers on a 1:1 basis but can embed themselves within target communities with simplicity. The technology is the enabler, of course, but collaboration is critical – banks must collaborate with brands or resellers for this model to succeed for the benefit of both parties.

Unlocking access to SME finance

SME financing has been an uneven playing field for too long. Established and larger organisations have no barriers to credit and trading, being that they are – well, established and larger. Yet for M/SMEs, which employ half of the global workforce, the story is very different.

Access to finance is slated as the second biggest obstacle facing the sector. Simply put, they are unattractive for banks to serve. The time and cost for banks to onboard them, conduct due diligence and risk assessments, and navigate complex or missing credit histories, makes them unappealing.

But with the rise of collaborative marketplaces and ecosystems, such as our joint venture with the International Chamber of Commerce to launch ICC Tradecomm, we can bring alternative lenders to this sector, match on risk appetite, and digitise and simplify areas such as Know Your Business (KYB). All of which will unlock the flow of finance to this critical sector and allow them to operate and scale to support their much-needed and much-valued contribution to the global economy.

A global stage for innovators

Finally, the platformification of the business worlds opens up the stage for new and diverse talent. Our platform is currently home to around 200 fintechs, each of which brings innovation and specialism which can be easily integrated and consumed by any of our 8,600 institutions. It is an opportunity springboard, that enables them to reach banks without the astronomical marketing costs and drawn-out implementation conversations.

Let’s shift the conversation

Technology is the enabler, but collaboration is the key. It’s about time we rewrite the rule book of old, with all the talk of competitive advantage, and shift the conversation to collaborative advantage.

Simon Paris is the Chief Executive Officer of Finastra, an open platform that accelerates collaboration and innovation in financial services, creating better experiences for people, businesses and communities.

https://www.theceomagazine.com/opinion/sme-technology-finastra/