Fintech Startups-OBSERVATIONS FROM THE FINTECH SNARK TANK
There’s a misguided notion permeating the banking industry: That fintech startups are somehow more ethical than legacy banks, or that there is a fintech “ethos” that distinguishes fintechs from banks (and somehow makes fintechs morally superior).
This perspective isn’t always explicit, but references pop up here and there:
- Abraham Tachjian, Head of Risk and Virtual Banking at Standard Chartered Hong Kong recently tweeted, “Cashless isn’t all it’s hyped out to be and goes against the #fintech ethos.”
- 9to5 Mac reported, “Americans paid $113 billion in credit card interest to banks last year, nearly 50% more than five years ago. So adopting the new fintech ethos of zero fees and transparent pricing makes for thinner profit margins.”
- The Guardian cited a study that claimed that “Monzo is one of the best ethical current accounts” and found “the vast majority of companies in the personal finance sector score badly on ethics.”
- An article on Medium.com asserted, “Fintech is better than traditional financial companies because challenger banks focus on securing the data of their clients using technology. Traditional banks are slower than challenger banks especially the issue of adopting cybersecurity measures.”
These references don’t adequately capture the zeitgeist out there. I could point to tweets I’ve seen that allude to the “superior morality” of fintech, but they’re hard to find on Twitter.
Two Sides of the Coin
My response to Tachjian’s tweet was “The idea that fintech is more ethical or altruistic than existing financial institution is nonsense.” This led to some support, and some disagreement. Those supporting wrote:
- Travis Engebretsen: “Agreed. A company’s ethical compass comes from its leaders, not being a fintech company.”
- Sharon O’Dea: “There’s nothing inherently fairer about FinTech. In many respects the nature of startups encourages corner-cutting on things like compliance in favour of acquisition.”
- Rick Childs: “Fintech may be disruptive in the tech, but banks will always be superior on the boring things like …. oh you know… internal controls!”