Exploring the role of Fintech in relation with Sustainable Business Model

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What are our Future FinTech Champions learning at the moment? And what are their thoughts on the current development of FinTech? Read through this submission from one of our FFCs, Poovalagee Parsooramen, currently studying @ Middlesex University.

First of all, before looking at the relationship between Fintech and Sustainability it is essential to understand the two different terms.

Sustainability means meeting our own needs without compromising the ability of future generations to meet their own needs. In addition to natural resources, we also need different kinds of socio-economic resources. Sustainability is not just about environmentalism. In most of the definitions of sustainability, we also found concerns about social equity and economic development. Although the concept of sustainability is a relatively new idea, the  movement as a whole has its roots in social justice, conservationism, internationalism, and other movements of the past that have rich history.

By the end of the 20th century, many of these ideas had been united in the call for “sustainable development”. In the 21st century sustainable development was accelerated by the progress towards the Sustainable Development Goals and the implementation of the Paris Agreement are the most pressing challenges. There is also  Sustainability as a Value Policy, is shared by many individuals and organizations who display this value in their daily activities and actions. Individuals have played a major role in advancing our current environmental and social situation. Today, people must create and apply solutions with the generation of the future.

In addition to that, sustainable business is also about having a financially sustainable model. Financial sustainability can be defined as the ability to start, grow and maintain the staffing business with short-and-long term financially. A business can achieve Sustainable finance when it is selling a product or service not only at a price to cover its expenses but also creates profit. This is possible when the business develops a plan that outlines its long-term goals and the resources that will be needed to achieve them.

The Three Pillars of Sustainability

1, Environmental Sustainability   

Ecosystem integrity is maintained, all systems terrestrial environments are kept in balance while the natural resources they contain are consumed by humans at a rate where they can replenish themselves.

2. Economic Sustainability

Human societies around the world have access to the financial and other resources they need to remain independent and meet their needs. The economic system remains the same, and activities such as a safe livelihood are available to anyone.

3. Social Sustainability

Human societies around the world have access to the financial and other resources they need to remain independent and meet their needs. The economic system remains the same, and activities such as a safe livelihood are available to anyone.

What is Fintech?

Financial technology (Fintech) is used to describe a new technology that improves and automates the delivery and use of financial services. Basically, fintech is used to help businesses, business owners and consumers better manage their financial operations, processes and lives using specialized software and algorithms, specifically used on computers and, more and more, smartphones. Fintech, the word, is a combination of “financial technology”.

When fintech first emerged in the 21st century, the term was initially applied to the technology used in the backend of established financial institutions. Since then, however, there has been a shift towards more consumer-oriented services and thus a more consumer-oriented definition. FinTech currently covers various sectors and industries such as education, retail banking, fundraising and nonprofits, and investment management.

The advantages of Sustainable Fintech

The severe impact of the current pandemic on health and economic systems could lead to unprecedented social development. FinTech has helped countries respond to a crisis of such magnitude and speed, especially when financial assistance is urgently needed. These technologies digitize and simplify payment processes, making transactions and disbursements accessible to all businesses and individuals. Governments and financial service providers should create incentives to improve the institutional, legal and technical financial infrastructure. The new landscape has the potential to build a more resilient economic reconstruction process.

Managing the disruption caused by the Covid19 pandemic requires a concerted effort from all sectors of society and focuses on those who are most deeply affected by the situation – the “most vulnerable”, low-wage workers, small and medium-sized enterprises ”. In particular, governments are providing emergency financial assistance to prevent businesses and individuals from losing the income so essential to their survival. While these emergency funding policies come in different forms in different countries, they share two main requirements: prompt payment and minimal paperwork. It is in these loci that financial technology plays an important role.

During the current Covid19 crisis, micro, small and medium enterprises (MSMEs) are facing adverse effects on their supply chains or demand levels, threatening their liquidity and relevance business customs. To try to keep MSMEs afloat during these turbulent times, governments are taking measures such as wage subsidies, concessional loans and lines of credit with general guarantees. For example, in countries like Ecuador, Peru, Colombia and Jordan, FinTechs enable fast and simple payment processes, reduce transaction costs and shorten the gap between funding sources and intended beneficiaries there. As MSMEs represent 70% of the global employed workforce and around 60% of GDP in most OECD countries, this rapid support is needed to secure a certain level of financial viability and mitigate the impact of the economic downturn.

To meet the unprecedented need for financial support, national payment systems are being joined by more financial service providers, and in particular those that rely on FinTech. In particular, FinTech-based solutions have been instrumental in helping governments identify recipients more accurately, providing recipients with mobile account opening and cashless transactions, and enabling remote assessment. For example, in Mauritius many banks have shifted to contactless transactions and more customers have adopted mobile app banking. The MCB bank came up with their JuicePro mobile app that also helped out entrepreneurs. There is also the company MIPS who increased its market share. The SBM bank also offered the contactless card that could be used in most places.

Given the sufficiency of FinTech-based solutions to provide emergency financial assistance, it is essential that governments build momentum to improve their digital, legal and physical payments infrastructure. Equally important, governments and FinTech providers should coordinate responses. For example, while regulatory changes are needed to allow new players to join quickly (e.g. regulatory sandbox), digital financial service providers should ensure the capacity for large-scale technology for national payment systems (i.e. improved distribution networks).

While coordinating efforts to mitigate the impact of the economic downturn, governments and FinTech providers should also keep in mind the basic criteria for comprehensive and customer-centric services: customer security and privacy; simple mobile interface; appropriate communication channels and information campaigns. Such criteria are necessary to ensure that the digitization of financial services does not exclude or harm those excluded from the digital world, nor does it even limit the right to make their wise choice. Furthermore, Digital Financial Literacy is an important aspect to take into consideration. Digital Financial Literacy consists of providing the knowledge, skills, confidence and competencies to safely use digital financial products and services to make proper decisions. Thus empowering consumers to adopt financial technologies.

What is the potential of FinTech to achieve sustainability goals and make the financial sector more sustainable?

Firstly, as smartphone ownership increases rapidly, digital applications, the development of which has been accelerated by the Covid19 pandemic, have proven to be an effective way to bring vulnerable people into the world banking system. Secondly, digitization in the financial sector faces regulatory challenges, such as cybersecurity and data protection, as well as challenges related to a lack of financial capacity in some developing countries. Thirdly, think tanks have a role in sustainable fintech by monitoring progress in other countries, providing updates to decision makers and encouraging the emergence of new business models. Finally, Sustainable fintechs and the financial sector cannot achieve the SDGs alone. Although they are powerful catalysts, they must be accompanied by policies that make the inclusion of risks and costs possible and necessary for the financial sector.

Fintechs that are driving sustainability

The United Nations Environment Program Is Responsible Banking Responsible Finance Initiative Principles (UNEP FI) describe ways in which banks can engage in creating products and services that benefit both individuals and to society with the larger goal of having a positive impact on the planet. Banks from around the world have joined this initiative to commit to these six principles, in accordance with the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement.

The six principles for responsible banking are: 

  1. Alignment: The pledge will align the company’s business strategy to be coherent while meeting both individual needs and societal goals, such as those set out by the SDGs, the Paris Agreement and government goals.
  2. Impact & target setting: Drive change and positive impact while working to reduce negative impact.
  3. Clients & customers: Banks will work closely with clients and customers to encourage and enable sustainable practices that create a positive foundation for future generations.
  4. Stakeholders: Businesses will work hand-in-hand with their different stakeholders in order to achieve these goals.
  5. Governance & Culture: These efforts will be carried out through effective governance.
  6. Transparency & Accountability: Success in the implementation of these principles is shared with maximum transparency


Ecobank is the latest addition to the list of Principle Banks and joined on November 13, 2019. Committed to providing outstanding customer service, the bank was named “Best Retail Bank.” Africa” at the Banker Africa Awards 2019. Ade Ayeyemi, CEO of Ecobank Group said: “At Ecobank, we take our responsibility for sustainability seriously by continuously ensuring that Sustainable practices are established throughout our decision making, management, business and organizational processes. Along with our focus on our clients and our intention to be a trusted advisor, we take a proactive leadership role in sustainability and our decisions and actions take society’s goals into account and future generations of Africa. By subscribing to the six Principles of Responsible Banking, we are publicly declaring that we are following the best sustainability practices adopted by the world’s major banks. The Bank has demonstrated an ongoing commitment to sustainability. Last year, all 33 Ecobank locations across Africa planted trees to combat the estimated 5 million trees cut down each year around the world. In April 2019, all sustainability resolutions were passed at the 31st Annual General Meeting of Shareholders, letting shareholders know that the bank is ready for long-term sustainable growth.

In Mauritius also many organisations are engaging themselves in this initiative by adopting sustainable business models. It has been seen that many banks are adopting Fintech initiatives. For example MCB with the juice application. Other companies also such as My.t with their My.t money wallet. In addition, banks are also providing low interest rates for Green financing such as the Afrasian Bank.  In addition the governments are using specific fintech services to distribute emergency funding to SMEs during MOonzo and Revolut in the UK.

Another aspect of the Sustainable Business Model is green finance. Green finance aims to increase the level of financial flows (from banking, microcredit, insurance and investment) from the public, private and non-profit sectors towards the priorities of sustainable development. An important part in this is better management of environmental and social risks, seizing opportunities that provide both reasonable returns and environmental benefits, and increased accountability. The UN Environment has worked with countries, financial regulators and the financial sectors to align financial systems with the 2030 agenda for Sustainable Development, to direct financial flows to support the achievement of the Sustainable Development Goals. In a research done in 2018, it has been found that Fintech offer the potential to unlock green finance technologies, such as blockchain, the Internet of Things and big data, developed over the same timeframe as the Paris Agreement and the SDGs.  Fintech can be used for green finance in areas such as blockchain applications for sustainable development; blockchain use-cases for renewable energy, decentralized electricity market, carbon credits and climate finance; and innovation in financial instruments, including green bonds. For example, fintech investment platforms allow consumers to choose SDG friendly funds for their personal investments.

The main areas for the current work on green financing are:

  • Supporting public sector on creating enabling environment
  • Promoting public-private partnerships on financing mechanisms such as green bonds
  • Capacity building of community enterprises on micro-credit