The finance sector's decision to ape Big Tech and adopt platform business models enabled and powered by the mass acquisition and manipulation of data is creating new risks for society, warns a report from the Finance Innovation Lab.
The report - Lifting the Lid on Fintech - argues that fintech is transforming finance on a systemic level, uncovering the new data, business models, and businesses underpinning the speed and convenience of 21st century finance.
Fintech has touched lives in the UK and around the world, with digital banking, contactless payments, robo-advice and other developments gaining huge popularity.
But, the report finds that technology is exacerbating existing risks for democracy, sustainability, justice, and resilience in finance. It is also creating new risks, particularly around the acquisition of data.
"As a result, we are seeing unprecedented levels of corporate power and the establishment of new institutions that are too big to fail. There is little transparency or accountability for the data collected about us. New business models seek to predict and even influence our behaviour. Automation embeds pre-existing inequalities within essential services," says the report.
The lab offers several recommendations for policymakers that it says can alter the trajectory, including: putting social and environmental purpose at the heart of government policymaking; creating non-market alternatives to Big Tech, run in the public interest; incentivising "public interest" fintech; and better regulating data collection.
Mick McAteer, founder, The Financial Inclusion Centre, says: “Fintech joins a long list of innovations heralded by promoters as transformative. And there are real benefits. But, this critical report looks beyond the hype, and demonstrates how fintech and big data creates real, unrecognised threats to consumers and society.
"The Lab’s robust framework principles would help policymakers and regulators protect citizens and society from the more dystopian aspects of fintech, and promote the socially useful benefits.”
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