A lot of ethical responsibilities are placed on the fintech companies as the vast volume of data they have about customers could drive them to manipulate customers’ purchasing and financial choices. In the case of enormous abuse, traditional banks could utilize the trust they have built across many years to strategize their banking services and make themselves more relevant. Technology has proven to be a core part of human existence and financial technology is at its hub. According to a survey, fintech happens to be the fastest-growing tech sector with massive revenue and profit generations. How big techs and small start-ups have been able to pull this stunt is thanks to their continuous innovative ideas. The mode and pattern of administering fintech services and products spell ethical consequences for consumers but could be appropriated by traditional banks.
Digitalization swept through nearly all aspects of our lives following the global outbreak of the coronavirus. A report has it that by April 2020, there was a 200 percent increase in digital activities. More people signed up for digital services like never before. This expanded the business market and prospects for fintech companies that render seamless financial transactions to customers. But unscrutinized and unregulated ethical conducts and profit interests of this sector hold a pervasive consequence.
Fintech Economy Is The New Normal
Traditional banks lost their grip on customers due to their non-digitized and difficult banking system. People were more likely to abandon their transactions if there were layers of difficult procedures required for the transaction. Traditional banks focused on minimizing risks following the years of the economic recession. Taking the wheel, fintech sought to revolutionize banking by focusing on meeting customer needs, providing seamless, faster, cheaper financial services (including loans) with just a tap. Fintech also provides wider service coverage for the underbanked population where traditional banks found it difficult or risky to establish their services.
Fintech services allow the big tech and other players to harvest tons of customer data and other activities that allow them to hurt startups. Google, Amazon, Apple and Facebook known as the big four generate huge income through advertising. Besides other sources of its revenue, advertising hauled in 146.92 billion US dollars of Google’s revenue in 2020 alone. To date, the search engine behemoth has little or no competitors except in Japan, China, and Russia where local search engines are more preferred. Digital advertising is also Facebook’s main source of revenue.
Reports have also revealed that big techs have from time to time ignored providing users with the privacy of the data harvested from the customers. Such sensitive information like our shopping choices and traits, location, personal emails are some of the data they have collated, and how they use them gives great consequences.
While fintechs can use our harvested data to transform the digital economy, it can be used to bind and control the customers if ethical regulations are not followed and the drive to maximize profits abounds.
Ethical Consequences And How the traditional banks can Harness the situation
In early 2018, Cambridge Analytica harvested data from millions of Facebook users, causing a major political scandal as the data was used to carry out political campaigns. Last year European Union levied a huge fine on Google, Amazon, and Facebook over what they referred to as an antitrust campaign. The union accused them of harnessing data that hindered competitors and user privacy.
One would stop to wonder what they could do with user data especially for google as it expands its Google Pay banking services teaming with other traditional banks. But if properly applied, fintech companies can use the data of clients to personalize the services and tailor it to user-specific needs. But this is not always the case. In turn, these developments have waned the trust of customers and their approach to not just sharing the data on the internet but also using fintech services from non-traditional banks.
Findings by Ponemon and IDX show that there is consumer sentiment towards digital privacy revealing that 74% of consumers say they have little control over the personal information collected on them while 86% of consumers are very concerned about their privacy when using free online tools like Facebook and Google. Traditional banks on the other hand have garnered the trust of customers.
The major determining factor for who will be the top player in the financial services sector is not just providing customer-centric service but creating a trust for the customers by maintaining ethical standards and a strong business approach to grow profits.