As Aristotle once said, "For we are what we repeatedly do. Excellence, then, is not an act but a habit." His words are a potent reminder that our professional responsibilities extend beyond mere tasks; they are an avenue for ethical conduct and societal contributions. This holds especially true for fintech firms, who are uniquely positioned not just as conduits for capital flow but as instruments for social justice and intersectionality.
Today, we are witnesses to an escalating humanitarian crisis. With over 114 million forcibly displaced individuals worldwide, a number that has surged by 4 million since May, collective action that transcends borders and institutions is urgently needed. The UNHCR has declared 46 emergencies across 32 countries in the last year alone, underlining the need for all sectors, including fintech, to take ethical action. Fintech can play an invaluable role, particularly when viewed through an intersectional lens that considers the multifaceted experiences of these individuals.
The term "intersectionality," coined by Kimberlé Crenshaw, isn't merely a trending buzzword. It is a framework through which unique challenges and opportunities at the intersection of fintech and social justice can be understood. Crenshaw urges us to "name the problem to solve it." For refugees and the displaced, the intersectional problem is financial exclusion compounded by a lack of documentation, legal status, and cultural barriers.
The Fintech Opportunity
According to a 2021 World Bank report, approximately 1.4 billion adults globally are unbanked, a number that includes many refugees. As Christine Lagarde, President of the European Central Bank, aptly noted, 'The merits of financial inclusion are strongly rooted in empowerment. Access to credit is a key link between economic opportunity and economic outcome. By empowering individuals and families to cultivate economic opportunities, financial inclusion can be a powerful agent for strong and inclusive growth." This transformation offers fintech firms an opportunity—indeed, an ethical obligation—to act.
Humanitarian crises aggravate financial exclusion in key ways:
Documentation- 10 million people globally are stateless, per the UNHCR. For refugees, losing official identification not only precludes the ability to access vital services in their asylum countries– including education, government aid, and healthcare– it raises the barriers to accessing services from private sector providers. Asylum-seekers from countries deemed “high-risk” by financial institutions are often barred from opening accounts without a passport, even if they are able to furnish other forms of government-issued identification.
Severed access to wealth & income- Forced displacement severs populations’ access to the accounts they used to safeguard wealth, access remittances (globally, a $948.99 billion market) through, and build their pensions in. Imagine having to rebuild your nest egg from scratch without any of the capital you’ve accumulated to get off your feet.
Cultural barriers- Individuals displaced by such crises often find themselves navigating unfamiliar and sometimes hostile environments where language differences impede access to essential financial services. This linguistic divide not only hinders basic communication but also complicates the understanding of complex financial systems and regulations. For example, Syrian refugees who have sought asylum in Germany. Upon arrival, many of these individuals, unfamiliar with the German language and financial system, face significant challenges, such as opening a bank account, which is a crucial step in establishing a stable life in a new country, becomes a daunting task. The banking terminology, regulatory requirements, and even the basic process of filling out forms in German can be overwhelmingly complex for someone not fluent in the language.
Erasure of underwriting data- The erasure of underwriting data, such as credit history and educational/professional credentials, during humanitarian crises, leads to categorising affected individuals as "high risk" on credit and employment applications. According to a study conducted by the International Rescue Committee, displaced populations are twice as likely to be denied a loan or other forms of credit than those not affected by displacement. This classification often forces them into the arms of predatory lenders, exposing them to exorbitant interest rates and perpetuating financial vulnerability. Humanitarian crises worsen financial exclusion by compounding the difficulties displaced individuals face in accessing essential financial services, further marginalizing them economically.
Case Studies: Turning Potential into Action
Here are some examples of fintechs tackling these issues:
Kiva: Peer-to-Peer Lending for Refugees- Kiva's refugee investment programme provides loans to refugees and internally displaced people. Through their platform, individual investors can offer loans to refugees, allowing them to start small businesses or pay for essential services. The peer-to-peer nature of the platform enables financial inclusion without requiring traditional banking structures.
Gravity Earth: Digital IDs for the Unbanked- Gravity Earth uses blockchain to create digital IDs for people without official documentation. For refugees, who often lack official papers, these digital IDs can be a lifeline, opening doors to financial services, employment, and legal protections.
Another standout example is AID:Tech, which uses blockchain to offer digital entitlements like aid and healthcare. Their initiatives provide essential services to the unbanked, including refugees, thus meeting the intersectional needs of these vulnerable populations.
What fintechs at large can do
Fintech has the moral responsibility and technological capability to act as transparent channels for the fair distribution of aid. Thus, their role should transcend business objectives to embrace ethical imperatives. The adoption of ethical responsibility should not be an isolated act but a habitual aspect of their business model.
KYC procedures- Fintech firms face a vital challenge in adapting Know Your Customer (KYC) procedures for displaced individuals. Traditional KYC methods often exclude those without standard identification or stable addresses. To bridge this gap, fintechs could innovate by integrating biometric verification or recognizing alternative ID forms, perhaps in partnership with humanitarian agencies. Utilizing blockchain for creating consistent, decentralized identity records could also be a transformative step. These enhancements in KYC processes are essential not just for regulatory compliance, but as a commitment to financial inclusivity, ensuring that vulnerable populations are not left behind in the digital financial landscape.
Accommodate services- Fintechs have an essential opportunity to enhance services for displaced populations, building on initiatives like those by NatWest, Restart and Barclays for Ukrainian refugees. These institutions have set commendable precedents by offering tailored banking solutions, such as fee waivers and multilingual support, crucial for refugees adapting to new financial environments. However, the fintech sector can further these efforts by systematically reducing fees for key services like international transfers and account maintenance, which are often burdensome for displaced individuals. Additionally, expanding the range of languages available in digital platforms and customer support can significantly ease the transition for non-native speakers. By refining these aspects, fintechs not only extend their market reach but also underscore their commitment to inclusivity, paving the way for a more equitable financial landscape for those impacted by displacement.
Create inroads to global economy- The role of fintech in providing secure digital solutions for wealth storage and efficient commercial payments is critical for small businesses led by displaced individuals. Digital wallets and online banking platforms offer safe, accessible places for storing assets, crucial in uncertain living conditions. Moreover, streamlining commercial payments through fintech platforms can significantly reduce operational complexities for these entrepreneurs. Additionally, the potential of crypto in this ecosystem cannot be overstated; its lower transaction fees and borderless nature make it an ideal tool for remittances and international trade. By incorporating these technologies, fintechs can offer a robust infrastructure that supports the financial stability and growth of small businesses run by displaced individuals, helping them to integrate more seamlessly into the global economy.
Supporting women- Fintechs have a unique opportunity to support entrepreneurial endeavors among displaced women, a group that often faces heightened financial challenges. By developing specialized credit products tailored for women without traditional credit histories, fintechs can unlock significant entrepreneurial potential. This support is crucial, as access to credit is a key driver of business growth and economic independence. Furthermore, fintechs can offer educational resources and financial planning tools specifically designed for displaced women, helping them navigate new economic landscapes and build sustainable businesses. Such initiatives not only assist in overcoming immediate financial barriers but also empower women to contribute meaningfully to their communities, fostering long-term economic resilience.
In conclusion, the role of fintech firms in addressing the financial challenges faced by displaced individuals, particularly through the lens of intersectionality, is not just a business opportunity but a profound ethical imperative. As Aristotle rightly pointed out, excellence is a habit, not an act; fintechs must habitually integrate ethical practices into their business models. This involves adapting KYC procedures to accommodate displaced populations, enhancing services with fee reductions and multilingual support, and innovating with technologies like blockchain for secure, inclusive financial services. Furthermore, fintechs have a critical role in creating inroads for these individuals into the global economy, offering digital solutions for wealth storage and efficient commercial payments. Special attention to supporting entrepreneurial endeavors among displaced women, through tailored credit products and educational resources, can unlock tremendous potential and foster long-term economic resilience. In essence, fintech firms are uniquely positioned to transform challenges into opportunities, turning potential into action. By doing so, they not only contribute to the financial empowerment of displaced individuals but also uphold their moral responsibility, championing a more equitable and inclusive financial landscape.
