Consumer trust and confidence has significantly decreased in the post-crisis financial industry. The appetite for a purely profit-driven value proposition is fading fast. Many financial institutions, professionals, and academics seek new perspectives that provide balance between profitability and social benefit. Gaps in the traditional system, which many large institutions can’t fill, don’t want to fill or are too slow to fill, are being disrupted by financial innovators and social entrepreneurs. Two emerging hotbeds, driven by the “fintech” sector and the “social finance” sector, threaten a dramatic shift in the financial industry.
The potential of both sectors has caused people to pay attention. Fintech is reshaping the finance sector through low-cost and highly efficient means of electronic trading, exchange and transaction services. Social finance, or investments that generate financial performance and include positive social impact, is more than just corporate social responsibility (CSR). Social finance offers investors the opportunity to reasonably protect their assets in the face of volatility, as well as to support solutions to some of the world’s greatest challenges.
Fundamental aspects of the financial system require a bit change, as all businesses do, to stay on top. This change is evident in the amount of interest and investment entering into these sectors. Global fintech investment has tripled since 2008, and is expected to increase to $8 billion in the next three years, according to Accenture. As it stands today, social finance is an asset pool currently at $22 trillion, based on estimates provided by BNY Mellon.
Overall, both sectors represent a shared opportunity to accumulate resources, to distribute those resources toward growth-enhancing activities, and to benefit from such activities. Transforming growing interest into meaningful change requires cooperation and organization, authority and discipline, and an essential responsibility. The importance of this shift may be best noted in the famous words: we cannot direct the wind, but we can adjust the sails.
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