Fintech’s Unclear Role in Addressing Inequality Gap – BIS

Several statements by the Bank of International Settlements (BIS) said that fintech companies’ contributions in addressing the financial welfare of consumers. The Financial Times noted that there is no clarity whether technology “bridges or widens the inequality gap.”

The BIS’ paper titled “Welfare implications of digital financial innovation” showed an indeterminate picture in assessing the potential of fintech in enhancing the welfare consumers. This is despite good intentions and some positive figures shown in the BIS report.

This scrutiny came in light of several digital platforms claiming noble causes for their services. An example of this is Libra, a digital stablecoin. According to its white paper, Libra is seeking to help people across the globe in order to “make financial inclusion a reality for people everywhere.”

Fintech’s Unclear Role in Addressing Inequality Gap = BIS

The Financial Times agreed that fintech products and services “have aided financial inclusion.” This is due to the fact that fintech companies have given access to digital platforms to individuals without access to traditional products and services, such as loans. M-Pesa’s and IndiaStack’s respective operations in east Africa and Indi are some examples of this positive impact.

However, there are reservations about fintech’s contribution to people’s welfare. The article said that it is important to “question how sustainable it is to lend significant amounts” to individuals who have previously been “underserved by banks.” Moreover, these people may not have the capacity to pay back their debts.

Aside from sustainability, the question of bias remains to be an issue. This is seen in issues with Apple and Goldman Sachs being accused of profiling by “freezing out certain sorts of people for their new digital retail offerings.”

The report also said that there is evidence that biases have gotten worse in the age of digitalization. This is due to the unclear algorithms that make decisions instead of actual humans.