The role of FinTech in driving sustainability and inclusive practices in banking

The financial crisis of 2007 had a profound impact on the global banking industry by leading to a loss of trust and confidence in traditional institutions. This has created an opportunity for technology-centric firms such as challenger banks to emerge, offering lean and technology-based structures that provide logistic and cost-efficient outcomes. While decentralised approaches based on the decentralised blockchain approach are yet to be proven as serious contenders for dominance in the retail markets, larger international banks can adopt the technology they use to streamline their processes and reduce their cost base. Additionally, the crisis has led to increased attention to sustainability and inclusive practices in banking, with sustainability and greening becoming a more integral part of a bank's brand image.

FinTech offerings have the potential to increase accessibility to consumer financial services, some applications also pose energy usage and environmental impact challenges. Completely decentralised networks involving a cryptographic proof of work can lead to significant energy consumption, while centralised networks can reduce energy usage and create trust in the central party to uphold the rules of the system. Finally, it is evident that consumer banking customers are increasingly making choices based on non-monetary factors such as trust, brand image, and the institutions commitment to the green agenda. This highlights the need for banks to prioritize sustainability and socially responsible practices to appeal to a broader range of customers and maintain market competitiveness.

The chapter explores the role of the financial crisis in creating opportunities for FinTech to enter the retail banking markets and create new institutions and asset types. It discusses the potential for FinTech to contribute to green finance and financial inclusion and highlights the varied costs and benefits of different types of FinTech offerings. Ultimately, it suggests that consumer banking customers are increasingly making choices based on non-monetary factors such as brand trust, usefulness, and corporate social responsibility.

This is an Accepted Manuscript of a book chapter published by Routledge in International Banking in Global Perspective on 4 March 2024, available online: http://www.routledge.com/9781032310602