World Economic Forum: Fintech has been able to lower transaction and service costs and reach populations otherwise unable to participate in the formal financial system

The World Economic Forum (WEF) is a highly influential global organization that engages with top political leaders, business executives and other prominent members of global society to demonstrate that combined with integrity and high standards of governance, entrepreneurship is in the global public interest. Among other things, the Forum hosts the high profile annual event that takes place in Davos, Switzerland each year.

Fintech has emerged as a key sector of both entrepreneurship and financial inclusion. Fintech is an important part of the digital economy that has “produced innovations that have transformed the way we live.”

WEF recently partnered with the Cambridge Centre for Alternative Finance (CCAF) and the World Bank on the Global Covid-19 Fintech Rapid Assessment Survey – a project that is in the midst of collecting data.

Recently, Crowdfund Insider connected with Matthew Blake, Head of Financial and Monetary Systems at the World Economic Forum, who is leading the charge regarding Fintech at WEF. Blake shared his perspective on innovation in financial services and how Fintech is evolving during the COVID-19 crisis.

The Forum has been covering the Fintech sector for years. What type of activity has the WEF been pursuing specifically in the Fintech sector?

Matthew Blake: Over the past couple of years, the Forum has studied the Fintech sector through several lenses. The flagship initiative, the Future of Artificial Intelligence in Financial Services, has assessed how AI is shaping the financial services ecosystem. Specifically, the work has looked at the impact of AI on dominant operating models, industry competitive dynamics for incumbents and Fintechs alike, and regulatory and governance challenges. This work is now culminating in a project that explores how the intersection of AI with other emerging technologies, such as 5G and quantum, is changing the financial services landscape.

In addition, the Forum has launched an initiative on Digital Assets and the Future of Capital Market Structure which brings together relevant public and private-sector stakeholders to identify the most promising potential roles for distributed ledger technology in capital markets. In early 2020, the Forum also collaborated with the Cambridge Centre for Alternative Finance on a report ‘Transforming Paradigms’ which surveyed over 150 financial incumbents and fintechs to understand the current state of AI adoption in financial services and its subsequent implications.

Many followers believe that the underbanked/unbanked can significantly benefit from Fintech innovation. What are your thoughts on this?

Matthew Blake: In payments specifically, Fintech has been able to lower transaction and service costs and reach populations otherwise unable to participate in the formal financial system. It has also had a significant impact in the lending space for MSMEs/SMEs as it has increased access to credit where these organizations previously had been excluded (for it being too costly or the system being biased towards larger institutions).

We have seen this become a reality in China where digital payments and mobile money payments are mainstream. In China, merchants are able to leverage services like Alipay and Ant Financial to remove credit friction by using the data and information Alibaba has on its network of 16 million merchants as a means of alternative credit scoring through behavioral analytics. This allows the company to extend credit to firms that have been barred from traditional banks due to information scarcity (a.k.a. a thin credit file), especially assisting startups that do not have a long history of credit.

On the business side, in addition to reaching new customers, there are lower transaction and service costs due to the low cost of onboarding new customers remotely, also allowing for quick and easy scaling.

The COVID-19 crisis has added fuel to digital transformation, how is this impacting traditional finance?

Matthew Blake: As with most able sectors, traditional finance has had to quickly shift their operations to be mostly remote. This not only has implications for the workforce, but also has implications for firm and system security and the ways transactions are executed.

Additionally, many banks and Fintechs have distributed support to small businesses and households in need—demonstrating the strength of the traditional system.

On the digital side, transformation plans that were expected to take ~5 years have been pushed through in a matter of months out of necessity (in-person services such as going to a bank is simply not an option).

With pressure from both supply and demand sides, financial services products and services have evolved (e.g., chatbots, mobile banking, digital invoicing), and many who were previously reluctant to go digital have readily adapted. On the flipside, the digital environment has led to a spike in cyberattacks.

So some Fintechs have dramatically benefited from the pandemic as their services have experienced a spike in demand. Some others, like certain online lenders, have struggled. What have you seen?

Matthew Blake: The sector is facing both opportunities and challenges. For challenges, the economic implications of the virus have greatly, and negatively, impacted small businesses. Coupled with the difficulties in accessing credit for small businesses, the environment has directly influenced Fintechs in the MSME lending space.

Additionally, Fintechs are traditionally lean institutions so they may find it difficult to adjust to surges in volumes (both in terms of service usage and customer service needs). On the other hand, because Fintechs are by nature digital organizations, they have a strong advantage compared to some of their incumbents. Without the burden of legacy systems, they are able to be more nimble in both B2C and B2B offerings.

What are sectors of Fintech to believe have the most opportunity going forward?

Matthew Blake: Based on our flagship work, we are seeing enormous potential for Regtech, Suptech, and backend services that streamline ops—areas where there is room to bring simplicity to increasingly complex operations.

Along those same lines, we also see an opportunity for Fintechs that can streamline and automate the customer experience, leveraging AI and cloud in tandem, in sectors where this was not traditionally the case. For example, for Insurtech, there is room to automate the claims experience and offer quick payouts (as does Lemonade) and leverage use-based auto insurance (as does Root). Lastly, we still have a great opportunity to use data and enhanced data analytics to better serve low-income segments of the population, as mentioned previously.

In the end, will Fintech become ubiquitous? Do you expect big tech to dominate Fintech?

Matthew Blake: Existing and new technologies will absolutely play an increasing role in financial services. That being said, we find it more likely that further consolidation will take place in the fintech space rather than fragmentation (for example, PayPal’s acquisition of iZettle).

In terms of big tech, these companies will continue to work themselves into the financial services space, however big tech taking over and dominating is unlikely. While they may have the capability to do so, at some point antitrust concerns would be too great and regulators would step in. What we see as more likely is big tech continuing to play a key role as service providers of tech used in financial services such as Amazon Web Services being a cloud service provider of choice to large swaths of the sector.

Any opinion on policy initiatives to encourage Fintech adoption?

Matthew Blake: Since the beginning of the crisis, the Forum has convened senior stakeholders from private financial institutions and the public sector to discuss the impact of COVID-19 on the financial system. These discussions pointed to several areas where the financial system would benefit from policy interventions. Among these, the group agreed policymakers must ensure that the financial system remains capable of safely meeting the public’s need for financial services through digital channels. In the short term, policymakers should leverage the strengths of the entire system (including fintech) to deliver support to households and small businesses. They should also encourage banks to explore partnerships with fintechs, who are better equipped to serve a digital-first customer experience, and operate in a more agile fashion.


This interview is part of an ongoing series looking at the evolution of the Fintech industry with particular reference to the changing landscape in light of Covid-19.

The series has been initiated in support of The Global Covid-19 Fintech Rapid Assessment Survey being carried out by the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, in partnership with the World Bank and the World Economic Forum. The empirical data collected will be used to understand the pandemic’s impact on the FinTech markets, how the global Fintech industry has responded and some of the immediate regulatory and policy implications. Crowdfund Insider is proud to be a research partner for the survey.

To help create the empirical data that will inform evidence-based decisions post- Covid-19, we encourage you to participate in the survey at:

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