Innovate Finance, the industry body representing the Fintech community in the UK, and Vested Impact have released The Fintech Impact Report 2024, prepared in collaboration with Accenture, assessing the impact UK FinTech has on the “economy and society.”
This latest report measures the Fintech ecosystem’s overall impact by analyzing a “larger” number of UK Fintech firms (3,560) and a number of financial institutions against a framework of five different impact categories which are said to be “linked” to the major United Nations’ Sustainable Development Goals: Productivity, Peace, Planet, People and Place.
Important findings from the detailed research report are as follows:
- UK Fintech’s overall contribution – 90% of UK FinTechs are a force for good across Productivity, Place, People, Planet and Peace. The UK’s FinTech sector has an overall net impact score of 24 (in a spectrum from -100 to +100), indicating a “net positive impact” on society, and higher than industries including Capital Markets, Construction and Retail but lower than Telecommunications and Education.
- Impact on Productivity – 98% of Fintech companies have a significant positive impact on Productivity in the UK, encompassing Economic Growth, Job Creation, Innovation and Infrastructure. Fintechs are driving productivity and digital infrastructure, increasing access to finance and financial resilience of the vulnerable. However with a drop in investment by 37% in the first half of 2024 from the previous period, “more support is needed for the UK to remain competitive.”
- Impact on Peace – 26% of UK Fintechs are positively contributing to the protection of fundamental freedoms around data privacy and access to information. Fintechs are a significant positive contributor to financial security and regulatory compliance, but face challenges as the digital landscape evolves.
- Against a backdrop of the UK’s Corruption Perception Index declining in 2023 for the second year running and a rise in mobile banking services, Fintechs have seen a decline in their positive impact on addressing money laundering and illicit flows of money.
However, tackling the challenge will involve multi-sector collaboration.
The United Kingdom’s emergence as the European market leader in RegTech investment has also contributed to enable financial institutions to comply with regulations in a “more efficient” and “transparent” manner.
- Impact on Planet – only 10% of UK Fintechs are driving a positive path for our planet. The Planet Impact pillar addresses key issues such as climate change, responsible consumption and production, water usage, and land management. While the proportion of UK Fintechs negatively impacting the Planet has decreased from 86% to 73% from last year’s report, the overall negative impact has increased, making this the highest negative impact area. Furthermore, the positive contributions from UK Fintech companies are currently not enough to offset the growing negative effects on emissions.
- Impact on People – Fintechs help reduce financial inequality by expanding access to safer financial services for underserved communities and improving financial literacy. 39% of Fintechs are having a positive impact on People, an impact category that covers issues from Social & Economic Inclusion to Education, offsetting the negative impact of 17% of companies in the sector. Relative to Fintechs, incumbent Financial Institutions have a larger relative scale of influence on People (25% vs. 10%) and Place (10% vs. 3%) due to their vast customer and employment networks. However, their depth and quality of impact on People, especially for vulnerable groups, trails behind FinTechs (18% vs 25%).
- Impact on Place – 14% of FinTechs have a positive contribution on local communities and infrastructure, with only 3% having a negative impact. Net Impact Rating for Place is the second highest for UK FinTech after Productivity, “addressing Sustainable Cities and Communities through greater access to adequate, safe and affordable housing and services.”
Across all of the UN’s Sustainable Development Goals, the report indicates that the UK Fintech ecosystem is having an overall “positive impact.”
But to unlock the potential for Fintech and also foster further innovation, collaboration between industry stakeholders and policy makers is considered to be “essential.”
Methodology
3,560 UK-headquartered Fintech firms were identified for the purpose of analysis against the UN SDGs by Vested Impact.
In addition, 14 of the largest established UK FIs were also chosen to offer a comparison to the Fintech sector.