Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
In the Future, Home Will be Wherever Consumers Choose to be
Flinks | Yves-Gabriel Leboeuf | Aug 7 2019
Consumers will soon be able to benefit from the same level of trust they get from the local bank in their hometown, wherever they are in the world.
Imagine for a moment that as you settle in a foreign country, you go straight to a financial institution and ask for a mortgage to buy your new home. They don’t know who you are or what you do. They have no context on which to base a decision. And so it’d make sense to reject your request.
Context has always been a key part of the trust bond between consumers and financial institutions.
Global connectivity in finance — and especially accessing and understanding transaction-level data — has the power to fill that gap by enabling data portability. Having your financial history following you allows for unprecedented autonomy and freedom, wherever you decide to stay.
It happened before
Early nineteenth-century American merchants faced a similar problem.
Up until then, they relied on personal ties for much of their credit information — from wholesale merchants down to local butchers keeping tabs on their clients. If they didn’t know their customer first hand, they could ask other merchants about a potential customer’s trustworthiness. They had available sources of information, based on experiences and opinions.
See: Open banking in Canada – time to prepare for change
As markets expanded, especially in the cities, merchants began to trade with customers they did not and could not know personally.
The lack of knowledge about distant and unknown customers was what we're now used to call a pain point. Merchants did not have the appropriate context to judge if they should conduct business, lend money, accept to open a credit tab, etc.
Limited connectivity at work
A proper solution for this lack of knowledge and context about consumers was to gather and distribute information on a large scale.
The answer came in the form of reports that were managed by networks of correspondents across the nation’s cities and villages. They would collect information from merchants about their customers’ character and reputability of paying things back in a timely manner. All of those data points would then be consolidated in a ledger, accessible for a fee.
If you’re thinking “credit bureau”, you’re right — the agencies built around this concept in the nineteenth century are basically the ancestors of today’s credit bureaus. Of course, the information being reported and the techniques have evolved. But collectively we rely on the same premise to bridges the data gap: businesses still need to figure out whether they can trust potential customers, and to do so they rely on profiles drawn by agencies that collect and consolidate information. Consumer’s context can be shared, but only as long as it’s in the space covered by these agencies.
Trust can cross borders
This model of limited connectivity has now reached its limits.
With people being so mobile worldwide, customers don’t get the same ability to prove they are worthy of trust with credit or access to certain services, simply because the lenders, financial institutions and other companies don’t know them. The same can be true for people with thin credit files or in the process of rebuilding their credit profile.
See: Why Open Banking Represents a Seismic Shift for Fintech
We’re once again facing a gap: information that is relevant about a consumer cannot be accessed. And so we’re left with a financial services system that:
- puts up barriers to access for some segments of the population;
- has people rebuild their financial profile from the ground up after they relocalize to a new country;
- makes it longer and harder to reach important milestones.
Or, simply put, a system that can't understand some consumers' financial life profile because it doesn’t have the proper context.
This is bound to change with global connectivity in finance. Let’s imagine once again settling into a new country, but this time with the ability to give access to your financial data — wherever the source is. Your identity and financial assets can be verified in a timely manner, opening up access to your new country’s financial services system.
Or imagine you’ve been earning a decent salary for years and never needed to have a credit card or a loan. Your traditional credit score might not say much about you, but other types of financial data can be used to understand you as a consumer. Transactional data, specifically, allows businesses can get a deeper and real-time understanding your financial profile and behavior.
When your context can cross borders, trust does too.
Yves-Gabriel Leboeuf, Co-founder and CEO, Flinks
Flinks is a data company that empowers businesses to provide better financial services to consumers. Trusted by over 200 world-class companies, Flinks enables businesses to connect users’ bank accounts, gain financial insights into their customers and provide better risk products.
Other articles you may like:
- Designing a data transformation that delivers value right from the start
- Element AI: The market is still figuring out how to share data with enterprise AI startups
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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