September FinTech in Review: ESG and the Evolving Shape of Crypto

Our Week in FinTech columns for September covered themes of trends here to stay: ESG investing and the constantly-evolving face of cryptocurrency.

Sustainable investing continues to be a major theme in the markets, and looks more and more like a model that all advisors need to learn inside and out to continue to play a significant role going forward. People want to know where their money’s going; a recent study by Pitchbook showed that some 60% of all firms were somewhere along the path from exploration to full integration of sustainable investing strategies.

ESGs: Investing With Impact

Many investors may never have heard the term ESG, but in terms of what it stands for, it’s exactly what an overwhelming number of them are looking for from their portfolios. It’s more than just the latest FinTech trend – in fact, it’s been around for decades, under a variety of names from Socially Responsible Investing in the 90s to a host of others, but behind all the jargon and all the acronyms is a simple hunger on the part of investors: for their money to be used to make an impact that means more than simply a good yield.

ESG and the Investment Narrative

Finding good ESG data to meet increasingly sophisticated client needs is difficult – reporting standards vary from country to country and sometimes even from company to company, as a lack of any real standardized data from regulators continues to prove a pain point.

“The data quality needs to be 100% certain and needs to be accessible to have a real effect on the stock market,” said Stefania Di Bartolomeo, founder at Physis Investment, which specializes in sustainability data for investors, at a recent meeting of the Chicago Payments Forum. “If no one has access to great data, it won’t generate any kind of effect.”

Three FinTech Themes in Payments, Wealth, and Crypto

The top three FinTech categories we follow provided insights into three themes marking the evolution of markets and money:

  1. The high cost of U.S. payments, especially for low-income people.
  2. The development of new software tools that make it easier for retail and institutional investors to reach their financial goals.
  3. The ongoing drama unfolding as crypto-finance transforms traditional forms of money and finance.

Eyeing Crypto

U.S. regulators are playing catch-up with crypto. The phrase appeared a number of times in this week’s media reporting sparked by concerns over the lending of digital assets by cryptocurrency exchanges and decentralized finance (DeFi) applications.

Crypto Investments and Faster Payments Meet the Unbanked and Unequal

Who can easily take advantage of the benefits of digital financial services and who cannot? Taken together, this list of articles and research papers shows that cash is no longer king. They also suggest increasing income inequality.

The ticket to the digital economy and its efficiencies and rewards is a bank account. Bridging the gap between cash and digital has policy implications that go beyond whether someone can use a digital wallet to make a payment or even avoid a fee with a faster payment.

The gap in income will widen as long as the digital divide persists. As one of the research papers listed concludes, “Policy-makers should recognize that rising income inequality is more than a distributional issue; it is likely a central force shaping broader macro-economic trends.”