By Tilman Ehrbeck on behalf of the Flourish Team
When we launched Flourish earlier this year, we did so with a point of view for the kind of global economy and financial system we want to help build. This vision has struck a cord. At last week’s Singapore FinTech Festival, for example, we were invited to talk about our work and motivation, and one of our portfolio companies was a winner of the startup competition.
Today, we share with you the principles behind our fair finance vision. Having a set of guiding principles is important because markets, technology, and finance are powerful forces. They shape the lives of billions, mostly for good, but when unleashed carelessly or unethically, they can be harmful as well.
We seek to demonstrate that better financial solutions are feasible, scalable, and profitable. To advance our vision, we only partner with entrepreneurs who pursue profit with purpose, and we hope that other stakeholders will join us.
Working from a clear sense of what a fair financial system looks like, we have derived five principles:
1. Financial services empower people to achieve their life goals.
We start with what should be an obvious idea, that finance must have consumers’ well-being at heart. People use financial services to achieve their life goals, such as get an education, pay for healthcare, buy a home, among other needs. When people have financial services they can understand, connected to their real-world needs, their economic prospects improve.
That hasn’t always been the case. Financial services can be complex, hard to use, designed for markets rather than individuals. It doesn’t have to be that way. People deserve financial services that are user-friendly, clear of purpose, designed with language for lay people, not experts.
2. Business models are built on consumer trust and business trustworthiness.
To ensure the first principle is met, people need to trust their financial services providers. We believe that for that to happen, businesses must use models that align their practices and profits to helping consumers achieve financial health.
In a fair financial system, winning business models compete for trust. Hidden fees and hidden third parties are things of the past. Customers know how much they pay and what they get upfront.
3. People have meaningful control how their financial data is collected and used.
As data becomes more central to financial services, concerns about privacy, security, and trust have arisen. Nobody should have to worry about what happens to their personal information when using finance.
A fair financial system will give control back to the people, protecting their financial data, providing transparency, requiring permission to access their data, allowing them to freely move accounts among providers.
4. The financial infrastructure is open, low-cost, and drives competitive markets.
To create this fair financial system, entrepreneurs need an open infrastructure and shared standards that facilitate service delivery at low cost. Digital infrastructure should make it possible for people to move money quickly and cheaply. It should make new solutions more available to more people.
In the ideal system, the private sector leverages a public stack of infrastructure technologies (such as for authenticating identity) to create applications that deliver distinct customer value propositions.
5. Digitally-native regulation protects consumers and promotes innovation.
An ideal system must be regulated in a fashion that allows continued innovation. Citizens rely on regulation and policies to protect them. These are hard to update as technology changes, so they must anticipate and adapt to circumstances before problems arise.
Flexible, responsible, consumer-centric regulation and supervision based on the nature of the service — rather than the legal structure of the provider — are essential for fair finance principles to work.
How we evaluate investments against our Fair Finance Principles
The Fair Finance Principles describe an end-state vision. They are not a defined roadmap or specific strategy. Market conditions will vary across geographies and change over time.
That said, they are our compass, guiding our investments and our decision-making in everything we do. We apply our best judgement to only support ventures that are consistent with this vision and help evolve the sector for the better. We ask entrepreneurs how their innovation will make customers better off. We look for data security and privacy practices in our due diligence. We make sure that the business incentives are aligned with customer financial health.
Of course, new areas of opportunity and unforeseen challenges will emerge, and we will have to respond to them. Guiding us — and our entrepreneurs — will be a shared vision for fair finance.
For more details on our Fair Finance Principles, click here.