The world we live in is characterized by rapid change. With each passing day, younger generations are becoming increasingly tech-savvy, leading to the widespread adoption of fintech as a fundamental banking platform. However, global markets continue to suffer whenever interest rates rise or a banking crisis occurs, which has been a common theme lately. Additionally, the environment is in a state of flux, and there are numerous international conferences on climate change to address this issue.
To gain more insight into these developments, Economy Middle East interviewed Drew Propson, who serves as the Head of Technology and Innovation in Financial Services at the World Economic Forum, an organization that is actively monitoring and addressing these challenges.
What type of robust and scientific fintech data is needed to facilitate evidence-based regulation and generate regional insights that can assess how fintech activities are impacting consumers, SMEs, and financial inclusion?
If we consider what the ideal outcome of a robust fintech ecosystem would be, we would likely all agree that this would be greater access to, and use of, quality, affordable, financial products and services that lead to financial well-being for individuals as well as SMEs. With this as a starting point, we can identify what type of data we need to measure progress toward our goal.
Demand-side data at the regional and global levels, such as that collected by the World Bank for their Global Findex Database (e.g., account ownership %, usage, ability to absorb an emergency), is precisely what is useful for assessing the overall picture of saving, borrowing, making and accepting payments, and the ability to manage financial risks. The Findex data offers a detailed view of financial inclusion for individuals. What is needed then is similar data on SMEs, as well as data on the specific role of fintech in advancing inclusion. Here, data from the fintech firms themselves can be extremely valuable. The World Economic Forum is currently collaborating with the Cambridge Centre for Alternative Finance on a research initiative to capture this data and offer insights that will inform market development and facilitate evidence-based regulation.
How would you describe trust in the capital markets ecosystem in place today, and the democratization of it following the arrival of retail investors, given the global economic downturn?
In general, trust in capital markets goes up when markets are strong and one sees their wealth increasing and goes down when markets are less friendly and wealth is decreasing. Recent volatility in the markets and a challenging macroeconomic environment, then, naturally have reduced trust in the capital markets.
Nevertheless, investors are still active. New digital platforms and the low cost of investing have broadened access to the capital markets, and with this, we have seen the rise of retail investors. What is missing yet, as indicated in the Forum’s Future of Capital Markets initiative, is ensuring these investors have the tools they need, and the right incentives in place, to invest responsibly. This is where the next round of innovation for capital markets should focus.
Read more: First council for fintech leaders in MENA launched during Investopia 2023
What has the Global COVID-19 Fintech Market Impact and Industry Resilience Study revealed in terms of insights into the medium- to the long-term impact of the pandemic on the fintech industry?
The Global COVID-19 Fintech Market Impact and Industry Resilience Study, published mid-last year, aimed to offer information on the medium- to the long-term impact of the pandemic on fintechs. What we found was that the global fintech industry has been more resilient to the pandemic than initially reported in late 2020, and firms in all verticals (e.g., digital payments, digital lending, insurtech) experienced increases in revenue and turnover.
Overall, the pandemic was a real tailwind for fintechs, as the use of digital financial services increased rapidly out of necessity. Moreover, our research findings showed that a large proportion of fintech clients were new customers (individuals as well as businesses), and customers from groups that in many countries have been underserved by traditional financial institutions.
Decentralized autonomous organizations, or DAOs, are a natural consequence for blockchain-based communities, such as when managing protocol-based networks and applications and broadening participation in governance. What does your DAO toolkit aim to achieve for a broader society?
DAOs are an active experiment on how we connect, collaborate and create. It’s worth noting that DAOs today manage significant assets, engage millions of contributors, and operate across regions and industries. However, many questions regarding operations, governance, law, and policy are only just beginning to be addressed.
The Forum’s DAO Toolkit aims to offer a valuable resource to developers, policy-makers, regulators, and entrepreneurs seeking to engage with the DAO ecosystem such that DAOs can reach their full potential.
Are industrial decarbonization efforts such as carbon capture and storage, or SAF fuels, economically practical today? What is required to make these commercially viable?
Innovations around industrial decarbonization will need time, financial investment, and significant commitment from multiple stakeholders to reach commercial viability. The Forum aims to support this process with initiatives such as the Clean Skies for Tomorrow Coalition (CST), an effort co-led by the Forum, the Rocky Mountain Institute, and the Energy Transitions Commission.
CST is a global, cross-value-chain coalition working to facilitate the transition to net-zero flying by 2050. This public-private partnership is driving a shift to zero-emissions aviation through sustainable aviation fuels (SAFs), other emissions-mitigating technologies, and emissions abatement investments. Members are collectively advancing the commercial scale of viable SAF production for broad adoption by 2030, through supply, demand, policy, and financial levers.
Are global clean energy investments of approximately $4-5 trillion required annually by 2030, over 3 times today’s levels, what’s needed to avoid a climate disaster? Where would these green investments come from?
Part of the solution will certainly need to be increased “green” investments. Fortunately, we are seeing incentives taking shape, such as those offered through the Inflation Reduction Act (IRA) in the US and the Green Deal Industrial Plan in Europe, to help move investments in this direction.
One area that deserves further attention is the crucial role venture capital plays in funding innovation. Throughout 2023, the Forum will be actively working with VC firms and associations to explore how greater support can be garnered for early-stage investments in climate mitigation and adaptation solutions.
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