Building for transparency and sustainability

Financial products have a reputation for being difficult to understand when it comes to both terminology and functionality for everyday consumers. Customers often have to deal with an abundance of arcane jargon and long, convoluted application processes. One of the key goals of fintech has been to broaden access to financial products by increasing transparency, simplifying tools and promoting user experience, enabling more consumers to access investment opportunities that were once only offered to wealthier clients.

The next level of financial access focuses on what happens to money after it’s invested, exemplified by the growing trend of Green Finance. At least $30.7 trillion of funds is now held in sustainable or green investments, up 34% from 2016, as consumers seek to align their financial habits with their ethical outlook.

Building this into financial apps will require a new approach to data architecture, based on transparency, autonomy and choice.

Introduction to Green Finance

As consumers become more financially aware, many want to know what they’re funding and whether their financial interests line up with their personal beliefs. This is the foundation for Green Finance, an approach to investing that prioritises social and environmental impact.

There are two main strands of Green Finance. The first is ‘Greening Finance’, which makes explicit the link between climate-related activity and financial risks for organisations and helps them manage these risks through shared understanding and fostering transparency long term.

The second is Financing Green, which looks to accelerate private capital flows into clean growth and environmental sectors to support the delivery of carbon targets and international objectives by improving access to finance for green investment, addressing market barriers and developing new approaches.

Both strategies seek to maximise the environmental value of capital, a goal shared by many consumers.

The power of autonomy

Traditional investment options have always been tied up with what was practically possible. Manually administered funds could only offer as many investing options as could be reasonably managed by their team while maintaining profitability, but digital investing is freed from these constraints.

Instead of choosing a particular portfolio or fund that fits their type, investors can instead mix and match investment opportunities that suit their goals, priorities and values. This can also be a route to increasing the stickiness of your users. By increasing autonomy over the capital allocation within your app, you increase retention through improved self-actualisation for users.
 
Building for transparency

Providing choice for customers starts with widening the range of available investment options to users. This requires additional data architecture and implementation to provide flexibility to consumers.

Implementing live integrations through financial APIs, enables you to offer more choice to customers and improve user experience without the need for additional fund management. By automating the share workflow via API instead of manual management, you not only increase efficiency but also transparency. Users can track the journey of their capital with full accountability, instead of relying on the choices of a fund manager.

In addition, reducing the need for manual input also reduces the costs of managing investments. This reduces the cost of moving money for customers, too, enabling them to be more flexible and agile with their capital according to the needs and trends of the moment.

Businesses are already being built around this concept, with Alpaca recently raising a $6 million Series A on the potential to power the increased choice and flexibility in stock and share management.

A clear future

The first generation of fintech apps expanded access to financial products – the next generation will need to focus on expanding control and accountability for an era of savvy investors who want to align their investments with their values. APIs will provide the essential infrastructure to build a clear, transparent financial future for your users, helping them put their money where their heart is.