By: Fintech Association of Nigeria
Ethics refers to the guidelines for conduct, which seek to address questions of morality. Beyond asking “is this legal?”, ethical considerations necessitate the key question “is this right?”
Values provide the principles and ideals upon which judgement is made and help organisations rank issues in order of priority based on these values.
Accountability in a broad sense refers to a situation where an individual or a company is responsible for the outcomes of a particular decision or activity. Therefore, the word accountability is used interchangeably with responsibility.
When fintech firms are held accountable, it provides a level of integrity of financial market activities. So, how are these three concepts linked?
Well, accountability ensures that fintechs are openly answerable for the ethical (or non-ethical) decisions that they take on behalf of customers, and these decisions must be based on solid values that govern day-to-day fintech operations.
Due to the complex and innovative nature of their products, markets and technology, fintech firms are exposed to similar risks of scandals as incumbent banks. For example, Munich-based fintech Wirecard collapsed in June 2020 under €3.5 billion in debt in one of Germany’s largest modern-day accounting frauds.
According to the Financial Times, embezzlement running into billions of euros took the form of unsecured loans and payments to ambiguous partners in Asian countries. Things quickly took a sour turn when the “partner companies” were traced back to the Wirecard CEO and three other executives who were subsequently arrested and are currently facing trial in Germany.
The case rocked the global fintech industry with negativity and had stakeholders raising the issue of trust in digital challengers. To be an all-rounder, there should be no trade-off between scalability, accountability and ethics in fintech operation.
Ethical practices will not only help with public perception and customer retention, but it will also reduce employee turnover. A survey carried out by BBC Worklife revealed that 80% of workers find it important that company values were consistent with theirs. This comes at a time where paradigms are shifting and generations are becoming more ethics-conscious.
Supporting this, the survey was very clear that workers under 45 were more likely to quit over unethical practices or being asked to partake in such. It is therefore in the best interest of fintech companies to uphold ethics in order to ease the hiring process, maximise employee satisfaction and retain key talent.
Due to the dynamic nature of the fintech industry, it is understood that no single code of conduct can be suitable for all organisations, contexts and stakeholders.
Therefore, fintech companies are urged to develop internal policies, procedures and guidelines that are tailored to their particular context, activities and markets. However, those specific codes of conduct can be shaped by reflecting on these 10 guidelines for ethical practice:
There are some key internal and external policy documents which serve as a guide for what is acceptable within an organisation.
Some of these are;
Employees’ Code of Conduct, Directors’ Code of Conduct, Code of Ethics for Financial Professionals by The Securities and Exchange Commission (SEC), and the Code of Corporate Governance for Banks by the CBN, Nigerian Code of Corporate Governance by Financial Reporting Council of Nigeria (FRCN), Consumer Code of Practice Regulations by Nigerian Communications Commission (NCC).
Data governance is another huge part of the fintech evolution and is also a key area where strong ethical values and accountability need to be applied.
This is because the increase in access to financial services has also led to increased availability and access to customers’ sensitive information. For example, the Central Bank of Nigeria (CBN) recently launched the updated framework for Open Banking in the country, which would grant financial institutions and other third parties, a legal right to access personal data, although with the ethics of consent.
This move represents a grand opportunity for fintech firms to offer more innovative products and clears the pathway for hyper-personalisation and tailored financial services. However, open data sharing also poses the risk of data theft, financial fraud, identity theft and other cyber threats.
Therefore, fintechs and in fact all participating financial institutions will be largely accountable for any data breaches in a way that they have never been before.
In order to be well prepared for these advancements, financial service providers are advised to follow these four steps; data classification and encryption, audit third-party vendors, tighten internal processes and employ independent security consultants, commonly called ethical hackers, to come in and attempt to breach the systems.
These steps are essential to know how prone an organisation is to cyberattacks, so that any vulnerabilities can be addressed in a preventive manner.
In conclusion, all three concepts of ethics, value systems and accountability must be present and well-articulated in an organisation, through a common code which is openly known and shared between all members of the organisation.
The purpose of the Code of Ethics and Professional Conduct is to enhance the ethical values and principles within in the financial institution and to promote discipline, objectivity, integrity, transparency, efficiency and loyalty in employees when performing their duties and tasks.
In addition, fintech firms should endeavour to establish Ethics and Governance Committees with diverse views and a range of technical and non-technical backgrounds should exist in the committee. The perception of the fintech industry over the next decade will depend on the impact of its emergence and how much trust the industry can build in society.
Your views are critical, to what extent do you consider ethics a challenge for the fintech ecosystem? Comment below to keep the conversation going.
We sincerely hope you have enjoyed our three-part series on Building Resilience in Fintech Business!
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