A STUDY ON SUSTAINABILITY IN THE FINTECH BANKING INDUSTRY AND THE EVOLUTION OF SUSTAINABLE RATINGS IN FINTECH

Aakash Sharma; B Mishra

doi:10.55955/340003

Authors

Mr. Aakash Sharma Guru Ghasidas Vishwavidyalaya https://orcid.org/0000-0001-8946-6074
Prof. B. D. Mishra Guru Ghasidas Vishwavidyalaya

DOI:

https://doi.org/10.55955/340003

Keywords:

Finance, Sustainability, Fintech, Banking, Rating

Abstract

The assessment and promotion of responsible and ethical practices within the dynamic fintech banking sector are crucial, and sustainable ratings play a pivotal role in achieving these objectives. As the fintech industry disrupts traditional banking, it becomes imperative to evaluate its environmental, social, and governance (ESG) performance to effectively manage risks and maximize positive impacts. This abstract delves into the significance, challenges, and recommendations surrounding sustainable ratings in fintech banking. Although fintech and digital banking offer great potential, they also pose ESG risks. Innovations in areas like digital payments, decentralized finance, big data analytics, robo-advisory, and lending platforms reshape the financial landscape and contribute to financial inclusion, consumer empowerment, and efficiency. However, the long-term sustainability implications of these advancements remain uncertain. To address this, tailored ESG rating mechanisms are needed to assess fintech banking based on material sustainability issues. These ratings evaluate performance across key metrics such as climate action, ethical AI, data stewardship, financial inclusion, and governance. Stakeholders can leverage these ratings to identify sustainability leaders and align investments with the United Nations Sustainable Development Goals. Mainstreaming fintech sustainability ratings requires collaboration among multiple stakeholders, encompassing the establishment of reporting standards, disclosure frameworks, assurance mechanisms, and capacity-building initiatives. Challenges in this pursuit include the absence of sector-specific measurement standards, the reluctance of fintech firms to allocate resources to sustainability efforts, limited internal expertise, and concerns surrounding confidentiality and security. Overcoming these challenges necessitates the introduction of mandatory sustainability disclosure policies by regulators, the development of industry-specific reporting standards by industry associations and standard setters, and the integration of sustainability due diligence into the decision-making processes of investors. Furthermore, capacity-building programs are essential to educate fintech leaders on material ESG risks and integrate sustainability considerations into their strategic planning. Ultimately, sustainable ratings in fintech banking serve as a framework for evaluating and incentivizing responsible practices, empowering stakeholders to direct investments towards sustainable fintech innovation and fostering an inclusive and sustainable financial ecosystem.

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