Fintech companies have become transformative forces in the global financial services landscape. With a global market valuation of US$294 billion in 2023, across more than 33,000 companies, the sector has seen considerable growth, highlighting its significant impact on financial access, inclusion and economic participation.
This growth has been driven by increased global smartphone penetration, mobile and broadband internet coverage, and advances in digital infrastructure, including digital identity and instant payments.
To measure the impact of fintech solutions, several measurement frameworks have emerged in recent years. A new report from the Milken Institute, an economic think tank, examine these frameworks and explores case studies showing how innovative companies are advancing financial inclusion and consumer well-being.
Main impact frameworks
The first frames described are results-oriented frameworks. These frameworks focus on measures of consumer financial health, such as improving credit scores, increasing savings and reducing reliance on costly debt, and offer ongoing monitoring, reporting and regulatory adaptation in real time based on these results.
According to the report, fintech companies are well-positioned to leverage results-driven impact frameworks, given their ability to aggregate and analyze financial data at scale. This allows them to monitor key indicators, such as debt ratios and improving credit scores, and develop comprehensive measures of financial health.
Another impact framework described in the report is the US Treasury National Strategy for Financial Inclusion. This strategy emphasizes the importance of holistic and regular measures of financial health and well-being, beyond traditional measures of financial access, to ensure the impact of financial services on resilience and overall economic security of consumers. This approach calls for collaboration between the public and private sectors to develop and implement data-driven strategies, and suggests that financial health and well-being could be published regularly like other macroeconomic indicators like domestic product gross (GDP) and the unemployment rate.
THE Vital Signs of Financial Health The framework, developed by the Office of the Comptroller of the Currency (OCC), uses a structured set of indicators that banks can use to assess and support the financial health of their customers. This framework defines financial health as stability in daily finances, resilience in the face of adverse circumstances, and security for the future. It includes metrics such as positive cash flow, liquidity cushion as well as prime or near-prime credit ratings.
Finally, another important framework is the Consumer Financial Protection Bureau (CFPB). Financial Well-Being Scale. This framework defines and measures financial well-being using a qualitative approach focused on individual perceptions and feelings regarding financial security and freedom. It integrates four main dimensions: to what extent individuals believe they manage their daily financial affairs, to what extent they feel confident in their ability to manage financial difficulties or emergencies, whether they believe they are making progress towards their long-term financial goals term, and whether they believe they have the financial flexibility necessary to make choices that bring them personal satisfaction. Unlike the OCC’s Financial Health Vital Signs, which focus on tracking quantitative financial indicators, the CFPB’s Financial Wellness Framework emphasizes more subjective impact elements.
Private sector impact measurement frameworks
In addition to these important frameworks, private sector fintech companies have also developed innovative approaches to measuring and reporting their impact.
For example, Intuit, an enterprise software developer, created the Intuit QuickBooks Small Business Index, which aims to provide timely and accurate measures of the financial health and employment dynamics of small businesses. The index uses anonymized data from Intuit’s QuickBooks online payroll system, focusing on companies with up to nine employees in North America and the United Kingdom. This allows for a more specific focus on micro-enterprises, which are often overlooked in broader economic analyses.
Another example comes from Circle, a financial technology company specializing in digital assets and blockchain technology. Circle uses a comprehensive framework to define and measure its impact, focusing on three overarching dimensions:
- Improve financial accessibility by creating affordable financial solutions and reaching regions where traditional banking infrastructure is either insufficient or non-existent;
- Create economic opportunities and enable underserved communities to participate in the global economy; And
- Providing crisis response through timely financial assistance during humanitarian crises.
Remitly, a global digital remittance company, offers another example of an impact framework. The company uses a holistic, multi-dimensional approach to assessing its impact, which it describes in its annual Global Impact Report. This framework centers on three key indicators: cost of remittances, access and reach, and community impact.
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