Writes Dionysus, content writer
Headline Diplomat eMagazine, LUDCI.eu
Fintech, also known as Financial Technology aims to automate and improve the delivery of financial services. It integrates technology with offerings presented by financial companies, making it easier to serve customers.
Some examples of Fintech include Crypto apps, peer-to-peer (P2P) lending apps, investment apps, robo-advisors, and payment apps. While this improvement has revolutionized finance, it also opens the door for human rights abuses.
This article will explore Fintech and the challenges to human rights, revealing how Fintech even aids traffickers alongside ways institutions can rectify this misfortune.
Three Risks Fintech Pose to Human Rights
The advent of Financial technology has allowed monetary institutions to grant people access to business capital, send and receive money, access wider loans with lower interest rates, and more.
Unfortunately, this industry isn’t subject to the same strict regulation as traditional banks, making risks to humans easier to surface in this rapidly growing industry.
These human rights risks include:
1. Predatory Lending Practices
Fintech allows financial institutions to offer monetary services to individuals, and granting people access to loans is among these services. Unfortunately, some loan companies have predatory lending practices that exploit desperate persons.
Predatory lending happens when lenders impose deceptive, abusive, or unfair loan terms on individuals. This unfortunate contract often comes with high-interest rates and fees, which can strip borrowers of equity and demote the borrower to a lower credit score, while benefiting the lender.
This problem exists globally but is most significant in developing countries, with a good example being the presence of multiple fast-loan apps in Nigeria. These Nigerian lenders offer high-interest quick loans with no collateral to desperate borrowers who then struggle to pay, resulting in a perpetual cycle of debt.
Furthermore, these fraudulent lenders use shame tactics to persuade borrowers to pay the borrowed money alongside the accumulated high-interest rate. Fortunately, Google removed the majority of Nigerian loan apps for proper inspection.
2. Breach of Privacy
Fintech has four aspects including Artificial intelligence (AI), blockchain, cloud computing, and big data. Big data assists FinTech companies in predicting and staying ahead of customer expectations, resulting in better service.
This data can be acquired from a user’s phone or other methods and often includes:
- Social Media contacts & updates
- Cellular data consumption
- Online activity
- Dialing habits
The problem arises from these data procurement approaches as users have little to no control over how these entities collect this information. Some financial startups may use a permission approach, granting the institutions access to customer financial activities and data.
This permission-based access is problematic, especially when determining the blame for damage when leaks and mistakes occur. Nevertheless, having little to no control over one’s privacy when using an essential piece of technology raises ethical questions about the Right to Privacy violations.
3. Cybersecurity
A Cyber-attack is the biggest problem that Fintech faces today, with hackers targeting different financial institutions. These malicious activities result in the user’s personal account information (bank accounts and credit card numbers) and finances being stolen.
This online bank robbery has become prevalent in recent years with Cybersecurity statistics revealing that approximately 2,200 cyber attacks happen daily. Furthermore, these data breaches can cost around $9.44M, totalling $8 trillion by 2023.
Naturally, this data breach is a human rights violation, where individuals are permitted to protect personal data about themselves. The inability of Fintech to properly secure this private information makes them a constant target for hackers looking to steal money and people’s identities.
How Fintech Unintentionally Aids Traffickers
Like any technology, criminals misuse Fintech in achieving their goals despite numerous financial companies having know-your-customer (KYC) and anti-money laundering (AML) procedures.
The two most common ways traffickers exploit Fintech are via Digital Payments and Money laundering.
Essentially, Fintech allows users to complete financial transactions fast and conveniently, which traffickers also employ. These malicious individuals may use cryptocurrencies or online payment platforms to disguise traction or send money across countries.
On the other hand, human traffickers can hide the true nature of their illegally acquired funds via Fintech channels and other techniques. Some methods include using fake identities, manipulating digital payment systems, and more.
Conclusion
Undoubtedly, Fintech presents multiple benefits to society including easy access to loans, quick financial transactions, and more. Unfortunately, such benefits are present with risks such as data leaks, predatory lending practices, and little to no control over Fintech data collection.
Furthermore, Human traffickers employ Fintech benefits to further their malicious actions; these criminals transfer money across countries via digital payment systems and cryptocurrency. They also hide their illicit proceeds by manipulating digital payment systems and using fake identities.
To combat this issue, legislation should implement and enforce laws that hold Fintech establishments to the same level as traditional banks, while maximizing users’ ability to safeguard their data.
On the other hand, Fintech companies should harness emerging technologies like Artificial Intelligence to drastically reduce cyber-attacks and data theft.
Featured Photo: Mati Mango: https://www.pexels.com/el-gr/photo/5952651/
