There’s a new trend in the financial services sector: Striving toward a “higher bottom line.” And the concept is simple — to make business decisions that benefit both earnings and society, while recognizing that the two are positively linked.
Revenue and profit are unarguably important, but many companies, particularly those that offer financial services, have the opportunity to enact positive social change too. By aspiring to this higher bottom line, they can achieve the ultimate goal — strong profits and a better world. Or at least, better service, access and tools for those who need them most.
It won’t always come naturally, but if these companies seize their opportunity to do both, the whole country stands to benefit.
In this article, we’ll look at four ways companies that offer financial services and accounting services can benefit the community while maintaining profit-driving growth.
1. By making financial services more widely accessible
This goes beyond mobile banking. As financial companies make services like investment management, financial planning, insurance, capital raising and accounting more accessible to individuals and small business owners, both parties will benefit.
According to a report by McKinsey & Company, expanding access to financial services can increase the GDP in the United States by as much as 6% before 2028. Much of that growth would come from greater investments and consumption of these services.
By making financial services simpler and more user-friendly, the industry can access a vast audience of low- to middle-income individuals who don’t currently utilize these services — increasing industry revenue and improving financial health in these underserved communities.
2. By decreasing costs and friction
The trend towards decentralized financial services is already gaining momentum, as evidenced by the boom in fintech (financial technology companies). Services like contactless payments, person-to-person payments, credit access and thousands of niche services gained widespread popularity during the pandemic. One report from Vantage Market Research states that the fintech market is already valued at $112.5 billion and is expected to nearly triple to $332.5 billion by 2028.
Remittance payments are one significant example of how these innovative fintech companies are making financial services more affordable than ever. When remittances (money sent from workers in the U.S. to their family members overseas) are sent using the traditional banking channels, individuals pay 10%-20% in fees. Now, using fintech services, the cost to send money overseas has decreased significantly and is even free in some regions.
3. By expanding access to credit and capital
Another trend in the financial services sector that can benefit both bottom lines and society as a whole is improving access to funding.
For entrepreneurs, small businesses, homebuyers and students, accessing funding has always been challenging. The financial sector has largely catered to major corporations, big businesses, brokerages and wealthy investors. But as the financial services industry evolves, funding for smaller projects is becoming more accessible — enabling a greater number of individuals to build their own wealth along the way.
Greater data now allows financial services companies to offer customized funding opportunities to a wider audience, while helping these companies closely monitor their risk. The underwriting and funding approvals process, formerly a time-consuming manual one, can now be done in seconds using data and algorithms. As a result, these companies can offer more assistance to more consumers without taking on too much risk. Unlike the destabilizing credit issued in the financial crisis of 2008, today’s companies can maintain their stability, manage their risk and still provide much-needed funding to a wide range of individuals and small businesses. And the increase in growing businesses, home purchases, and education access, offers significant, long-term benefits to the economy.
4. By earning back trust
The financial crisis in 2008 eroded society’s trust in the finance and accounting sectors. But by practicing transparency, better managing their risk and using a more stable business model, these sectors can rebuild that trust.
A sound financial system is crucial for healthy, growing economies. And a strong economy is essential to the success of financial services companies. It only makes sense that these companies can improve society and strengthen their bottom line by engaging in responsible innovation. If financial services companies are willing to include multiple stakeholders in their planning and decision-making, including consumer advocates, they can ensure their products and services strengthen communities and generate profit, while earning significant trust in the process.
Financial services companies are in a unique position to create positive social change without sacrificing profits or growth. But what they’ll do with these opportunities is up to them. We hope to see more companies step up and serve better — and we’ll be right beside them.
Want more? Escalon provides startups and small to midsized businesses with proven expertise in accounting, HR and other essential back-office services. Talk to an expert today.