Wednesday, November 14, 2018

Understanding fintech from the U.S. to China

By Melissa Wrapp and Bill Maurer

On September 28-29, the 2018 California-Shanghai Innovation Dialogues hosted by UC Irvine brought together scholars, policymakers, and industry professionals from across the globe to discuss the ethics and broader social impact of emergent technologies, from insurtech to blockchain to roboadvising. Filene’s newest Fellow, Bill Maurer, gave a talk analyzing the burgeoning cryptocurrency ‘ICO’ phenomenon focusing on the power of big data and digital platforms to create seemingly totalizing systems. Here, Maurer teases out some of the major financial innovations headed our way and the socioeconomic implications that credit unions should be attuned to.

Photo credit: Marilyn Nguyen

What changes are happening in the international fintech space?
We are living in an increasingly digital world. The decreasing costs and rising quality of smart devices is accelerating fintech use. More and more we can expect to see technologies developing around what some are calling the ABCDs: AI, Blockchain, Cloud, and big Data. In China in particular, apps that create an ecosystem of different utilities, such as WeChat Pay and Alipay, are becoming giants in the mobile payments space—and reaching beyond payments into transit, bike sharing, credit, dog walking, you name it. Although their rise in China is in part linked to particularities of the local context, it is important for us to understand these technologies as companies like Facebook, Apple, and Google make moves toward integrating payments, social media, news, and other applications.

Filene Fellow Bill Maurer. Photo Credit: Marilyn Nguyen.
Americans sometimes struggle to understand what they see as Chinese consumers’ relaxed attitude toward data aggregation. What is the appeal of these apps?
For many in China, it is the same as the reason we in the US unthinkingly click through user license agreements without reading: convenience. Analysts are often quick to jump to a framework of surveillance and oppression in conceptualizing Chinese financial innovations. This isn’t unreasonable given the government’s proclivities toward censorship. There are already signs that “social credit” schemes (think Uber ratings, but for everything in your life) may be used to silence political dissidents. And products like Zhima Credit (also known as Sesame Credit), a new social credit scoring system offered by Ant Financial, coincide with broader government plans to collect citizens’ social credit data. However, as scholars at the conference pointed out, these possibilities for algorithmic governance fit into a much broader system of regulation geared toward promoting and maintaining trust in China’s low-trust market environment. So it is important to keep in mind that “convenience” in China is bound up in the social value of stability, concerns over fraudulent goods, and transparent pricing; and that it means something completely different than it does in the American context.

What is something unexpected social scientists have discovered about how people are engaging with new fintech?
People in the tech space often pitch their products in terms of revolutionary, wholesale disruption. However, what we are finding is that rather than entirely replacing things that came before, fintech is creating new layers of possibilities. Turning again to social credit schemes in China, for example, researchers have found that migrant workers are using new apps to access credit in order to extend longstanding patterns of informal lending to friends. Migrants’ efforts to improve their credit scores, therefore, are not linked to a desire to consume more for themselves, but to be able to lend to relations and friends. It is important to pay attention to the way new technologies mix up formal and informal practices, as well as older traditions and tendencies around money with new delivery channels, interfaces, and possibilities. All these continue to be informed by culturally specific moral logics around money, as well as existing financial practices.

Insurtech panel (LtoR): Lei Guang, Liz McFall, Xian Xu, Robert Collins
Photo Credit: Marilyn Nguyen 
What do participants in the credit union movement need to understand about new fintech products?
Despite our best efforts to channel our customers’ behavior toward certain ends, humans will always find workarounds. No matter how “intelligent” roboadvising becomes, for example, it will never fully exclude affect and emotion. No matter how much data is collected by insurtech companies, there will always be a smoker who lives forever and a marathoner who dies young. Sociologist Liz McFall reminds us that the origins of the word risk are related to “things to avoid in the sea.” There will always be things to avoid in the sea: sea monsters, rocks, and reefs lurking beneath the surface that are not fully known. It is better to recognize when people are tinkering, subverting, and otherwise creatively repurposing our technology and try to understand what they are up to and why, than to assume they will adopt tech the way we intend.

Take this conversation to the next level with Filene Fellow, Bill Maurer, when he speaks to how credit unions should analyze the risks of adopting new fintech with its promises and opportunity costs at big.bright.minds.2018. big.bright.minds. brings together experts from each of Filene’s Centers of Excellence to help us redefine consumer financial wellness. Join Bill Maurer and Filene in San Diego on December 6-7.

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Melissa K. Wrapp
PhD Candidate, Department of Anthropology
University of California, Irvine

Bill Maurer
Dean, School of Social Sciences; Professor, Department of Anthropology and School of Law; Director, Institute for Money, Technology and Financial Inclusion
University of California, Irvine

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