Fintech On The Front Line

What is Fintech?

The term “fintech” refers to new technology that aims to improve and automate the delivery and usage of financial services.

Fintech, at its most basic level, is used to help organisations, company owners, and individuals better manage their financial operations, procedures, and lives through the use of specialised software and algorithms that run on computers and, increasingly, smartphones.

Fintech is a mix of “financial technology” and “financial innovation.” Fintech was coined in the twenty-first century to describe the technology used in the back-end systems of established financial organisations. However, since then, there has been a shift toward more consumer-focused services and, as a result, a more consumer-focused definition.

Fintech currently encompasses a variety of sectors and industries, including education, retail banking, charitable fundraising, and investment management to name a few.

Fintech also includes the development and use of crypto-currencies such as bitcoin. While that segment of fintech may see the most headlines, the big money still lies in the traditional global banking industry and its multi-trillion-dollar market capitalization.

Many fintechs, such as the UK’s Wise multi-currency transfer service which has “temporarily stopped” transfers in Russian rubles, are doing their bit to contribute to the pressure on the Russian government. Visa, Mastercard, PayPal and others have blocked access to the Russian market. As a result there are cash shortages e-commerce will be extremely difficult.

(European fintechs are helping in other interesting ways. Zopa, in London, has offered sponsorship of 50 work visas for Ukrainian who flee to the UK. Applicants must have a background in engineering, technology, and data analytics or experience in consumer financial services. Some people are anticipating a fintech brain drain from Russia in coming months as well.)

When it comes to cryptocurrency (estimates are that Russians hold some $200 billion in cryptocurrencies, more than a tenth of the total) exchanges such as Coinbase, Kraken and Binance have blocked accounts connected to sanctioned individuals and entities. At the same time supporters are whizzing cryptocoin donations into Ukraine.

(Bitcoin isn’t a good choice for sanctions busting either way, I would have thought. People who use it to avoid sanctions on Russia are leaving a permanent record for the US authorities to track at their leisure and people who use it to send support to Ukraine are leaving an immutable record for Mr. Putin’s lieutenants to peruse at leisure, I would have thought).

Whether disgruntled Muscovites who found that their Apple Pay no longer gets them into the subway will form an effective pressure group I couldn’t say, but the world’s displeasure has at least been made clear to them. The oligarchs who discover that their Visa card no longer works in Harrods will hopefully communicate their frustrations to the Russian leadership and although I can well imagine Mr. Putin pushing their concerns aside (“How many divisions does fintech have?”), these continuous inconveniences will hopefully act as a constant reminder of Western displeasure.

Social Media Subversion

The BBC’s disinformation correspondent on that same radio show made some interesting points about how social media wars, rather than cyberwars, seem to be the order of the day and I am sure she was right to point in this direction. I do not mean social media as in propaganda but social media as an actual weapon of war.

The use of social media seems a cost-effective and practical adjunct to conventional weapons. The Wall Street Journal reported on the use of social media on the battlefield, referring to a NATO exercise in which a “red team” was tasked with disrupting the operations of a group of soldiers. It cost them $60 to rent some Russian bots to get hold of identities and contact details of the soldiers. The attackers then engaged the target on Facebook and Instagram to map out connections between troops, find out where they were (to within 1,000 metres) and even persuade them to send selfies (to find out what equipment they had). NATO’s conclusion was the “The level of personal information we found was very detailed and enabled us to instil [sic] undesirable behaviour… Every time we attempted to manipulate behaviours, we succeeded”. Wow. Every time.

Soldiers being what they are, the internet has proved to be a fifth column, whether it is because of soldiers giving away the location of secret facilities by jogging around them while wearing fitness trackers or, as appears to have happened on the borders of Ukraine, trying to get dates on Tinder and giving away military machinations in the process. Presumably with this evidence to hand, the British Army has banned WhatsApp completely because of concerns that Russia might be exploiting the platform to obtain sensitive information (eg, troops deployments).

(Rather oddly, the UK media have at the same time been reporting that the Prime Minister, Mr. Johnson, gets details of vital government business sent to him via WhatsApp, a fact revealed by some papers filed in court.)

Where Is Our Cyberwar?

So what happened to the cyberwar then? That BBC conversation went into a discussion of cyberwarfare, and I made the point that I thought the role of cyberwar in conflict had been overestimated. Bruce Schneier, one of the world’s leading experts on cybersecurity, made a similar point recently, writing in Schneier on Security 10th March 2022) that it has been interesting to notice how unimportant and ineffective cyber operations have been in the Russia-Ukraine war. Ian Levy, Technical Director of the UK’s National Cyber Security Centre reinforced this view when he that the invasion of Ukraine has made many observers reconsider how we see the world and, in particular, how Russia might also use cyber operations. He noted that “we’ve not seen – and don’t expect to see – the massive, global cyber attacks that some had predicted”.

That’s not to say that there are no cyberattacks, of course. Security Week notes that Russia had already tested cyber operations against the Ukrainian power grid in 2015 and late 2016 yet when it came to the invasion it used old-fashioned boots on the ground to capture a nuclear power plant. We might speculate that was because it couldn’t take the plant offline via the matrix or whether it was as a part of a plan to occupy Ukraine (which would require leaving the infrastructure largely operational) but nonetheless it was all rather conventional.

It seems as if cyberwar doesn’t, for the time being anyway, really do much to change the outcome of conflict. Yes, hackers can temporarily mess up the rail networks in Belarus and Poland, or deface government web sites in Russia and Ukraine, but that’s a long way from having Migs drop out of the sky because of a virus in command and control systems.

Instead of the cyberwars of science fiction we have the fintech wars involving cryptocurrency exchanges, payment cards and remittance systems. While these battles by themselves may not bring the war to a halt, they will certainly communicate the right messages to smartphone-wielding Muscovites.