Fintech companies have emerged as transformative forces in the global financial services landscape. With a global market valuation of US$294 billion in 2023 spread across more than 33,000 companies, the sector has witnessed considerable growth, underscoring its significant impact on financial access, inclusion and economic participation.

This growth has been propelled by increased global smartphone penetration, mobile and broadband Internet coverage and advancements in digital infrastructure, notably digital identity and instant payments.

To measure the impact of fintech solutions, several measurement frameworks have emerged in recent years. A new report by the Milken Institute, an economic think tank, examines these frameworks and explores case studies showcasing how innovative companies are advancing financial inclusion and consumer well-being.

Main impact frameworks

The first frameworks outlined are outcomes-oriented frameworks. These frameworks focus on consumer financial health metrics, such as improved credit scores, increased savings, and reduced dependency on high-cost debt, and propose continuous tracking, reporting and real-time regulatory adaptation based on these outcomes.

According to the report, fintech companies are well positioned to leverage outcomes-oriented impact frameworks, given their capacity to aggregate and analyze financial data at scale. This makes it possible for them to monitor key metrics, such as debt-to-income ratios and credit score improvements, and build comprehensive financial health measures.

Another impact framework outlined in the report is the US Treasury’s National Strategy for Financial Inclusion. This strategy emphasizes the importance of holistic and regular measures of financial health and well-being, beyond traditional metrics of financial access, to ensure the impact of financial services on consumers’ overall economic resilience and security. This approach calls for collaboration between 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 gross domestic product (GDP) and the unemployment rate.

The Financial Health Vital Signs framework, developed by the Office of the Comptroller of the Currency (OCC), uses a structured set of indicators that banks can employ to assess and support the financial health of their customers. This framework defines financial health as stability in day-to-day finances, resilience to handle adverse circumstances, and security for the future. It includes metrics such as having a positive cashflow, a liquidity buffer as well as prime or near-prime credit ratings.

Finally, another prominent framework is the Consumer Financial Protection Bureau (CFPB) Financial Well-Being Scale. This framework defines and measures financial well-being by using a qualitative approach focused on individual perceptions and feelings about financial security and freedom. It incorporates four primary dimensions: how well individuals feel they are managing their day-to-day financial affairs, how confident they feel about their ability to handle financial shows or emergencies, whether they believe they are progressing towards their long-term financial goals, and whether they feel they have the financial flexibility to make choices that bring them personal satisfaction. In contrast to the OCC’s Financial Health Vital Signs, which focus on monitoring quantitative financial indicators, the CFPB Financial Well-Being framework emphasizes the more subjective elements of impact.

Private-sector impact measurement frameworks

In addition to these prominent frameworks, private-sector fintech companies have also developed innovate approaches to measuring and reporting their impact.

For example, Intuit, a business software developer, has created the Intuit QuickBooks Small Business Index, which aims to provide timely and accurate measurements of the financial health and employment dynamics of small businesses. The index uses anonymized data from the Intuit’s QuickBooks Online Payroll system, focusing on businesses with a maximum of nine employees in North America and the UK. This enables a granular focus on micro-businesses, which are often overlooked in larger economic analyses.

Another example comes from Circle, a fintech firm specializing in digital assets and blockchain technology. Circle employs a comprehensive framework to define and measure its impact, focusing on three overarching dimensions:

• Improving financial accessibility by creating affordable financial solutions and reaching regions where traditional banking infrastructure is either insufficient or absent;
• Creating economic opportunities and enabling underserved communities to participate in the global economy; and
• Providing crisis response through timely financial aid in humanitarian crises.

Remitly, a global digital remittance company, offers another example of an impact framework. The company uses a comprehensive, multidimensional approach to assess its impact, which it outlines in its annual Global Impact Report. This framework centers on three core metrics: remittance cost, access and reach, and community impact.

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