Can we make the digital revolution work for everyone?

Technology and financial inclusion come together at Web Summit

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Jan 30, 2018

Jan 30, 2018

Institutional Partnership

Partnership

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By Michael Schlein

Financial inclusion: Collaboration is key

Mastercard's Ann Cairns, Accion's Michael Schlein, WorldRemit's Ismail Ahmed & Quartz's Eshe Nelson:Almost 2 billion people worldwide do not use formal financial services. Our panel of experts highlight why strategic partnerships are integral to support them.

Posted by Web Summit on Monday, November 27, 2017

The phone you have in your pocket is probably faster, smaller, and smarter than the phone you carried five years ago — or even the computer you typed on ten years ago. Technology is progressing exponentially, and many of the pioneers driving the digital revolution — from Tesla’s Elon Musk to Alibaba’s Joe Tsai — gathered in Lisbon for Web Summit to discuss the progress that they’ve made and the work that they still have to do. I traveled to Web Summit to be part of these conversations, and to emphasize how the digital revolution can benefit everyone and provide people with the financial tools to build better lives.

Financial Services Improve People’s Lives

For 3 billion people, the global financial system doesn’t even exist.  Almost 2 billion people worldwide have no credit card, no savings account, no access to loans — nothing. Another 1 billion individuals may have some access to financial services, but they’re not getting what they need. To discuss how we can leverage financial technology — or fintech — to help these people, I sat down with Mastercard’s Ann Cairns and WorldRemit‘s Ismail Ahmed for a panel moderated by Quartz‘s Eshe Nelson.

Why does access to high-quality, affordable financial tools matter? Let’s look at the life of a farmer in Kenya. She gets paid once a year —at harvest-time — and she has to make that money last for the entire year, yet she lacks a safe place to save. She lives in a cash world, which keeps her invisible to the financial system — unable to build credit that she could use someday to expand her farm or send her children to school. And her cash is easily lost or stolen. She can’t pay online or mail a check, so she has to spend hours traveling to and from a brick-and-mortar office to make a simple utility payment just to keep the lights on. Without the vital financial tools that many take for granted, her life is so much harder than it needs to be.

People without access to financial services are essentially punished for being poor, as Ann Cairns pointed out during our panel. Mastercard addresses this problem by promoting inclusive economic growth because when people lack convenient, reliable financial tools, many things end up being more expensive.

Technology Makes Financial Inclusion Possible 

But there’s good news. We’re entering a golden age of fintech where we can use the explosion of digital technologies to really transform the lives of the poor. The Kenyan farmer from the example above could benefit from Apollo Agriculture’s fintech solutions. Apollo uses GPS and satellite data to provide custom support to farmers, helping them to access better seeds and equipment, learn how to plant more resilient crops, and develop their financial literacy as small business owners.

New developments in technology open up a vast, untapped market. In the past, too many people were ignored by financial institutions —banks and other financial service providers often wrote off entire markets as too inaccessible or expensive to reach. But with innovative fintech, there’s no transaction too small, risk can be measured more precisely, and new markets become viable. For example, All Life was the first company in the world to offer full life insurance to people living with HIV, taking tech into the world of insurance and bringing coverage to people who had been denied the service for years.

Tech companies have been leading the way in developing digital solutions for the world’s 3 billion financially underserved people, but banks and fintechs working together make for a potent combination. If we can harness the global brand names, distribution, customer base, and capital of big institutions with the nimble structure and inventive technology of fintechs, we can change the world.

For strategic partnerships between banks and fintech companies to be effective, governments will have to help ease the way for technology that can improve the lives of their citizens. For instance, even though many people have mobile phones that could allow them to access digital services, connectivity issues could reduce how transformative phones could be. Or as Ismail Ahmed discussed during the panel, some companies may lobby regulators to suppress competition and prevent innovators from creating new or improved services. Governments could encourage innovation by improving utilities and making sure new developments don’t get caught in bureaucratic red tape or waylaid by special interests.

It’s still very early days for fintech. But with the right partnerships, guidance, and hard work, we can harness the power of technology to make sure everyone has the tools they need for a more stable and prosperous life.

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