Conference Presentation, Panel
FinAction: Applying FinTech to Solve Our Greatest Financial Challenges
Milken InstituteJackson Mueller, Henri Dommel, Rory Eakin, Sahil Kini, Valery Vavilov, Craig Vosburg, PETER BARRON, NICOLAS GARCIA, JACKSON GABOURY, RORY KAUFMANN, David
- Fintech evolution is expected to pivot from hype to tangible impacts for end users, small businesses, and investors, driven by a secular momentum of digitization that displaces expensive, corruption-prone paper-based payments and moves toward a zero-transaction-cost world.
- Electronic payments have generated approximately $2 trillion in incremental U.S. GDP and over 20 million jobs since inception, with future growth predicted from connecting the 2 billion unbanked globally and meeting specific needs like bifurcating savings for the gig economy.
- Strategic goals include bringing 500 million people into the financial mainstream and leveraging alternative data to provide small businesses with a cost of capital 500 to 1,000 basis points lower than traditional sources.
- Private capital markets aim to de-risk investments in companies at the $1 million revenue inflection point, targeting a failure rate of less than 5% over five years for the 250 portfolio companies, thereby creating jobs outside traditional tech VC geographies.
- Blockchain technology is predicted to act as the "next internet" for digitizing assets like homes and cars, enabling instantaneous property rights registration by removing third parties and protecting citizen data from unauthorized changes.
- In India, the combination of bank accounts, Aadhaar, and mobile phones has enabled the enrollment of one billion individuals in six years and the opening of 270 million bank accounts for direct subsidy transfers within three years.
- Digital infrastructure in India has reduced account authentication from days to two minutes via EKYC and allowed a telecom company to reach 100 million subscribers with valid KYC in three months, making flow-based lending the primary method for providing formal credit to the unbanked.
- The UPI transaction layer is predicted to bypass traditional Visa and Mastercard pricing models, shifting revenue generation from transaction fees to debt provision while treating transaction fees as a cost center.
- The remittance sector, representing a hidden giant with $600 billion in formal flows and an estimated additional $300 billion in informal channels, presents opportunities to drive financial inclusion by linking these flows to broader financial services.
- Mobile wallet initiatives in regions like Uganda have reached 1.4 million subscribers within four months of launch, aiming to replicate the scale of M-Pesa in Kenya through public-private partnerships.
- Digital finance innovation is evolving rapidly, with expectations that regulatory "sandbox approaches" will be established to accommodate non-financial service providers and enable safe, scalable government social payments.
- Entrepreneurs facing high-interest survival costs ranging from 50% to 1,000% APR are predicted to build cash reserves and expand businesses once formal credit access replaces reliance on predatory lending.
- Non-traditional lenders are identified as more receptive to alternative data flows for credit underwriting compared to traditional banks, suggesting that building a base of historical data will allow for continued expansion of lending impact.