Panel, Conference Presentation
Inclusive Finance: How Technology Brings Banking to the Underserved
Milken InstituteChris Brummer, Chris Larson, Bill Berheit, Shamina Singh, David Thompson, Bob, David Rockefeller Jr., Stacey Worden
- Global financial inclusion challenges are quantified with projections that 2.5 billion adults are unbanked and 2 billion have zero access to finance, while over 5 billion have limited access, creating a market with a predicted purchasing power of at least $4 trillion by 2020, potentially doubling to $8 trillion.
- Mobile technology and smartphones are expected to replace physical banking infrastructure ("bricks") with digital solutions ("clicks"), enabling peer-to-peer transfers, micro-savings (starting at one cent), micro-borrowing (as low as $1), and insurance premium payments in increments of $0.10, particularly in regions like Kenya where mobile adoption is high.
- Innovators plan to create systems where every smartphone acts as a global ATM using QR codes for identity validation, allowing the movement of digital cash between any two smartphones worldwide and leveraging sophisticated financial engineering to store real cash directly on devices.
- The industry is shifting focus from building new global cryptocurrencies to establishing global rails for existing currencies (USD, EUR, RMB) to replace slow, fragmented correspondent banking systems with real-time settlement infrastructure capable of routing value in seconds via the cheapest path.
- Regulatory landscapes are identified as a primary hurdle, with many countries perceived as over-regulated due to fear of technology, though future expectations suggest regulators will embrace transparency provided by digital ledgers, potentially leading to laws allowing fingerprint or photo identification for those lacking formal IDs.
- Strategic partnerships involving governments, NGOs, the public sector, and corporations are deemed essential for success, with specific plans to digitize social subsidies for over 150 million people through 500+ public-private programs to eliminate corruption and stabilize income for the poor.
- Market competition is predicted to intensify in areas with high mobile transaction potential, which currently represents only 2% of global transactions, with expectations that fees for teller services will drop rapidly in competitive environments and that mobile devices will become ubiquitous points of sale.
- Regional disparities in adoption are noted, with significant innovation expected in South Africa, Kenya, India, and Indonesia compared to slower progress in the United States and Europe due to legacy systems, while cash remains a critical component for over 85% of global remittances in areas with limited infrastructure.
- Risks and counter-arguments include the potential dangers of eliminating cash, which some view as a threat to liberty, and the complexity of navigating over 170 currencies and varying laws across 200+ countries where regulators and laws differ significantly from technology development speeds.
- Specific corporate initiatives include Ripple's pilot with Western Union for real-time settlement, Abra's goal to move money between any two phone numbers using smartphone infrastructure, and Safaricom's evolution of M-Pesa into a comprehensive mobile banking platform.
- Future scalability is anticipated through the expansion of conference activities and market reach, with projections that the group size will triple in the next year and grow to the stage of prominent figures like Robert Rubin the following year, alongside the expectation that digitized transactions will make corruption difficult as criminal entities avoid digital trails.