On March 25, IDEO CoLab Ventures and experts including Dave Kim from the Gates Foundation, Simon Chamorro from Valiu, and Will Le from Celo and 40+ others from around the world shared perspectives on financial inclusion for the next billion users, with a focus on emerging markets. You can watch the full video here.
Over the last two decades, extraordinary effort has been dedicated to helping those living in poverty gain access to the digital financial system. Great progress has been made in providing access, yet 30% of the population remains unbanked. Many of those, who do have bank accounts, are not using them because they are complicated, inconvenient, and expensive. While still nascent, crypto currencies represent the promise of new financial infrastructure and purpose-built products and services that might better serve unbanked. As we navigate today’s turbulent economic crisis and emerge to re-architect the global financial system, we have a unique opportunity to be sure we are including populations that are underserved, or completely left out of today’s system.
It’s one thing to imagine this future, but it’s another thing to be actively building it. For our recent virtual brainstorm, we were joined by 3 innovators who are working directly with unbanked and underbanked populations. They shared their perspectives and stories of real people from they’ve met working on the edges of crypto and financial inclusion.
Dave Kim, Gates Foundation:
“When you ask people to jump from the financial tools they know over to digital, you’re asking them to make a big jump!”
As a program officer for the Financial Services for the Poor team at the Gates Foundation, Dave has a unique global view of different approaches to financial inclusion. He has worked across much of Africa and Asia (Kenya, Tanzania, Uganda, Nigeria, India, Bangladesh, Pakistan and Indonesia)
- Financial services does three jobs to alleviate poverty: managing an individual’s day to day, long-term income growth, and resilience to shocks
- Dave shared “The Human Account”, an open research platform that shares data, tools, and stories of peoples financial health in a number of countries.
- Dave highlighted both how fragile and resilient people’s livelihoods are through the story of a rice farmer in Myanmar who’s “retirement plan” was lost when her avocado grove burned down.
- A pattern across countries and contexts is the rise of financial agents, or intermediation. These human interfaces to the digital world are critically important in building trust, fluency and adoption of digital financial services. These agents are likely a bridge between the current state and a mobile banking future.
- Dave closed by sharing that these issues exist closer to home here in the US, where 70% of Americans are not financially healthy and 53% have no emergency savings. Worldwide, the economic effects of Covid-19 will be felt by many, many people who have no safety net.
Simon Chamorro, Valiu:
“Latin American communities are loyal, fast learning, have a high demand for digital financial services, and high expectations of emerging financial services.”
- Around 60% of people in Latin America handle cash, primarily. They’re not in the banking system, or liking the digital banking system. There are a lot of informal networks where cash moves around.
- About 6.5M Venezuelan migrants are in Latin America, and are desperately in need of digital financial services. They are financially literate, but just don’t have the tools and infrastructure to help them achieve financial stability right now, especially with the hyperinflation of the Venezuelan bolivar.
- There is increasing evidence that we’re seeing hyperinflation in other Latin American countries such as Argentina, Colombia, Mexico, Peru. If you’re saving in the local currency, you’re drastically losing value and money every day.
- We’ve noticed crypto trading volumes growing in Latin America, especially in peer-to-peer exchanges and platforms like localbitcoins. It’ll be interesting to see what happens next.
Will Le, Celo
“Due to the high unemployment in Kenya, 2/3 of people turn to online work to fill the income gap. There is a massive demand for mobile-based microwork.”
- Will Le (@CeloOrg)
- Despite a lot of the benefits of cryptocurrency, we haven’t seen as widespread adoption as we would expect. And we believe that part of that reason is that there is a lot of friction around usability right now.
- Crypto adoption will need to be made suitable for low-end devices because there are lots of areas with low connectivity
- in Kenya, youth unemployment is around 35% but most people feel that the official numbers are much higher. As a result people, have turned to online work as a way to fill the income void
- We are currently testing what it’ll look like to do work on your phone and have the earned money sent directly to your phone for fractions of the cost instantaneously. Typically, right now, it takes about 2–3 days to clear a bank payment.
- I think we’re seeing the emergence of an interesting opportunity: there will be more people in need of jobs than ever, but we’re also seeing entire countries going on lockdown right now.
- Imagine the opportunity to earn income on your phone for the safety of your home — this could be a lifeline for a lot of people.
We’re all in this together
Emerging markets account for 60 percent of the world economy on the basis of purchasing power, according to the International Monetary Fund.
A slowdown in developing countries is a slowdown for the planet.
Over the years, IDEO and IDEO.org have been working together on the ground with a number of different communities and challenges related to a better financial system. We are inspired by projects like the Women and Money project, a budgeting toolkit for low income families in SF, and projects exploring last mile money and agent networks in Tanzania.
Are you working on something awesome? Reach out to us on Twitter @IDEOVC!