What Would Life Look Like with Universal Financial Inclusion?
The future is closer than we think.
Universal financial access by 2020. That’s the World Bank’s goal. While we’ll likely miss that deadline, we’re on track to achieve that reality at some point in the near future. But what would daily life look like if universal financial inclusion were achieved and cashless options became standard?
Consider this hypothetical scenario. Working as a housekeeper in one of Johannesburg’s affluent homes, Miriam sends money home to her family in Zimbabwe on a weekly basis. The transfer is anything but easy. Not only is she forced to carry cash — a risky endeavor due to South Africa’s endemic crime — but she’s charged fees as high as 19% to remit her money. Once the money arrives in Zimbabwe, her husband is also forced to carry it in cash since he, too, lacks a bank account.
In 10 years, will Miriam’s experience remitting money be any different? It very well could be.
Miriam’s employer will be able to deposit her paycheck instantly into a digital currency account. When she buys groceries at the local market, vendors won’t care whether she uses Wala or WeChat Pay or Mama Money because interoperable mobile wallets will allow all of the platforms. With some of the extra funds saved via digital remittances, Miriam could invest 10% of her paycheck into a bespoke savings account to prepare for her family’s future. Mobile data will remain expensive despite some price decreases, but Miriam will eagerly renew her phone contract each month in order to qualify for free bundled insurance that will cover both medical and funeral expenses.
Meanwhile in Zimbabwe, her husband will receive the remittance instantly on his mobile phone. He will have the option of paying for school fees and other bills without carrying cash, saving him hours of walking and waiting each week. The burden of carrying large amounts of fiat currency will disappear. The rest of their family will also benefit from the cashless lifestyle. Following savings advice from her investment app, they could achieve their goal of purchasing a tablet computer, which their children will actively use to learn computer skills.
Of course, not every disruption is without sacrifice. In a digitally dependent future, Miriam’s husband will spend hours each week helping his own parents to conduct their financial affairs because poor eyesight will prevent them from reading the small screens. A free gaming app their oldest son will downloads could compromise his passwords and empty his digital wallet, despite requiring biometric identification safeguards.
In this vision of the next decade, how will financial inclusion and digitization benefit Miriam and her family? Everyone will have access to their money at faster speeds, potentially reducing their impoverished state. This means more food on the table, more years of school tuition, and perhaps more long-term investments. Simultaneous trends of cheaper solar energy and better internet reception will work symbiotically with the decentralized financial sector. However, access to financial services does not translate to intelligence with financial services.
Some members of the community will struggle since they won’t be able to utilize the digital revolution. Whether from old age or disability or illiteracy, these citizens will require consistent time investments to navigate new technological barriers. Furthermore, in some countries this will be exacerbated by high age dependency ratios. Existing crimes such as identity theft will become more prevalent, sophisticated, and difficult to resolve. Struggling to stay relevant in the new financial services landscape, some banks will try to levy high fees on customers with a remarkable success rate. Microloans to ill-equipped citizens, either for luxuries or online gambling, will be ever more common, too.
Once governments eventually stop printing cash, citizens will become reliant on private companies for transacting their monetary matters — a first in human history. The level of societal trust required for this structural change will take years to cultivate. One potential upside is citizens will find it much easier to switch financial carriers than national administrations. The role of governments will need to evolve to combat cybercrime, provide price stability for cryptocurrencies, and regulate telecom monopolies. Civic leaders will need to incentivize value-added products such as insurance and savings rather than consumer indulgences. All these challenges will have the combined effect of offsetting the increased productivity afforded by financial inclusion. With time, countries will adapt.
Do the benefits outweigh the costs of universal financial inclusion and digitization? Yes, absolutely. But we must be prepared for what happens afterwards if we wish to mitigate damage. We are living in a moment of remarkable transformation in emerging market fintech. A grounded vision of the future will help us maximize the promise of the present.
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