“Are you ready for Isaac?”
I attended a startup and tech conference four years ago, and one of the presenters asked this as the main argument of his keynote about fintech.
Back then, the industry wasn’t yet widely known as fintech. But the presenter, Scott Bales, had a vision for the banking system, and that is for tech firms to give better access to the millions and millions of unbanked and underbanked individuals across the globe through democratized financial services that are mainly digital-first or mobile-first.
He highlighted that for the financial sector, it’s now becoming more common to be “sans branch”. This means the physical presence of a bank branch is becoming less and less important, in favor of digital services that can be offered in lieu of it.
Central to all these is the proverbial “Isaac”, a young person born in a digital native age, where persistent mobile data connections and mobile apps are ubiquitous, and where people’s first access to the internet are done on a mobile device instead of a computer.
This generation, argued Bales, who is now Managing Director at venture fund Innovation Labs Asia, does not know a world without the internet. And this means that startups will need to tailor-fit their services to an audience like “Isaac”. Startups, especially fintechs, will need to make leaps and bounds in order to better address the needs of a digital native generation – whether they are millennials or younger.
With blockchain tech, tomorrow’s dreams are realized today
Fast forward to 2017, I am increasingly of the opinion that Bales’ thoughts were prophetic. However, back then we probably did not expect the potential of fintech to be so big. That was four years ago — startups were already dealing with peer-to-peer banking through mobile devices, and digital accounts could be opened through smartphone apps.
Still, these were largely based on the traditional banking transactions: depositing or withdrawing money, paying merchants for purchases, and using mobile devices for other such payment transactions.
For years, Bitcoin and the blockchain already proved to be viable means to establish trust and authentication among fintech users and providers. However, the cryptocurrency’s rise was the bigger news. Blockchain tech took a backseat role behind the scenes.
Today, it is simpler than ever for users to take care of their banking and financial transactions through blockchain-powered services. And this has the potential to change the lives of millions of poor and marginalized users for the better, particularly through better access to capital, financial resources, and game-changing small business transactions.
Reducing poverty through better access
According to the World Bank’s global financial index, there are around 2.5 billion unbanked or underbanked individuals across the globe, representing a quarter of the world’s population. For this number, the inability to access financial systems and transactions can be debilitating in terms of not being able to secure potentially life-changing resources.
For example, credit cards offer a good way to access credit during times of emergencies – medical expenses, urgent repairs, and even the need for small business expansion can usually be addressed with the swipe of a card. But what if you don’t have a credit card or even a bank account?
For most underbanked users, the last resort would be to turn to loan sharks and their extremely predatory interest rates. This contributes to the cycle of poverty, as such predatory lending practices often result in the borrower getting deep into debt even before they can finish off principal payments.
Thus, fintech companies and other startups are now tasked to address not only the highly-capable and moneyed crowd, but also the marginalized sectors, who stand to gain the most from innovations in finance.
“We believe that if you really want to increase wealth, in any country, the best way is to make it easy to do business”, writes Alexi Lane, founder and CEO of Everex, a Singapore-based blockchain-powered startup that provides cryptocash services with focus on easy and inexpensive access to fintech services. “Capitalism, entrepreneurship, and free flow of money have improved more lives than any development scheme or government policy. History is proof”, he adds.
Lane has shared on Quora that the decentralized nature of the blockchain makes such payment platforms significantly more efficient and secure. “So we’re opening up financial world to the underserved. International ecommerce for everyone. You can only achieve this with blockchain tech; everything else is too centralized. Once everyone has the same access to payment and business services, everyone has a better chance to make money and a better life.”
While its platform can be used globally, Everex is focusing on emerging markets, such as Thailand and Myanmar, where it has already established a foothold, enabling migrant workers to send money back home through blockchain-powered transactions. Of course, the bigger opportunity is with how users can borrow small amounts of money through micro-credit transactions, without the need to undertake formal processes that traditional banks require, or without the predatory interest rates offered by loan sharks.
In such transactions, cost and speed are main drivers of innovation. “Ethereum, and blockchain technology generally, have the capacity to lower transaction costs, increase transparency and onboard diverse swathes of individuals who don’t have access to the financial services many of us take for granted”, says Lane.
These innovations are seen to bolster financial infrastructures, especially in emerging regions like Asia – one reason why Chinese firm Holley Group, has chosen to invest a US$500,000 round in Everex as its first capital infusion into a tech company in Southeast Asia. It is “not just a single project investment, but an investment into the future”, says Wenxin Liu, Regional President of Holley Group ASEAN Region Headquarter, especially since such blockchain-powered platforms can equally service banks, financial institutions, and individuals.
As part of growing its platform, Everex is launching its initial coin offering (ICO), meant to crowdfund capital in exchange for digital tokens, wherein early adopters can get gains from better pricing on its cryptocurrency upon launch.. The ongoing ICO is currently at 30,000 ETH, equivalent to around US$ 6 million. Once complete, Everex aims for a total of $157.5 million in capitalization.
Breaking the cycle of poverty through economic inclusion
It is certainly easy to take financial transactions for granted if a credit card and mobile banking app were easily accessible on a daily basis. However, it is not just in financial transactions where blockchain tech can potentially reduce poverty. At the Singularity University’s Exponential Finance Summit in Singapore this June, Ashish Gadnis, founder of blockchain-powered ID startup BanQu, says that economic identity is essential to breaking out of the poverty cycle.
It is not just about transactions, but also longer-term economic inclusion. Economic identity, he says, is “the marriage of identity and commerce, resulting in a global, vetted, and manageable asset.”
Again, it’s easy to take for granted the fact that you have an established identity, bank records, credit history, and the like. But for the billions of underbanked, such transactions and credentials are currently difficult to establish. Platforms like BanQu enable users to “build a recognizable, vetted identity, which is the base prerequisite to participating in any form of ownership or transactions in the global economy”, adds Gadnis.
BanQu does this by storing user data on its blockchain, which provides the ability to share data directly between two users without a centralized authority. The secure and immutable nature of the blockchain offers a way to share sensitive user data without worrying about the information getting lost or altered along the way.
Thus, helping the marginalized goes beyond the infrastructure for transactions. The real value in pulling people out of poverty in the long term, says Gadnis, is giving them the identity in order to participate in these transactions. “People need to be connected to the supply chain, not be given more money.”
In conclusion: Better access means better opportunities
It’s easy to take fintech applications for granted as faster, easier, and sexier way to do things, especially for people already used to digital transactions. For the marginalized, however, these technologies might be the only way to do things moving forward. By providing a means to access previously hard-to-reach services like secure identification and frictionless transactions, blockchain-powered startups are helping pull people out of poverty and toward a more inclusive economy.