Time is Money: Fast-Track Financial Inclusion NOW
This weekend, I had the privilege to present a keynote at Money 20/20 in Las Vegas. They asked me to talk about financial inclusion, but we’ve been talking about financial inclusion for years. Much of the fintech industry has been working on it for years. We’ve come up with a lot of smart tech to help the un- and underbanked get access to the digitized world of payments, but it’s not enough. At the rate we’re going, we will eventually achieve financial inclusion, but it’ll take us about 200 years.
It’s time we changed the conversation. It’s time we moved it forward a lot faster.
We need to move the financial inclusion conversation from one about simply providing access to one about supporting usage and delivering impact. We need to realize the goal isn’t financial inclusion. That is simply the point of entry. The real goal is prosperity; the real target that benefits us all is inclusive growth—which could potentially bring $7 trillion to the global economy.
And I think there are three things that can get us to inclusive growth much more quickly:
Deep and Broad Understanding of the Unbanked
Rice merchants aren’t taking electronic payments. Rickshaw runners in Vietnam and Uber drivers in India have to take cash. Babysitters, care givers—they are still getting paid in cash. Schools—so often the locus of food and healthcare in addition to education, often only accept cash—even in the US! And in many countries utility payment centers have long lines of people waiting to pay for services in cash. Why? Because the people who supply the rice, the care, the kerosene need cash to pay for their everyday needs, because those supply chains work in cash…It’s a vicious cycle and the only way to escape it is to start working above it.
We need to start at inclusion of people—not just their money. We need to bring entire institutions of their lives—entire ecosystems from identities to school to utilities to agriculture to transit—online and then make paying for individual elements within those institutions seamless, secure, and easy as can be.
Scalable Tech Strategies with Hyper-local Solutions
Small and micro businesses drive local economies. They are, however, bogged down by cash. After he has paid his staff, a vendor may not have enough cash on hand to restock with enough products. He runs low. Customers go elsewhere.
Mastercard is solving for this one problem by partnering with Unilever and a local bank on a pilot program in Kenya in which we bundle a service that connects kiosk owners with their supply chain, digitally with a credit option. This allows small and micro-businesses to buy and sell more, advancing inclusive growth. It’s a solution that can be adjusted to work on a local level, but has a platform that can be scaled globally. That means it works for the people in the field and for my business.
Holistically-minded, innovative partnership models
On an electronic payments level, Mastercard can connect just about anyone to anything. But what’s going to drive relevant usage among the underserved are our connections to and partnerships with all the organizations and institutions that currently serve the un- and underbanked. I’m talking about governments, schools, agriculture, utilities, packaged goods, etc. Together we can create tech-driven solutions that help the underserved retain more of what they’ve earned and give them some financial resiliency.
If we really want to help the underbanked climb the financial ladder to middle class, help them stay there, and do this is our lifetime, then every organization has a part to play. Governments need to create conditions for companies to operate and cooperate. Public and private companies need to bring their strengths to partnerships that can build long-term, scalable models that can deliver real impact.
It’s almost 2018. Financial inclusion is not an event. It is not an announcement. It is the imperative. And in order to make it work, everyone has to come to the table.
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6 年Well said Michael... I agree with your inclusive growth argument and also that financial inclusion is not an announcement or an event but is a journey and everyone?has to play a role. Having said that I believe there is also work to be done to educate the market and create awareness for the financial product already exist today to support financial inclusion.
Chair of TMF Group and Crown Agents Bank. Board member of Lightrock, excited about impact investing. Board member of London Business School. Passionate about equality delighted to see a UK gov with 44% female ministers
7 年Thanks Michael. You are really clear it takes partnership to build inclusion. Technology doesn’t work if you try to simply diffuse it around the world. A certain number of building blocks are needed in each place to be able to address the supply chain. Inclusion is all about choice, it's not taking the option to pay by cash or to barter away, its connecting up people who are not connected today and offering them wide variety of choices which are available to us today.
Economist - donor funded projects
7 年Dubious... Who are these 2bn..? Perhaps they are risk averse for good reasons and shouldn't get tangled in some high commission credit scheme.. People use cash for a reason, and while they may seem unbanked they may use a variety of other low cost means to store value, exchange goods as well as microfinance services..
Well said, Michael. Everyone has to come to the table. At that table, much collaboration has to take place between each person to enact systems changes, with the focus being the people that we need to include into the financial system. While not trivial, recognizing the scale of impact, we should see it as an opportunity in different facets, in lives that will be positively impacted, benefit to corporations in terms of revenues when people achieve better financial health and resiliency, and benefit to society at large.
Mr Meibach, you assume that financial inclusion is a problem that must be urgently addressed, but there is simply no evidence that this is the huge issue you maintain it is. Studies by such as Moodys Analytics prove very little here because they are generally very well-rewarded for reaching the right conclusion, as were their colleagues in the run-up to the global financial crisis for producing ratings reports that gave AAA ratings to rubbish. And, yes, while value will indeed be created by the digitalisation and financial inclusion drive, you do not address the absolutely crucial issue of who actually appropriates this value? I would suggest that the digital payments people and commercial banks expect to appropriate the vast bulk of this value, which is why they are so hung-ho in favour of digitalisation and financial inclusion in spite of so many activities in their portfolios that are clearly anti-poor. Trotting out the old 'do well for oneself by doing good for others' claim is a very lame excuse for what is transpiring globally in this space.