In the era of big data, it seems that financial services businesses are fast catching up with zeroth moment of truth. Every financial company relies heavily on analytics technology to target several of the customers across world. They know where we live, what we do for living, how much we make, how much we save every month, what we might buy in future or which financial product will be suitable for our kind of people in future. The reality is however much different than expected, there are huge segments of the population in U.S. and globally about which these companies know very little. Businesses around the world have agreed that one of the primary reason for such data gap when it comes to consumers because many of the people offer very few data breadcrumbs offering clues about themselves, they are unbanked or underbanked and lack a credit history. In other cases, consumers might have left a trail, but it’s not possible by the company or agency that needs to asses someone’s worthiness for credit card, a cell phone plan or loan for an apartment. In many instances companies just don’t know what they don’t know; this leads to low serving rate. Financial businesses have failed to put systems in place that can assist in knowing or collecting data about groups of consumers, who don’t contribute to the financial economy through any digital channel. There is large drought when it comes to financial service, there is a huge conversation to be had about how do we in the industry represent the spectrum of U.S. population or if you have global coverage, how do you represents the spectrum of people globally when it comes to looking towards the list of privileges this was discussed by Jane Barratt, Chief Advocacy Officer of MX technologies, a Utah based firm that provides data to financial institutions and Fintech firms. Barratt and other experts had discussed how financial services and Fintech are becoming more inclusive and more empowering for consumers during recent event “Fearless in Fintech” conference at Wharton San Francisco.
Getting the Banking to Unbanked?
Fintech is important sector because the inclusion of various sections of society will benefit the sector growth rather than attain maturity after certain growth phase. Adrienne Harris, Former Special Assistant for economic policy in the Obama Administration added that used the example of fictional women who have been named Jane, who makes $60,000 a year. Harris described Jane’s life starting when she gets her biweekly paycheck with step on being a trip to check cashing business. Harris added that according to 2018 survey 55 million adults American were unbanked or underbanked, while 22 percent of households in the age of fintech and mobile payments almost 25 percent of the population is underbanked. Jane every month goes to cashier and pays 3 percent of the withdraw money that is $51, if she does this throughout the year they have to pay $1300 to have immediate access to money she has already earned. Her trips include going to a payday loan business and even pay the late fees because of number of utility bill amount exceeds far greater than paycheck amount. More than three-quarters of renters make use the same tradeoffs or strategic payments every month.
Fintech as emerging alternative or inclusion of present financial systems could improve and democratize consumer financial health a key aim but in order to do that the sector needs to tap into the untapped market committing to learn more about sector and how they spend their money. Getting in the untapped market will not be easy resulting in many opportunities and challenges. Fintech including blockchain and Crytocurency offers a tremendous potential to create more inclusions for the banking sector, with lot of potentials that are still untapped by the market. Many of the exciting experiments are happening in places other than U.S., particularly in the frontier or smaller-scale economies. Experts have suggested that even second world countries or third world countries offer important market for experimentation, while in U.S. having a cutting edge technology will be challenge because the demand for new form of money is still not required and there are many points when dealing fintech. The unbanked are completely invisible. There has often been misunderstanding that digital currency will remove the volatility from banking and finance, there is obviously a lot of volatility, but it would actually depend on the government to improve the business.
Venezuela has often used an example where cryptocurrency makes sense, not because the citizens have been demanding, but the nation has very volatile market making the currency unstable for its core use cases. Another example that can be used by businesses is more user-based, it refugee camps the UN is currently rolling out a program in that refugees are bio-metrically screened and then given access to crypto-wallet to use in camp ration stores. It will assist the refugee camps to keep check on number of food quantity consumed per day along with number f people living in the refugee camp. It will also give a clear overview of the diseases that are affecting the people living in camp or any other types of activities.
Governments and businesses around the world should be wary of viewing blockchain or cryptocurrency as a silver bullet; it solves many of the financial problems. It will not be able to solve the human-led problem likes when we have people trying cheat on people. Cryptocurrency will offer a certain level of financial inclusion and freedom for the unserved sector, but it’s not going to empower people. If we give more transparency information to more actors in the ecosystem, we would be able to create required accountability and added feedback loop. Creating an inclusive and empowering ecosystem is making sure that the sector is itself diverse.