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Blockchain For Financial Inclusion

 

Like any new technology, blockchain is morally neutral. It can be used to decrease costs and inflate bank profits. It can be used to expand the reach of financial services to the world’s poorest people.

It was refreshing to listen to today’s BrightTalks webinar “Blockchain: a Power for Good?” The session was moderated by Fintech consultant Diana Biggs. Panelists were Kosta Peric (Gates Foundation), John Edge (ID2020) and John Farmer (Microsoft). The panel discussed opportunities and challenges with applying blockchain to poverty-related initiatives. These include:

·       Universal identity ownership (ID2020)

·       Interoperable mobile payments infrastructure (Gates Foundation)

·       Globally available cloud-based blockchain (Microsoft/Ethereum)

·       Land ownership

·       Digital asset ownership

Since blockchain is near the peak of the hype cycle, we need to be careful not to overstate its potential. But the technology is quite compelling in some areas of financial inclusion and human rights:

·       Immutability: confidence that transactions, identities, and ownership records have not been tampered with.  (Though with smaller private blockchains the confidence may be lower)

·       Trust: ability to trust transactions between unknown participants

·       Transparency: ability to inspect from a regulatory and individual perspective. However, private blockchains need to be designed to balance conflicting privacy and oversight objectives

We’re at the stage of experimentation with blockchain. We’re past pure theory, but a long way from major production applications. See “Blockchain Beyond the Hype – Real Banking Applications?” which focuses on banking, but applies in other domains as well.

Financial inclusion and personal identity initiatives take place primarily at national or regional levels. We won’t see a global blockchain that addresses everything for everyone. This is where the popular analogy with the Internet falls down.

But we are seeing global efforts around interoperability, regulation, and cross-border acceptance. This is where non-profit organizations like the Gates Foundation, ID2020, CFSI and Accion’s Center for Financial Inclusion can really contribute. The handful of truly global companies can also contribute – I applaud Microsoft for taking a lead. National and international government agencies, such as USAID, GPFI and the World Bank’s CGAP. Not all are actively working on blockchain applications. But it will be through the efforts of organizations like this that we can move towards universal adoption.

It is critical that these international advocacy and innovation efforts include the private sector. Sustainable financial inclusion, digital identity and digital rights protection all require that commercial entities can operate profitably. The technology focus must be on reducing cost, mitigating AML risk, and extending reach with relevant and appropriately priced services. This must be done in ways that maintain an acceptable level of profitability for bank shareholders, along with the benefits of increased social return on capital.

There are huge challenges ahead, but massive opportunity for us to work together to use technology for good.

Like any new technology, blockchain is morally neutral. It can be used to decrease costs and inflate bank profits. It can be used to expand the reach of financial services to the world’s poorest people.

It was refreshing to listen to a recent BrightTalk webinar “Blockchain: a Power for Good?” The session was moderated by Fintech consultant Diana Biggs. Panelists were Kosta Peric (Gates Foundation), John Edge (ID2020) and John Farmer (Microsoft). The panel discussed opportunities and challenges with applying blockchain to poverty-related initiatives. These include:

  • Universal identity ownership (ID2020)
  • Interoperable mobile payments infrastructure (Gates Foundation)
  • Globally available cloud-based blockchain (Microsoft/Ethereum)
  • Land ownership
  • Digital asset ownership

Since blockchain is near the peak of the hype cycle, we need to be careful not to overstate its potential. But the technology is quite compelling in some areas of financial inclusion and human rights:

  • Immutability: confidence that transactions, identities, and ownership records have not been tampered with.  (Though with smaller private blockchains the confidence may be lower)
  • Trust: ability to trust transactions between unknown participants
  • Transparency: ability to inspect from a regulatory and individual perspective. However, private blockchains need to be designed to balance conflicting privacy and oversight objectives

We’re at the stage of experimentation with blockchain. We’re past pure theory, but a long way from major production applications. See “Blockchain Beyond the Hype – Real Banking Applications?” which focuses on banking, but applies in other domains as well.

Financial inclusion and personal identity initiatives take place primarily at national or regional levels. We won’t see a global blockchain that addresses everything for everyone. This is where the popular analogy with the Internet falls down.

But we are seeing global efforts around interoperability, regulation, and cross-border acceptance. This is where non-profit organizations like the Gates Foundation, ID2020, CFSI and Accion’s Center for Financial Inclusion can really contribute. The handful of truly global companies can also contribute – I applaud Microsoft for taking a lead. National and international government agencies, such as USAID, GPFI and the World Bank’s CGAP. Not all are actively working on blockchain applications. But it will be through the efforts of organizations like this that we can move towards universal adoption.

It is critical that these international advocacy and innovation efforts include the private sector. Sustainable financial inclusion, digital identity and digital rights protection all require that commercial entities can operate profitably. The technology focus must be on reducing cost, mitigating AML risk, and extending reach with relevant and appropriately priced services. This must be done in ways that maintain an acceptable level of profitability for bank shareholders, along with the benefits of increased social return on capital.

There are huge challenges ahead, but massive opportunity for us to work together to use technology for good.

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Graham Seel

Graham Seel

Principal Consultant

BankTech Consulting

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17 Apr

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Concord

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This post is from a series of posts in the group:

Financial Inclusion

The financial services industry has much to contribute to the UN and World Bank goal of full financial inclusion by 2020. This group will focus on industry contributions, ideas, barriers and enablers.


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