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While the landscape of geopolitics seems more divided than ever, the global population seems more universally determined than ever to achieve equal financial opportunity.
The Financial Inclusion Movement
According to the World Bank’s Global Findex Database, there are two billion adults globally—about half the total adult population—who have no access to financial services delivered by regulated financial institutions. While account penetration is nearly universal in developed countries, it is only 54% in developing economies. Through no choice of their own, those born into an economy and political system that lacks access to mainstream financial services are forced to depend on unregulated mechanisms for banking, savings, and lending – including reliance on loan sharks and payday lenders. With little ability to protect themselves by saving and investing for unplanned needs, many are forced to pawn assets when an emergency hits. It’s just not fair!
Of the two billion excluded adults in the world, how many are highly intelligent people with the potential to bring life-changing innovation to the rest of the world if only given an opportunity? My guess is a lot, and the rest of the world is missing out. Financial Inclusion and Universal Financial Access are popular monikers for a collection of broad initiatives that seek to bring affordable, regulated financial services to all individuals and businesses regardless of their geopolitical origins. When these initiatives are implemented, people are not only lifted out of economically-constrained situations, but are able to engage opportunities far beyond their native borders. This not only benefits them, but the rest of the world too.
The source of the problem: Paradigm shift.
Organizations like the World Bank, the International Monetary Fund, the United Nations, and others, have extensive programs and research activities that seek to inform and address Financial Inclusion. But the impeding factor is not awareness, it’s the legacy infrastructure of the world’s financial systems that were designed in a foregone era and viewed the world as geographically distant and disconnected. As the Internet has changed that notion and the social norms of today’s connected world offer a completely different expectation, banking systems have simply not kept pace.
What’s the problem with today’s financial infrastructure? Lack of innovation.
It’s been a long time since mainstream financial infrastructure has seen any transformational upgrades. Central banks have made little effort to integrate their settlement systems across jurisdictions and commercial banking has failed to take initiative either. In fact, it could be argued that the most recent innovation in financial services was the invention of the debit and credit card networks over sixty years ago.
The most inspiring innovations to the global financial infrastructure have come from outside of the financial services sector during the last decade. The invention of decentralized autonomous financial services built on blockchain-inspired technologies like Bitcoin, were born from financial crises caused by questionable fiscal & monetary policies as well as the inability of central banking systems to respond quickly to market panics. Having proven their potential in practice and by consumer adoption, digital assets and digital currencies are only now starting to be seriously considered by the mainstream financial establishment.
From a purely capitalist view, the market opportunity is staggering. If the positive impact to human equality weren’t enough motivation, having two billion more adults actively participating in the global economy should give ample incentive to financial services providers. Unfortunately, banks simply aren’t organized in a way to easily bring their business models to emerging economies. They need new infrastructure and new “rails” to support a new paradigm in global commerce. Digital assets, digital currencies, and their underlying distributed networks provide exactly what’s needed.
Throughout my executive career at Wells Fargo and IBM I encountered extreme resistance to changing foundational infrastructure— “it’s just too risky” said the big bosses. So I left to chase the promise of a completely new paradigm. In founding Sprocket, the inspiration was to promote human flourishing through the advancement of global financial technology, bringing regulated banking services to a mobile-connected world. Six years in the making, the Sprocket hybrid banking platform seeks to promote inclusion of all people as qualified participants in the global financial economy, especially those constrained by the economic regions in which they reside. Together with regulators, we’re making progress toward modernizing mainstream financial infrastructure, to blend the old with the new, and to improve equity and transparency in financial markets.
Come take a look. Come experience a new way to bank with sprocket.financial.
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