These days, I hear headlines on Financial Inclusion so often that, it makes me wonder if Financial Inclusion is the new Fintech. The past three years in India, with the rise of payments, Aadhaar and last mile access to financial services is a great example.
We have also had Nubank from Latin America that won Softbank’s investment, and the Grab and GoJek story in South East Asia. Some of them are taking the digital banking route to genuinely address an unbanked population, while others are simply using their lifestyle apps to provide sticky financial services.
This is in stark contrast to the overbanked West, where we see challenger banks, trying to win brownie points using ‘financial inclusion’ as a marketing ploy. There are several arguments about their scalability and viability due to the overbanked markets they are going after.
Most Fintech events these days have a panel on financial inclusion. I recently came across an event planned in India, and the objective was to make it as grand as the Singapore Fintech Festival. I understand there are several panels focused on Financial Inclusion. It’s not surprising as Asia is seen as the hub of financial inclusion.
However, in several of these instances, trying to achieve financial inclusion before getting a financial identity to the unbanked is like placing the cart before the horse.
One of the first articles I wrote on Daily Fintech was about a firm called BanQ. They were working on providing economic identities to women farmers in Africa. They were also using Blockchain to achieve that.
It wasn’t just BanQ, another startup Agriledger led by Genevieve Leveille is looking at solving inefficiencies in the food supply chain. The transaction data that Agriledger would capture in the process would act as an economic identity for the farmer. As a result they can avail other financial services, thanks to their track record on the ledger.
Even when Libra was announced, one of my biggest hope and ask from the project was solving the identity problem. It was positioned as offering financial inclusion at scale – but they were in a perfect position to first solve the social and economic identity issue as the first step towards getting to inclusion at scale.
If identity solutions are globalised, refugees can be offered jobs in their countries of refuge – a farmer in Africa, seeking refuge in Spain, could find it easier to get a loan to start or work in a farm in Spain. All he needs to show is his track record as a farmer.
It should be the same as an executive moving from one country to another for employment, without having to start from scratch completely.
On that note, I came across a report by Oxford Economics and identify firm Juvo. The report highlights the following countries and the potential GDP growth in those countries with proper financial identity initiatives.
- India – $7 Bn
- Indonesia – $15 Bn
- Philippines – $15 Bn
- Pakistan – $9 Bn
- Mexico – $31 Bn
In essence, tapping into mobile operators and providing financial identities to one and all would add $250 Bn to the global GDP and make available about $408 Bn worth of credit.
These numbers feel too low to me, perhaps the numbers are just an immediate benefit, and not a weighted or discounted average across years.
The projection that caught my attention in the report was that identities could increase the per capital GDP by $25 in South and South East Asia. This is a massive value-add when put into perspective.
While I wish Juvo all the very best in achieving their goals on financial identities, I believe it has to be a big player like a facebook or google, who would be best positioned to launch an self sovereign identity platform. It could perhaps be centralised on day 1, but evolve into a self sovereign network of identities.
When that happens, there would be onboarding of people onto financial services like never seen before. At this stage, it is all just wishful thinking though!
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Alibaba’s Single’s day sales hit $38 Billion in 24 hours. The US Black Friday Online sales was $7.4 Billion and Cyber Monday sales were even stronger at $9.2 Billion. Do we know the impact of this mindless consumerism on our planet?
We will, and soon, thanks to Mastercard’s investment and collaboration with Doconomy.
Only last week I wrote about Climate change and how Fintechs should wake up to the changing global landscape and act. We are witnessing and combating the biggest crisis that humanity has ever faced. It is critical that we come together and address it.
On that note, I proposed a few solutions that financial services and fintechs could come up with to track climate impact of business decisions.
One of the solutions was to track the carbon footprint of businesses using alternative data and disclosures. Firms will be provided a rating on how green their business models are, and banks could price their product and service offerings based on the ratings.
In essence, a greener firm could have a lower interest rate when they borrowed versus a high carbon footprint company. As a result, banks risk management will also be based on these methodologies, where their capital allocation will be higher when they do business with high carbon footprint companies.
This would create top down pressure on the entire business community and the markets to ensure they are acting in the best interest of the planet. We would also need a clear auditing mechanism to ensure firms don’t exaggerate metrics in their favour.
Now, that’s a top down approach for businesses. However, something similar can be done at the consumer end too. One of the fundamental mindset changes I would like to see is what is called “conscious consumerism” – of their carbon footprint when they splurge money in mindless shopping spree.
If we captured the Carbon footprint of purchases at the transaction level, that would be an important dataset to fix the mess we are in. This data can help gamify the process of capturing carbon scores for customer transactions.
If I did my Christmas shopping and came up with a Carbon score X and if my friend or colleague did their Christmas shopping with a carbon score Y, that could be gamified using a simple app and a leaderboard. The person with a lowest carbon footprint could be rewarded.
When we capture transaction data, and score customer behaviour, it makes them more conscious of their action on the planet. This would take time to scale, but it would start changing behaviours of customers.
As customer behaviour changes at scale, businesses have to pivot their approach to everything from sourcing the right raw materials, following sustainable manufacturing practices, using logistics with the lowest possible carbon footprint, and using the right packaging. This will have its feedback effect on competition as businesses that embrace sustainable practices quickly will have a competitive and a first mover’s advantage over their peers.
If it was China, I would even go one step further to ensure that the consumer’s social credit score includes climate points based on their spending. This would show results in a shorter span of time, and would help change business behaviour quickly.
Now, what if I did buy something which increased my carbon footprint? You should be able to compensate for that by spending money on environment friendly projects across the world, or investing the money into green assets.
So what are Doconomy doing and why are they special? First of all, DO is how they call themselves.
DO have two cards on offer, a white and a black credit card. The white card allows you to track and measure your carbon footprint as a consumer. The Black card has a built-in CO2 emissions limit – helps you become a conscious consumer (as they call it).
Behind the scenes they use an index called Aland to track the CO2 footprint of every single transaction. The index can categorise your transactions and identify its impact on the environment.
They also have a partnership with a firm called Trucost, which is a part of S&P. Trucost are experts in assessing risks relating to climate change and ESG factors. I have gone through Trucost’s clientele, and they have several big names like AXA investment managers, RBS, and several funds listed there. So clearly, they are all using Trucost to understand the climate risks of their portfolios.
In my last week’s article I discussed about rating agencies who acted at climate bureaus for corporates. This is a very similar idea too.
“We all have a responsibility to contribute to the solutions for the climate emergency we are experiencing. Time is running out. Many individuals are willing to do their part, but in many cases they find it difficult as they don’t know what else they can do. Through our collaboration with Doconomy, we hope to provide clear, effective channels to support these individual’s daily climate action.” –
Niclas Svenningsen, manager, Global Climate Action, UN Climate Change Secretariat
Coming back to DO’s offering, they are also providing compensation schemes should you break bad from time to time. Customers can cleanse their guilt by investing into green bonds or projects approved by the UN and aligned to their Sustainability development goals (SDGs). Thanks to all their efforts, DO are also a named partner to the United Nations Framework Convention on Climate Change (UNFCC).
For more information please do check out their website, I have added myself to their credit cards waiting list!
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They lost $4.6 Billion with the WeWork deal. They have struggled to raise fund-2. They are now focused on profitability rather than growth. Yet, Softbank fund joined by Alibaba’s Ant Financial pooled in $600 Million for PayTM’s recent $1 Billion fund raise. PayTM is valued at $16 Billion at the end of this funding round. […]
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A 3yr old Corporate Social Responsibility – CSR – initiative that took a life of its own, has resulted in a 2019 UN Global Climate Action Award for Alipay AntForest App. A great example of gamification and network effects on an ecosystem like Alibaba. At launch, it was one of the many charity projects that […]
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Earlier this week, there was an allegation that the credit scoring engine behind Apple card was biased. It emerged from the twitter account of David Heinemeier Hansson (@dhh). He raised the issue that his wife had been given a credit limit 20 times lower than his. David has about 360K followers on twitter, and the […]
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How do you make $10 Billion from $300 Million investment within a year? Walmart did just that with their acquisition of Flipkart in India last year. Flipkart is the ecommerce giant in India, and Walmart acquired a 77% stake in them for $16 Billion in 2018. Flipkart came with its payments app Phonepe (pronounced as […]
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The ten-year-old Fintech that listed on NYSE exactly 4 years ago – November 2015 with the ticker symbol SQ; continues to innovate. It is best known as a B2B Fintech in the payments space that had huge success with small merchants globally. It grew with POS terminals and smart credit card readers. As a publicly-traded […]
This is one of our Fintech From A Peak Interviews, where we talk to people making a big difference in people’s lives with fintech services, Accion, founded in 1961, is hardly an overnight sensation. This is a story of quietly doing the right thing for a long time and then suddenly the world catches up. Today Accion […]
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If you were in London over the last couple of weeks, you wouldn’t have missed the activities of the extinction rebellion. While I don’t condone all their actions, they are making a valid point and it is being heard at the highest and the lowest levels. A week ago, I explained to my five year […]
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