Banking On The Unbanked
Why Inclusion Is The Next Big Wave In Financial Services
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What is poetry which does not save nations or people? -Czeslaw Milosz
The internet destroyed most advantages newspapers had built. But it did offer “one gift: free global distribution.” — Jeff Bezos On The Washington Post Acquisition
In many capitalist businesses, the bottom of the pyramid was left out simply because it wasn’t profitable enough to serve it. Then, but not now. What disruptive technologies such as open API’s, stable-coins on a blockchain and AI are doing is opening up the doors of traditional businesses such as banking to the underserved and in many cases the poor and the disenfranchised. Many would call financial inclusion a socialist ideal. However, in the ultimate irony of our times, it is this so called ‘socialist’ ideal that will drive growth for the financial services sector. As technology brings down the cost of acquisition, identification and of serving the client, the financial services business will become a ‘volume game’. A very significant ‘network effect’ will be needed to drive growth in an otherwise slowing global economy. Profit, ironically, will come from serving an ever larger mass of the human population. This article explains why this will be the case.
There are three simple truths in business today. First, most traditional businesses have been network businesses forever. The success of a business depended on who you know and who else that person knows and so on. For many years, it was hard for multinational firms to fight against local businessmen because of the network effects a local business enjoyed. That network when it came to vendors was known as a supply chain. For clients, it is a loyal fan base (clients who act as ambassadors for a business) to spread the word around. With the advent of the internet, the network became exponentially global.The internet ushered in a new definition of a ‘network effect’. In the online world, networks operate at two levels which are the platforms a business owns and the users on the platform.
