It would perhaps be fickle to be too critical of the global economic system given the tremendous progress made towards so many of the Millennium Development Goals. Indeed, the goal of halving the number of people living on less than $1.25 a day was achieved seven years earlier than planned.
Despite this apparent success, there is a tangible sense of unease at the way the global economy functions, and particularly how wealth is distributed. It led to Thomas Picketty’s 2014 book Capital in the Twenty-First Century topping the New York times best seller list for non-fiction. It and other works have prompted a renewed exploration of the global economic system, and how inclusive it is. Indeed, that year the World Economic Forum cited global inequality as the biggest risk the world faced.
Central to this inequality is access, or lack thereof, to the banking system. A whopping 3.5bn people around the world lack access to a bank, with an astonishing 37 million Americans estimated to be ‘unbanked’ at the current time. It’s resulted in a clear and distinct divide between the financial haves and have nots.
Largely this is down to the business model of the banks that rely heavily on the network effect. This sees every new customer (and of course every dollar they deposit/borrow) increasing the value of the network the bank has. The problem is that building such a network can be costly, especially for customers with little to deposit and borrow.
Serving the bottom of the pyramid
It’s resulted in various projects to provide access to finance for the worlds poorest, from mobile banking to microfinance, and whilst the work of people like Muhammad Yunus have been tremendously important, I believe that the blockchain could be even more powerful.
Companies such as Wala are leading this charge. They’re a mobile financial platform, not dissimilar to the hugely successful M-Pesa, but the difference is that the platform is built on the blockchain. The company has announced a partnership with M-vendr, the provider of mobile Point of Sale (PoS) apps for small retailers and informal traders. The deal is a significant step for digital currencies in emerging markets, combining free banking services with a simple and accessible way to purchase goods within over 30,000 merchants across 15 countries.
“Our companies are built on the same foundation; a belief that new technologies should take the complexity out of financial services in emerging markets. We’re thrilled to partner with Wala, and the 1,000’s of merchants utilising the M-vendr powered PoS are really excited to start Wala financial services and accepting Dala tokens as it will add immense value to their customers,” M-vendr say.
A major facet of traditional banks is the way they process our identity, with many banks less interested in understanding your character as they are complying with regulations. By using blockchain, many of these challenges evaporate as a consistent digital ID follows each individual around.
Avoiding a traditional bank-led approach means not having to replicate legacy banking systems that bring large transaction costs with them. In a stroke, the partners will be able to use the distributed ledger technology of the blockchain to make the process and recording of transactions simple and efficient. Not only that, because they’ll be integrating it with existing microfinance networks it will be designed around the consumer from the start.
While zero-fee financial services are the immediate goal, the trust and transparency brought about by the blockchain could also lay the foundations of a modern infrastructure that solves other problems for the unbanked, such as credit scoring.
The progress in achieving the Millennium Development Goal on poverty so quickly is considerable, but ledger technology such as that provided by the likes of Wala provide a glimpse into a possible future where the unbanked and underbanked are increasingly enfranchised and empowered to become active participants in the global economy.