2017 has been a growing year for financial technology. A new, digital approach to delivering financial services has offered a faster, more convenient and useful experience to customers by combining platforms, channels and technology. Today, millions of people are gaining access to financial services that were otherwise unattainable in previous years.
Digital financial technology, or “fintech,” has expanded access to financial services for hard-to-reach populations and small businesses at low cost and risk. New products are now possible where they weren’t before. The combustion of cloud computing and data science, along with the proliferation of smartphones, has opened up opportunities to establish financial identities for the billions who are underbanked. The widespread use of mobile phones in emerging markets has created conditions for the large-scale expansion of mobile financial services, which will enable organizations to increase financial inclusion dramatically.
It’s an incredibly exciting time for telcos and financial services and their overall impact on society. 2018 will be the year telcos indeed become the catalyst for financial inclusion. Here are my predictions:
#1: DATA SCIENCE WILL DRIVE FINANCIAL INCLUSION
Data science has become the talk of the town for many global operators. Why? It holds the key to two distinct concerns for telcos. First, how to transition from collection, to analysis, to the application of the data in order to successfully engage users; and second, how to tap into the massive opportunity the data offers.
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Seventy-seven percent of the 4.9 billion mobile users around the world are prepaid, and therefore anonymous. Research has unveiled the value of leveraging data science to open access to mobile financial services across previously anonymous populations of prepaid mobile users. A new revenue stream is at the ready for operators - to the tune of $70 billion.
To drive and significantly increase engagement, operators must establish digital footprints for anonymous users to develop a financial identity. This process requires experienced data scientists who can mine multiple sources of data such as network data about the user, as well as data pulled from third-party apps. This data can then be combined, cleaned, and analyzed – using machine learning and bespoke algorithms - to create a financial identity, progressively and in real time.
As operators partner with data science experts, who are skilled at bringing vast, disparate and previously uncovered data together, they will see a dramatic change in the nature of their relationships with their customers.
In the next 12 months, more companies will heavily invest in data-science to drive transformative actions around the world to reach populations that haven’t had financial access in the past. Mobile operators will increase, deepen, and personalize their interactions with each prepaid user and, through data science-inspired incentives and game mechanics, access more relevant data for establishing financial identity. As a result, 2018 will see deeper, identity-based relationship between mobile operators and their subscribers.
#2: THE GOLDEN ERA FOR FINTECH
Transformations happen over a 50 year cycle, and usually in 10-year increments. The once obscure fintech industry is now entering its “Golden Age” - what Juvo advisor and investor, and fintech expert, Ron Suber refers to as the middle 10-20 year period of a transformation cycle. During this sweet spot, Ron says “technologies are at the height of their disruptive potential and incur the most radical innovation.”
We’ve seen this come to pass as conversations have shifted from a celebration of fintech to an exploration of opportunities and challenges, which in turn is forcing us to confront key economic and societal issues.
We will see an increased investment in fintech that will help drive the financial inclusion agenda. This will mean there will be a need for regulators and banks to be more trusting of the fintech community - inroads have been made, but more can be done.
The ability of real-time lending will result in a boon to local economies, particularly in emerging countries and we’ll see the success of financial inclusion rise to reach billions.
#3: BRIDGING THE FINANCIAL INCLUSION GENDER GAP
Due to recent events in the world, women and women’s issues have taken center stage in the media. Stories like Uber remind us that discrepancies exist even in Silicon Valley organizations that are supposed to be leading in a new digital age. In 2018, women will continue to be top of the agenda and this surge will touch many sectors, especially in financial access where women have been traditionally underserved or anonymous.
While significant progress has been made in terms of facilitating greater access to and use of financial services among underserved populations, barriers to financial inclusion remain. One of every three women in the world — or 1.1 billion — is excluded from the formal financial system. Identity is everything when it comes to financial services – mobile or otherwise. The telecoms industry holds a unique position to encourage financial inclusion, which gives women greater control over their financial lives and enables labor force participation.
Mobile financial services will play a dominant role in lifting women out of poverty and empowering them to walk up the pathway of financial inclusion. Throughout 2018 we will see a bigger push for telcos and financial services to work together in order to bridge the gap for women’s financial inclusion. The wheels were set in motion in 2017 as we can see in this example from a female janitor based in Jamaica who has found life altering opportunity via access to finance through her mobile phone.
#4: THE RISE OF CRYPTO & BLOCKCHAIN
Traditional financial investments not only require bank accounts, but access to accounts that require even more wealth and technology to take advantage of. With blockchain technology it is now possible for the unbanked to have access to the same type of investment portfolios available from Wall Street. Smart contract technology allows for the fractional ownership of investments, participation as a lender, and many other financial products.
In 2018 cryptocurrency and blockchain will be a driving force of financial inclusion. As more financially underserved individuals gain access to entry level smartphones capable of running apps that access blockchain systems, financial services based on this technology will be put into the hands of everyone with a mobile device.
Blockchain solutions will create more utility by providing interoperability between mobile-money and digital-money systems, providing the unbanked a convenient and easy tool for storage of wealth, person-to-person payments & remittances, and payments to merchants in-store and online. Because of it’s portability, privacy and security, cryptocurrency protects individuals' wealth from social, political and economic instability, creating long term stability and economic benefits to individuals and communities.
Advanced financial services such as investment portfolios, decentralized community-based lending, insurance pools (smart-contracts), and asset registries will empower communities to create economic safety nets and financial growth vehicles that were previously available only to those with access to large amounts of capital.
About The Author:
Steve Polsky founded Juvo Mobile with the goal of providing basic financial services to people worldwide. He leveraged the ubiquity of mobile service and the rapid adoption of smartphones to enable global financial inclusion. Steve’s career has centered on founding, launching and managing early stage technology ventures, including Flixster/Rotten Tomatoes, Amber Networks, VoicePlex Corporation and Edusoft. Steve is a lecturer for the Wharton School of the University of Pennsylvania’s undergraduate course in Entrepreneurship, and he holds five patents in telecommunications network architecture. Steve is a graduate of the University of Pennsylvania’s Management and Technology Program with degrees in Computer Science from the Moore School of Engineering and Finance from the Wharton School.