Enabling Technologies

2018: Digital Financial Technology Propelled

JuvoFounder & CEO

As it stands, 48% of the world’s population is unbanked and financially underserved, leaving new generations and disparate populations with either a deep distrust of the financial sector, or traditionally very little access to it. This translates to 2.5 billion people in developing countries who have to rely on cash or informal financial services that are typically unsafe, inconvenient, and expensive. However, within the past few years, financial technology has expanded substantially and inspired the beginning stages of financial inclusion in various parts of the world.

A new, innovative approach to delivering digital financial services has offered a faster, more convenient and useful experience to customers by combining platforms, channels, and technology. Now, millions of people are gaining access to financial services that were otherwise unavailable to them in previous years and 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.

The groundwork of financial inclusion is transforming the digital telco space. The year 2018 will be the year telcos indeed become the catalyst for financial inclusion. Here are my predictions for the year ahead:

#1: The Golden Era for FinTech

Transformations happen over a 50-year cycle, and usually in 10-year increments. The once uncharted FinTech industry is now entering its “Golden Age” – what Ron Suber refers to as the middle 10-to-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.”

This has certainly manifested as conversations have shifted from a celebration of FinTech to an exploration of opportunities and challenges, which, in turn, is urgently compelling us to confront key economic and societal issues.

This year, we will witness increased investment in FinTech that will help propel the financial inclusion agenda. Because of this, 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 accessibility to digital financial assistance 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.

#2: Data Science Will Drive Financial & Digital Access

Data science has been a hot topic for many global mobile network operators because it holds the promise to two key 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.

About 77% of the 4.9 billion mobile users around the world are prepaid, and therefore anonymous. Research has opened our eyes to the value of leveraging data science to allow access to mobile financial and digital 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.

In order to spark and noticeably increase engagement, mobile operators must establish digital footprints for anonymous users to create and develop a financial identity. This process requires experienced data scientists who can pull from multiple sources of data including network data about the user, as well as data gained from third-party apps. Using machine learning and bespoke algorithms, this cleaned, combined, and analyzed data is then used to create a financial identity, progressively and in real time.

Relationships with consumers will dramatically change as mobile operators partner with data science experts, who are skilled at bringing vast, disparate and previously uncovered data together.

Within the next year, more companies will heavily invest in data-science to drive transformative actions around the world to reach populations in which financial access has been unattainable in the past. This will lead to deeper, identity-based relationships between mobile operators and their subscribers.

#3: The Rise of Crypto & Blockchain

In order to qualify for financial loans or take part in investments, individuals are required to have bank accounts as well as access to accounts that, in order to take full advantage, require even more wealth and technology. Now, the promise of blockchain technology makes it possible for the unbanked to have access to the same type of investment portfolios available from Wall Street. On top of this, smart contract technology allows for the fractional ownership of investments, participation as a lender, and many other financial products.

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, P2P payments and remittances, and payments to merchants in-store and online. Because of its portability, privacy & security, cryptocurrency can protect individuals’ wealth from social, political & economic instability, creating long term stability and economic benefits to individuals/communities.

Due to these superior characteristics, cryptocurrency and blockchain will be a driving force of financial inclusion in 2018. 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.

#4: Bridging the Financial Inclusion Gender Gap

Women and women’s issues have been at the forefront of media for a large part of 2017. Controversies from tech and VC companies remind us that discrepancies and inconsistencies exist even in Silicon Valley organizations that are supposed to be leading in a new digital age. Women will continue to be top of the agenda in 2018 and this surge will touch many sectors, especially in financial access where women have been traditionally underserved or anonymous.

Despite noteworthy progress in terms of facilitating greater access to, and use of, financial services among underserved populations, barriers to financial inclusion still stand. 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. Yet, 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.

Lifting women out of poverty and empowering them to walk up the pathway of financial inclusion will be achieved in large part through mobile financial services. During this year, we will see a greater need and push for telcos and financial services to come together in order to bridge the gap for women’s financial inclusion. The wheels were set in motion in 2017, which is evident in this example from a female janitor based in Jamaica who has found life altering opportunity through access to finance on her mobile phone.

Steve Polsky

JuvoFounder & CEO

Steve Polsky founded Juvo 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 holds five patents in telecommunications network architecture. Steve is a graduate of the University of Pennsylvania’s Management & Technology Program with degrees in Computer Science from the Moore School of Engineering, and Finance from the Wharton School.

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