The best part of writing on consumer finance, is that there could be more drama to it than the other sectors within Financial Services. As I discuss socially impactful financial services with people, I frequently encounter the view that you can either have social impact or you can make a profit. It is viewed as a hard choice and a trade-off. I firmly believe that technology can be both socially impactful and profitable. The refugee crisis is bringing the kind of problems that we normally associate with the developing world, to our neighbourhoods in Europe and the rest of the developed world. However, a few Nordic startups are working with their governments to onboard the refugees into their society.
We talked to a company in Finland called MONI that is using pre-paid cards to help refugees get onto the ramp to being a productive member of society in their host country. Before getting to the details of MONI’s work, I would like to touch upon a research done by Tufts University on digital and financial inclusion.
Research on Cashless Economies:
No discussion on cashless economies is complete without discussing the Nordics and their progress in this space. They have clearly defined the blueprint for going cashless by creating the ecosystem to do so. Based on the research conducted by Tufts University, there are two main drivers to identify countries that would benefit the most from going cashless:
- Digital evolution and
- Cost of Cash
The Digital evolution Index provides an overview of how mature the financial services infrastructure is and also more importantly the level of digital inclusion. This is because, financial inclusion becomes a lot easier if policy makers and industry leaders first focused on digital inclusion. Africa is a great example where mobile payments growth followed penetration of mobile services. The Nordics are the leaders in this space, where digital evolution has been exploited well by policy makers to drive cashless initiatives.
The other factor that would optimise benefits when a country went cashless is the current cost of cash. Cost of cash is generally high where the banks have to take a lot of efforts in keeping ATMs stocked up and where the cost of access to cash is high due to the country being large like Russia, Australia or the US. Another factor that increases the cost of cash is the lack of effective governance around tax. For example, in India, the shadow economy was about 20% of GDP before the cashless drive kicked in late last year and that was about $500 Billion approximately. No wonder the cashless drive kicked in even though digital inclusion wasn’t as good.
The Refugee Crisis
One key point that we can infer from the research above is that, when the digital evolution/readiness is higher, the cost of cash can be proactively kept under a threshold, even in crisis. One of the largest crisis of our generation is that of the Syrian refugees. About 11 million people have fled homes and about 400,000 have lost their lives. There is help with funds pouring in from various parts of the world, and technology firms creating new ways for NGOs to collect donations. However, one of the key challenges for refugees is inclusion into the society they have moved into. One ray of hope in this space is the relentless efforts of the Nordic start-ups that have supported their governments in providing the refugees digital and financial inclusion.
It is important to understand the challenges that the refugees and the supporting governments faced. Most refugees don’t have identification that delays immigration and visa processes. However many of them are skilled enough to add value and are keen to work. Without work, some form of normal life, educating kids, and integrating into the society by contributing to it also becomes hard. Also, from the government’s perspective distribution of monthly allowances to refugees have been inefficient, insecure and expensive, thus making Cost of Cash pretty high. There couldn’t be a better situation where digital innovation could have helped the situation. I had an opportunity to interview MONI, a fintech startup who have been working with the refugees.
The MONI Story
MONI, a Finnish startup based out of Helsinki, focusing on digital payments have pioneered the cause of helping refugees by providing them and the Finnish government the ability to move to a cashless infrastructure. (Thanks to the team at MONI for accommodating an interview at short notice). Moni with good support from the Finnish Immigration Service have been able to distribute MONI prepaid cards to the refugees, thereby providing them means to manage their own accounts when they get their jobs and salaries. This wouldn’t have been possible with traditional banks where the KYC processes couldn’t have passed for refugees without identification.
MONI’s accounts are customizable and their features can be easily switched on and off. This is particularly important as both the Finnish Immigration service and Financial Supervisors impose strict controls on accounts used by the refugees. MONI have also gone one step further and provided its user interface in Arabic, Farsi and Somali. This has now resulted in a super-efficient financial onboarding process for the refugees. During my interview with MONI, they also mentioned that refugees and the unbanked would be their key customers. They believe that by helping refugees into the financial ecosystem, they would not only be able to sell other products to them, but also create a huge customer base that are loyal to the MONI brand.
MONI are not alone in their efforts to help the refugees, and have support from other tech startups for the social integration of the refugees. In one of his interviews, Antti Pennanen CEO of MONI had mentioned that the people within the Finnish Immigration Service have been very entrepreneurial with a “lets do this” attitude, and have a genuine interest to integrate the refugees into the society. That goes to show how public-private sector partnerships can work like a charm when both parties are driven to create impact. MONI’s partnership with the Finnish Immigration Service is an excellent case study for countries that are aspiring for better financial inclusion after having cracked the digital inclusion challenge. If only we could have more MONI!