European culture also means that August is the only permissible truncated business month, not tied to any religious festivities. During my one week of digital detox, another perspective sunk in regarding the ongoing Fintech and Capital markets innovations.
Where are we on Financial inclusion and exclusion?
Financial inclusion ventures have been growing. Whether it is providing IDs, providing land registries, access to deposit services, cross-border payments and micro-payments, or credit.
According to the most recent World Bank report on The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution the gap is now at 1.7billion people that remain unbanked (30% of the population).
Since 2011, 1.2 billion adults have obtained an account.
Since 2014, 515 million accounts have been opened.
Even though this is great progress, we can’t afford this pace of penetration. It would mean another 15-20yrs to cover the current gap. And that would be assuming that there is no increase of unbanked people, which has typically been because of lack of employment and therefore disposable income. General tech trends that are unstoppable, may well keep more disadvantaged parts of the population without jobs and access to capital.
It is also clear that the 2nd phase of the Conversion of unbanked to banked, requires more than standalone Fintech offerings. Favorable policies around education and economic growth, have to be combined.
Undoubtedly, gaps remain despite the significant increase in mobile and internet use. Mobile banking, Digital IDs and blockchain protocols focusing on financial inclusion, are the main categories of promising ventures.
A new kind of Financial Exclusion
Parallel to all this, there is another growing financial exclusion trend, that is an offspring of the accelerated pace with which the Crypto, ICO sector blew our mind in 2017. Everyone that wants to setup a Blockchain venture faces in one way or another, the possibility of becoming suddenly Unbanked.
How does it feel to be unbanked for the first time, in your business life?
Despite the volatility in cryptocurrencies, there are have been more than 100 ICOs launched every month in 2018; as per Daniel Diemers, the head of Blockchain EMEA at PwC Strategy. In Switzerland, the country of CryptoValley, there are no large banks that serve the basic business banking needs of these ventures. Only recently, Hypotherkarbank Lenzburg became the first Swiss bank to offer business banking to blockchain ventures (see press here). They are however, very selective. Bank Frick and Kaiser bank in Liechtenstein have been open for this kind of business for several months. However, unable to meet the mushrooming demand they have been “forced” to be selective and actually, only catering to Swiss and Liechtenstein ventures.
In the Netherlands, only ING is open but again the only verifiable account is that of the Bitfinex exchange. Estonia, the EU digital leader that one would expect to be more open, is not really. According to Mark Van Rijmenam, LHV Bank, is very conservative in on-boarding cryptocurrency companies; they don’t support ICO’s and cryptocurrency companies in an early stage. And if they do accept them, the price tag is very high. The UK is very problematic and Gibraltar is taking advantage of that.
Malta is the other crypto friendly nation, which much like Switzerland, is breeding a new class of unbanked entrepreneurs. Maltese banks are not yet involved in serving the business banking needs of blockchain ventures. Only recently that Binance moved to Malta and established a partnership with Malta stock exchange, one assumes that there is a Maltese bank that is serving Binance (anybody knows the name of the bank?).
France has opted out from dealing with the banking needs of crypto companies. Germany is very cautious and has none, at least for now.
Only Revolut, a genuine Fintech, is the place to open anytime a business account for a blockchain startup (not for the ICO) in just a few minutes. Revolut is out of the UK but has also a Lithuanian presence which gives them passporting into the EU.
Same same in Asia. In Singapore, DBS, OCBC are politely breeding more of the new unbanked.
Poverty and underdeveloped countries, are where the unbanked have been.
A new breed of unbanked, are all the companies that are setting up blockchain ventures.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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