Bitcoins and breakthroughs: the path towards financial inclusion

Christoph Meyer-Roscher

In October 2008, the financial crisis shook up the global economy, and people on the streets were marching through the world’s financial hotspots and raising their voices against established banking institutions. At the same time, an anonymous individual or group of people with the name of Satoshi Nakamoto released a research paper about an independent form of cryptocurrency called Bitcoin.

A couple of months later, the first bitcoins were mined and transacted over a distributed ledger technology called blockchain. While a decentralized database, working through the power of a peer-to-peer (P2P) network might sound like geeky tech talk, it is the advent of a real revolution—the first big breakthrough in the financial industry, whose full potential has yet to unfold.

In an industry heavily regulated by the authorities and dependent on high security measures, financial institutions have historically been slow in adapting to innovation. Digital-driven disruptions have taken their time to take shape.

Fast-forward to a few years after the 2008 crisis: Loss of trust in the domains of power, lack of transparency and speed, as well as costly frictions in dealing with legacy platforms have sparked the entrepreneurial drive within the startup realm. The continuous expansion of digital infrastructure, rise of machine learning and cloud computing and the wide-spread increase in mobile penetration have enabled rapid developments of technology-based financial products and services. While this is happening on a global scale, in different parts of the world, most brands share the ambition to aim for a higher purpose of financial inclusion.

Take this year’s breakthrough brand, Robinhood, for example. True to its name, the brand is a hero in democratizing investment, taking out costly middlemen and providing individuals with real-time market data, free of commissions, right at your fingertips. San Francisco-based Square, set out with the mission of making commerce easy and accessible to everyone. Over the last years, they have been continuously innovating point-of-sale solutions, helping shop-owners and retailers to efficiently manage their businesses and making their customers’ lives easier. Founded in Argentina in 2014, Ripio is another rising champion of financial inclusion. In various regions across Latin America, struggling with rather troubled currencies, Ripio enables people to use their local currencies to purchase and sell bitcoins via the blockchain. With the introduction of Ripio Credit, the brand is further extending its offering for the underbanked population, building a P2P payments system that doesn’t require traditional bank accounts or credit cards and allows users to transact and manage finances online, straight from their phones.

The potential is huge, especially for developing countries and frontier markets. New breakthroughs open up huge opportunities for local enterprises and neighborhood stores to underbanked populations in rural areas that are absent of ATMs and banking branches. According to a recent PWC study, 42 percent of the global adult population is absent from the financial system, predicting enormous growth potential for fintech brands tapping into these demographics and regions.

Banks have been working hard to restore customers’ trust, driven by fintech and Breakthrough Brands that are bringing new meaning to the industry. But do these changes mean that traditional retail banking might be obsolete one day? Are they able to compete in times where customer experience benchmarks are set high by the Amazons and Ubers of the world? While this is a wake-up call for the establishment, there are also great opportunities ahead. Partnering with startups and strategically rethinking their business models has already resulted in promising paths to the future for established brands. Though artificial intelligence and algorithms will become the better data managers, human judgement and personal interactions will still be an essential part of financial transactions, and facilitate trust beyond code.