TECHNOLOGY

Fintech—the next frontier

We've only begun to tap power of combining Fintech with human ingenuity.

In Summary

• That Africa and Asia are home to 85 per cent of the world’s poorest people suggests the important role that Fintech can play in expanding economic opportunity.

• Good news is that even as digitalisation makes illicit flows easier to execute, it also makes suspicious patterns easier to spot and disrupt.

This week the Central Bank of Kenya (CBK) and the Monetary Authority of Singapore (MAS) co-hosted 2,000 participants from 43 countries at the first-of-its-kind Afro-Asia Fintech Festival, called 'Fintech in the Savannah'.

The gathering included more than 100 world experts in finance technology (Fintech), 55 exhibitors, and 110 university students. A global hackathon was also launched for Fintech entities.

The world has watched Kenya’s leadership in Fintech with great interest and admiration. Ten years after M-Pesa’s 2007 launch, a rigorous study confirmed that mobile money had played a direct role in reducing extreme poverty - primarily by facilitating small business growth and improved financial behaviours, especially savings. Beyond M-Pesa, other transformative innovations were appropriately showcased at the festival.

 

Meanwhile, the Fintech sector in Asia continues to grow exponentially. In 2018, more than one-third of all venture capital Fintech funding in the world was directed to Asia (this figure excludes the $14 billion (Sh1.46 trillion) raised for China’s Ant Financial Services), and Asia was home to six of the world’s 29 Fintech “unicorns” (venture capital-backed private companies with valuations greater than $1 billion (Sh103 trillion).

In short, Fintech, is one of the hottest sectors for investment. That Africa and Asia are home to 85 per cent of the world’s poorest people suggests the important role that Fintech can play in expanding economic opportunity. But there is no guarantee that this will happen, and the direction Fintech will take depends on who designs it, and for what purpose.

Last year I was honoured to be asked by the UN secretary general António Guterres to serve on his Task Force for Digital Financing of the Sustainable Development Goals (SDGs). The task force is exploring how we can ensure the digital revolution that is rapidly transforming financial services can be harnessed to advance sustainable development.

Along with mobile technology, Fintech now encompasses artificial intelligence, machine learning, Big Data, the internet of things, blockchain, and other technologies. Fintech is making financial services more efficient and more individualised, and also rapidly moving us towards cash light economies. The transformative power of Fintech is readily apparent.

 

It is important to remember how much has changed in the 12 years since mobile money first took off. Along with mobile technology, Fintech now encompasses artificial intelligence, machine learning, Big Data, the internet of things, blockchain, and other technologies. Fintech is making financial services more efficient and more individualised, and also rapidly moving us towards cash light economies. The transformative power of Fintech is readily apparent.

The transformation could be good or bad. Consider illicit financial flows. “Dark money” is not moving as stacks of cash furtively stuffed into paper sacks. It is laundered digitally through the world’s financial system and the amounts are not trivial.

The task force’s data partner Refinitiv drew gasps during last week’s UN High-Level Political Forum in New York when they presented the numbers to a luncheon gathering of almost 100 diplomats and senior officials: $2.4 trillion in proceeds from the illicit economy will move through the global financial system this year alone, and only one per cent of the proceeds from financial crimes will likely be recovered.

The good news is that even as digitalisation makes illicit flows easier to execute, it also makes suspicious patterns easier to spot and disrupt. Even a marginal increase in recovery rates could go a long way towards financing the SDGs, improving health, education and other essential social services. And, we have only begun to tap the power of combining Fintech with human ingenuity.

Our friends in Asia provide one of the most compelling examples. Ant Forest is an app developed by Ant Financial, whose CEO is my colleague on the UN task force. Ant Forest users earn points by tracking their carbon-light behaviours: taking the bus instead of the car earns you points, riding a bike instead earns you even more points, turning off lights earns you points, and so forth.

 

When you amass enough points on the app (and the power of friendly competition in social networks is huge since friends can watch each other’s scores), Ant Financial will plant a real tree on your behalf. To date, more than 500 million Ant Forest gamers have planted more than 100 million trees: you can see the reversal of desertification from space.

Inspired by Ant Forest, GCash Forest launched just last month in the Philippines. Could we do something similar in Africa with our land or our iconic wildlife? Conferences such as 'Fintech in the Savannah' let us learn from each other and explore options.

While the festival strengthened Kenya’s position as an emerging regional Fintech hub, more remains to be done to fully capture the benefits. We need to boldly share our experiences and also learn from others.

Governor of the Central Bank of Kenya