Summer of 2019 was the kickoff for our financial/digital inclusion discussion series in California!
The idea for the inclusion discussion series was borne from several meetings and calls with philanthropists, NGOs, entrepreneurs, and regulators in Singapore, Seattle, Washington DC, San Francisco and Santa Barbara. Our goal was to create awareness for the topic in the local communities and to address local areas where inclusion would have the greatest impact.
The challenge with financial inclusion is that many consider it to be a philanthropic effort, and not a viable business proposition. This could not be further from the truth.
The very basis of economics, and the financial system, is that the broader the participation by everyone in the economy, the greater the opportunity for growth and ability for each participant to add value..
To help facilitate the discussion we wanted to begin with two of the hardest problems facing the United States today: Immigration and homelessness.
We decided to begin in San Francisco and use the city’s homeless problem as a starting point. From San Francisco, we went to Santa Barbara and focused on immigration given the large impact the County has for agriculture in the United States.
Our panel in San Francisco (SF) was graciously hosted by Juvo and their CEO Steve Polsky. Joining Steve on-stage were Adam Devos from TowerIQ, Mike Avila from The Singapore Stock Exchange, Bill Shraga from Senahill, and Steve Francis, Founder of Logic Monitor.
Our panel in Santa Barbara was hosted by The Santa Barbara Foundation. Ron Gallo CEO of the foundation graciously welcomed us and opened a terrific panel discussion. Joining us were Michael Brown of COLAB, Schan Duff of The Kiva Protocol, Father Randall Day from St. Marks in the Valley, Luis Villegas from Rabobank, Ben Tsai from Wave Financial, Claire Wineman from Grower-Shipper, and (again) Steve Francis Founder of Logic Monitor.
At Move 78, we consider these community discussions a key part of a broader mission for total digital inclusion.
We believe that financial inclusion is the first step to total inclusion in society. Why? Underlying each exchange is a basis for value…and value connotes money. And as Yuval Hara stated, money is the greatest illusion/religion ever created by man to facilitate the exchange of value between participants.
We began our discussion journey of financial inclusion in San Francisco. Why? Where better than a location where homelessness is an obvious problem, and despite the extraordinary wealth creation from Silicon Valley, one cannot but help see the homeless on every street corner and train station.
We began in San Francisco began with one simple question? Is it feasible to provide every homeless person a debit card with $1 on it? That $1 thereby "inviting" them to participating in the broader economy.
This statement alone elicited a visceral response, and it forced the conversation along the merits of a welfare state (for whom?). Alongside that, who should be included in the system? Does inclusion only mean those contributing to the economy? And what does it mean to contribute?
With Juvo, we discussed how a digital identity could be created using customer data available on/through mobile networks. Juvo proved that even without a national ID, individuals worldwide could establish the basis of a digital identity with their pre-paid SIM cards.
Bill Shraga from Senahill noted that Financial Inclusion is not a charitable endeavor but one that the business community should seriously revisit/consider as a new customer segment. Technology was lowering the costs exponentially for banks to carry and onboard new customers.
This was confirmed by Adam Demos as he recounted tales from the insurance space wherein the incumbents are now beginning to see the merits of updating their legacy tech stacks.
As the designated “straight man” of the group, Steve Francis added levity when he shared that corporations worldwide are starting to finally see the extraordinary benefit of the cloud…and the implications for lower customer onboarding/carrying costs.
As we discussed this, it was evident that as technology advanced, the ability for banks to successfully on-board new customers was an extraordinary opportunity. Micro-finance is now becoming available across sectors of financial services.
But, if the technology is enabling the opportunity, how best to implement it? And, for whom?
This was the perfect shift to Santa Barbara, another wealthy enclave of the State of California. But, not as well-known nation-wide is the substantial presence of agriculture in the County and how relevant the debate on immigration there is for the Country.
Ron Gallo, CEO of the Santa Barbara Foundation, opened our discussion with an passionate talk on how important it was today, especially in this politically charged environment, to realize how important inclusion is for the nation as well as the County.
However, the question remained, how best to do it?
Claire Wineman explained succinctly that the agriculture industry wants to see the change as much as anyone. This was contrary to type as most attendees had previously assumed that the industry held the opposite view. We couldn’t have been more wrong.
Agriculture needs a consistent and dependable workforce. As the breadbasket of the world, California simply has to farm, and farm well.
That then lead us to ask if the employers were motivated to see a better quality of life for their workers, then where did the bottlenecks lie?
Luis Villegas from Rabobank enlightened the group that while banks wanted to be able to process cash more efficiently for the workers that their systems simply could not handle it. In other words, the very technology that we reviewed in San Francisco was part of the solution, if deployed correctly.
But, as the group discussed this further, it became apparent that there remained small friction points that allowed pay-day lenders to prey on the migrant worker’s need for immediate access to their cash.
These friction points were ironically relatively straight-forward. Simple things like the use of checks instead of direct deposit, the lack of ease to open a savings account, the inability to transfer funds easily, and mobile access.
As technically proficient as the groups in both San Francisco and Santa Barbara were, it was amazing, and surprising, to see how prevalent paper was, and still is, in this process.
Bigger picture, Michael Brown from COLAB, highlighted that all of this had implications for the broader "American Dream." Cities across America needed to consider the broader impact inclusion would have on available housing and the ability for ownership, not just in California.
Ben Tsai from Wave Financial reminded us of Jeff Bezos’ quote: “Your margin is my opportunity,” and how given the number of friction points in the process it was inevitable that at least one market participant would capitalize on the margins available. To his point, why wouldn’t the banks slightly expedite the availability of cash and grab the margins being captured by the pay-day lenders? Someone at some point in the cycle would inevitably see the opportunity.
We returned back to Claire’s points on the Form I-9, which is officially the Employment Eligibility Verification form and is a United States Citizenship and Immigration Services form. Mandated by the Immigration Reform and Control Act of 1986, it is used to verify the identity and legal authorization to work of all paid employees in the United States. Currently, all U.S. employers must ensure proper completion of Form I-9 for each individual they hire for employment in the United States.
The Form I-9 is the basis of an identity within the US financial system, and a means to be compensated, but the process of actually opening up an account is incredibly problematic for the worker.
The key for banks is the ability to establish the identity of the end user (the worker), but now the concept of a portable digital identity is slowly being adopted.
Schan Duff, from The Kiva Protocol, shared with us how Kiva is addressing this problem for the world’s unbanked.
Kiva, Sierra Leone and U.N. agencies announced the first implementation of the Kiva Protocol on Sept. 27, 2018, at the U.N. General Assembly. The Kiva Protocol will be used to create a nationwide digital identification system designed to help the country’s 7 million citizens access the financial services they need to improve their lives.
According to The Kiva Protocol, globally, 1.7 billion adults are unbanked, including 80% of the citizens of Sierra Leone. Two of the major barriers to accessing financial services are a lack of formal identification and a lack of verifiable credit history.
The new Kiva Protocol is designed to address these barriers by using distributed ledger technology to issue digital identification to all citizens. Through the Kiva Protocol, both formal and informal financial institutions (from banks to shopkeepers giving credit) can help contribute to a person’s credit history.
So, for California’s migrant workers, the simplification of opening bank accounts may be just on the horizon.
Again, as he did in San Francisco, Steve Francis reiterated to everyone how straightforward this was to accomplish within the cloud. If the tech stack exists (which it does) each financial entity could leave their legacy systems behind for greater economies of scale and regulatory transparency.
We had a meaningful pause as Father Randall from St. Marks in the Valley, and Board Member at The Santa Barbara Foundation, reminded us all of the societal obligation we all have to the world’s poor to achieve this…we were now in possession of the means and mechanisms to truly impact the well being of our communities/societies world-wide. The parable of the Good Samaritan lent itself to his point as we all realized we have an obligation to help…and we can no longer be innocent bystanders. We now have a moral obligation to intercede.
The event in Santa Barbara wrapped with a beautiful sunset as the group realized the impactful discussion we just had together.
As the participants began leaving a small group of us went to the waterfront at Brophy Brothers realizing that this was not the end of the discussion, but simply the beginning.
Thank you to everyone for making the events a terrific success. Seeing the emotional response in Santa Barbara was a capstone to a wonderful and sincere discussion.