This summer, I was honored to be selected as one of 22 national and international students to participate in a two-week Georgetown-Santander Bank Partnership on Social Economy seminar that focused on innovation and resilience in the face of natural disasters.
The two-week intensive workshop featured a variety of distinguished speakers who lectured on topics such as globalization, financial inclusion, regulation and innovation, and data governance. During this time, predetermined groups researched, developed, and pitched an idea for a product or service designed to improve the financial health of consumers currently excluded or underserved by the financial services market, with a focus on those already vulnerable to natural disasters. I provided information about what our group created at the end but first, a few reflections and learnings:
Financial Exclusion-Underbanked/Unbanked Populations in DC
On the second day of the seminar, we embarked on a day-long financial exclusion experience produced by the Center for Financial Services Innovation. The primary task that day was to complete a series of financial transactions from the perspective of an unbanked or underbanked person living in DC. We broke up into smaller groups and were given a list of instructions that included cashing a check (without having a bank account) and then using the money from that check to make several purchases, including buying (and sending) a money order, buying and loading a reloadable prepaid card, and then using that card to make purchases. It all sounded simple enough at the beginning, however, very long story short, we quickly discovered just how challenging, time-consuming and frustrating it can be to do all these tasks when you don’t have access to some of the financial services and technologies available to higher income individuals. At the end of the day, none of the groups managed to complete the entire list (though some came close). Why?
Key takeaways from the experience and class discussions:
- Underbanked/unbanked people are often challenged with things that keep them from mainstream financial systems, such as outdated banking regulations, outdated check cashing rules, and process inefficiencies. These issues were things our group experienced first-hand. Additional challenges present themselves in people with no credit history, an inability to purchase a smartphone, and a lack of adequate transportation (there is a lot of running around when you cannot bank or buy things from your phone).
- All of this made me reflect on the frameworks for financial health and in the lack of innovative solutions for this segment of the population. I learned that most fintech companies are targeting higher income markets and that the broader financial services ecosystem could benefit from non-tech players that can more easily address the needs of this segment. It was encouraging to learn that fintech trends are now taking a closer look at the nature of credit, pathways to mainstream banking, and personal financial management solutions and thus, putting underserved segments in focus.
Globalization: Winners and Losers
During a time of tariffs, America’s first sentiment, and Brexit, the topic of globalization has never been more relevant. On the third day, distinguished Georgetown University Professor Ted Moran gave a presentation called Globalization Winners and Losers that gave me a lot to think about on the impact of foreign direct investment and progression in developing markets as it relates to extractive industries, low wage assembly, and middle-skill manufacturing.
In the big scheme of things, the United States is a clear winner in globalization. According to a Peterson Institute for International Economics Policy Brief, “The payoff to the United States from trade expansion from 1950 to 2016 was roughly $2.1 trillion.” However, when you look more closely at exactly who is benefiting from these gains, it is clear that others are losing. Domestically, the policy brief provides in-depth insight on the impact of manufacturing jobs. When you turn the spotlight on global impact, the line between winners and losers becomes broader and more complex. According to five studies, the United States benefits at a 20:1 ratio compared to other countries. While America is benefiting, other countries are being left behind; the rich are getting richer, and the poor are getting poorer. Then there are issues of tax evasion, human rights issues, and corruption. Poverty rates around the world have decreased, but income inequality is still high.
Who is winning and losing in extractive industries? Do foreign direct investments help communities or exploit them? Are low skill manufacturing jobs abusing workers or empowering (for example) vulnerable women with new opportunities? Professor Moran added an additional layer of complexity when he shared that there is feminist literature in favor of low wage assembly jobs because it gave women the opportunity to be more than just village girls, sending money home, marrying later in life, and having more agency over their lives.
He also touched on the role of organizations like the Extractive Industry Transparency Initiative, Transparency International, and other NGO’s in promoting the responsible management of resources, fighting corruption and monitoring human rights abuses.
However, a topic that I once believed to be more straightforward turned out to be a lot more nuanced and complex. Professor Moran left us with an important point to consider; from a United States policy perspective, we should not stop or hinder globalization. Instead, we should reduce the ratio and make it a more even playing field.
Towards the end of the seminar, Cara LaPointe, a futurist and senior fellow at the Beeck Center at Georgetown, presented her research on Blockchain and the Ethics of Technology. Incredibly relevant to the times, LaPointe’s presentation doesn’t talk about whether we should or shouldn’t be using blockchain. Instead, it emphasizes that when we use it, we must use it wisely and ethically. Blockchain, as I have heard it described by many people, is like the internet when it first came out, in that not everyone is entirely on board or “in the know” with how it works. Yet, the possibilities are endless. Another fantastic speaker earlier in the week, Alexander Sotiriou, who came to present on energy and digital inclusion, believes that “blockchain is a solution looking for a problem.” Though he made some excellent points, I am a blockchain enthusiast and agree with LaPointe on the full range of uses that blockchain offers. What I never really stopped to think about, however, are the ethical implications blockchain also presents.
LaPointe is the co-author of The Block Chain Ethical Design Framework, a document that outlines “ why intentionality of design, which is important with any technology, is particularly crucial with blockchain” and how the “characteristics that make blockchain potentially so interesting also introduce challenges.”
Blockchain, when planned and designed with attention to this framework, can be a viable solution to a series of challenges around transparency, data ownership, security, and governance. In contrast, a poorly planned blockchain project can have adverse effects on the very issue you are trying to solve. Blockchain data, like data you feed into a machine learning program, is susceptible to human bias and errors. And though unchangeable/ incorruptible data is a strength, what happens when that initial data is wrong? How do you correct something that can’t be changed? Perhaps you can override it, but it will always be that the original data is still there.
Thinking back to Sotiriou’s point, blockchain isn’t always the solution, and I appreciated that LaPointe also touched on that. Blockchain, with all of its potential, doesn’t mean it will replace existing systems, at least not in the near future. Blockchain is still in its infancy, and its application is still new to industries. I applaud companies like IBM that are driving possibilities forward.
On the last day of the seminar, our group presented our idea. Our specific task was to develop an idea for a product or service designed to improve the financial health of consumers currently excluded or underserved by the financial services market, with a focus on those already vulnerable to natural disasters. The product/service had to address consumers’ ability to SAVE but may also meet other financial needs (plan, spend, borrow). The product/service needed to address not just individual needs but also, be attentive to building community resilience to future shocks. The product/service could have been designed for any market in the world, as well as target consumers across multiple markets.
Considering two-weeks’ worth of learning and leveraging our team’s unique backgrounds and strengths, we created the Community Resilience Emergency Fintech Fund (CREFiF), a fintech social enterprise with the global mission of helping underbanked or unbanked individuals and communities vulnerable to climate change-related disasters to save money so that they are better prepared for the worst-case scenario.
CREFiF provides customers, both individuals and communities, to save money with the opportunity to participate in a profit sharing, data-driven program that incentivizes their saving habits.
CREFiF’s vision is that all the people both in developing and developed countries can more quickly recover after a disaster, together with improving their conditions for future disasters as well. CREFiF’s mission is to help these millions of people around the world to achieve that goal, by encouraging both the community and individuals to accumulate savings.
Fintech social enterprises like CREFiF can help address the challenges created by climate change and ever-increasing globalization. Socioeconomic innovations can help create more inclusive societies by empowering vulnerable individuals and communities with access to technology and financial services that help them be more in control of their futures and more resilient to shocks.
I am grateful to have had the opportunity to present this idea with a great team and was excited to see the other amazing innovations fellow participants created. There are many pathways to viable solutions to improve the lives of vulnerable populations.