Digital Currency Puts Fully Banked World Within Reach
Peer-to-peer lenders, cryptocurrency services and providers of tech-based services for cash-heavy users are all out to syphon business away from mainstream banks. The challenge for banks is figuring out if the threats are legitimate then trying to decide whether to beat them or join them.
A risk-based approach to anti-money-laundering rules would allow regulators to be sure mobile transactions are being screened for suspicious activity without hindering the technology's potential to do social good.
Commerce is humanity's ultimate social network. Ancient civilizations were connected by brave and savvy traders. Today, modern banks have made it easy for businesses to access credit and facilitated payments for consumers. E-commerce connects buyers and sellers around the globe.
But billions of people are either completely excluded from the benefits of global commerce or else forced to pay exorbitant fees and suffer long delays for access. In the future, I envision a world where our financial services are more inclusive, approachable, efficient, inexpensive and digital. I'm confident that digital currency will deliver the transparent, real-time and attainable financial independence and portability that underserved communities around the world rightfully deserve.
Technology wrests control away from inefficient institutions and returns it to people and businesses. As Barclays chief executive Antony Jenkins recently pointed out, the banking sector has yet to feel the full disruptive force of technology. But as JPMorgan Chase chief executive and chairman Jamie Dimon predicted last week in his annual letter to stakeholders, Silicon Valley is coming.
Disruption is coming soon, and the industry should embrace the trend. In the meantime, I believe adoption of digital currency will continue to grow.
People around the world are tired of paying banks for the privilege of holding and moving their hard-earned money. They're also angry about the destructive lack of transparency in global finance and unwilling to be excluded from it. They want to change the way money works, and they are using their smartphones and laptops to make that change happen.
According to statistics from the Gates Foundation, 2.5 billion adults around the world do not have an account at a financial institution. Only 41% of adults in developed countries have bank accounts. This means that over half of the adult population in the developed world lacks the viable financial records necessary to apply for housing, transportation and education in many areas. They also lack fundamental access to financial advice and lending options that can help them weather economic, family, employment or health hardships.
These figures expose only part of the problem. Children around the world are also unbanked and, in many cases, casualties of a global failure to teach financial literacy and responsibility at an early age.
The U.S. has many of the same problems. In 2013, roughly 20% of households in the U.S. were underbanked, meaning that they hold bank accounts but are still in need of additional financial services, according to statistics from the Federal Deposit Insurance Corp. Another 7.7% lacked access to any bank account at all. The cause is depressingly simple: banks don't see the working poor, immigrants and children as profit-makers. It's better business to turn them away.
We need a financial system that moves money with real-time transparency while upholding the highest level of security and privacy. This system should empower people to take control of their money and enable them to access funds in their home currencies and mother tongues.
Users should be able to easily and responsibly track their finances, rather than be punished with overdraft fees and minimum balance requirements. Consumers should be protected from the value-destroying impact of undisclosed risk that we saw in droves during the economic downturn in 2008, when ill-informed investors in the U.S. and abroad were blindsided and fell into crippling debt. And regulators and law enforcement officials should be empowered to better identify and exclude bad actors.
By utilizing the advantages of digital money, the industry and regulators have a dual and complementary ability to better serve people and businesses with easy, accessible, instant, and low-cost financial services while receiving full visibility into funds.
People around the world are already moving to online banking, using mobile apps to pay expenses and manage finances and sharing financial information that resides in the cloud. Innovations like PayPal, M-Pesa and Venmo are driving secure and simple digital finance adoption in the private sector.
Banks and other financial services can further bring about change by putting client welfare above short-term profits and by adopting the highest standard of financial stewardship that technology enables. And governments around the world can drive innovation in finance by embracing technologies like digital currency and the Bitcoin protocol, which lower costs for the poorest and most vulnerable of their citizens.
Consumers and businesses are always willing to try new technology that improves their lives. That's what digital money does. That's why I believe a better, fairer, more inclusive and fully-banked world is within reach.
Halsey Minor is the founder and chief executive of Bitreserve, a global cloud money service. He is also the co-founder of CNET, co-founder of Salesforce.com, founder of OpenDNS and founder of Grand Central (acquired by Google and rebranded as Google Voice).