David Gibson-Moore moderated a great panel discussion on June 29, 2022 hosted by The Abrahamic Business Circle as part of the Investors Roundtable in Dubai. The topic was the “Fintech Revolution: Banking the Unbanked”
A lot is happening in digital banking and the impact of new fintech applications is of great social and economic importance. This is particularly the case in the developing world. There is the perception that fintech could democratize finance just as the internet has enabled the global spread of information. In other words, anyone with a mobile phone will be able to pay their bills, have access to credit or set aside funds every month in savings.
The expert panel comprised Paul Friedman, Founding Partner, Cobalt Strategic Investments, Gordon Einstein, Founding Partner, CryptoLaw Partners and Saqib Iqbal, Founding Partner, SA Consultants
We firstly examined why the legacy banks have had such a poor record in the developing world and then looked at the opportunities potentially available through crypto and other fintech use-cases.
It was pointed out that decentralised financial services (DeFi) present an alternative to traditional legacy centralised systems. Through blockchain, individuals in emerging economies can leapfrog unavailable complex and costly financial infrastructures and participate in a variety of financial services for themselves and their families just like everybody else. At least that is the theory.
Emerging markets are also fertile ground for cryptocurrencies because their own currencies are often failing to do their job. As a store of value, as a means of exchange and as a unit of account national currencies in many developing countries too often fall far short.
However, a cryptocurrency winter may have has set in. We discussed the currently creaking crypto infrastructure. This is a challenge for the whole crypto community world-wide but especially many may be a risk in the developing world through the presence of small, often poorly engineered exchanges.
Since hitting an all-time high in November, bitcoin has dropped about 70 per cent and rival token ether has lost roughly four-fifths of its value. As with peers in advanced economies, there has been plenty of speculative fervour in parts of the developing world and many will have suffered badly by the recent plunge in crypto prices.
We examined the power of non-fungible tokens to empower small retail buyers to obtain fractional ownership of real estate and international. This will surely be eventually an enormous enabler. Investors of all sizes can participate in the ownership of investment opportunities and additionally earn the ability to receive passive income. This opportunity is however very much a work-in-progress in the developing world as elsewhere.
Lack of financial literacy and investor protection is also a major challenge. Regulators must act swiftly. The notion of community self-interest leading to self-correcting mechanisms that limit risks are not tenable.
So, over all, the potential for fintech in developing countries is enormous. We took a deep dive into the above issues and many more. We had a really great discussion. But major challenges remain. Watch this spot!