Sibos 2014: Financial Empowerment for the World’s Poorest

Bill Gates has played several roles during his career – business entrepreneur, inventor, investor and philanthropist – and made clear he was attending Sibos in his capacity as co-chair of the Bill and Melinda Gates Foundation. The aim of the Foundation is to assist those living in the world’s poorest regions, with much of its work focused on improving the health of their populations. The message here is encouraging, with the numbers living in absolute poverty and the number of infant deaths both halved over the past 25 years.

Gates said that digital technology was a great facilitator in helping the Foundation to achieve its goals, by making payments relatively inexpensive. For the world’s poorest to move up into the ranks of the middle classes they needed efficient financial services that enabled them to both save and borrow. However, too often financial transactions cost them dearly as their countries lack the financial services networks typical of the West’s developed economies.

How could the rollout of cheaper financial service tools be accelerated, Gates asked? The Foundation had tried funding micro-lending, but here again the interest rates were fairly high. The next focus had been on savings and insurance schemes. In the absence of digital payment platforms their effectiveness was muted, so resources were now being concentrated in this area – specifically a simple interface on mobile phones that allowed the user to track his or her financial activities.

“We think that digital activities can do a lot for the world’s poorest countries,” said Gates. By contrast, government initiatives tended to focus on subsidising goods consumed or services used by the poorest sections of society. A prime example was fuel, but fuel subsidies tended to benefit the wealthy rather more than the needy.

Prices were also subject to leakage and corruption, due to highly inefficient systems-a problem that Brazil had managed to tackle with some success. “We want to do the same in other countries, so the most powerful individuals don’t simply siphon-off payments,” added Gates.

Two billion new customers

Digital payments systems can help eliminate many of the potential system abuses, while computers can process payment data at very low cost and cloud services assist in areas such as disaster recovery back-up.

With devices becoming increasingly ubiquitous, users can digitally identify themselves and once their IDs are established transaction costs are extremely low. The recent launch of Apple Pay would give the adoption of user ID a further huge boost and financial services of the future would be based on connecting into the individual’s identity.

Gates cited the examples in developing countries of Bangladesh’s mobile money service, which had added more than 13m customers who use the service via their mobile phone since its launch in 2011. Kenya’s established M-PESA system now had valued-added applications, which had spurred neighbouring countries to examine their regulations so they could develop similar services. He was optimistic that the new few years would be marked by widespread innovation and individuals offered a wider choice of different transactions, which would be “digital, universal and almost free of charge.”

“Thanks to the advent of mobile banking, as many as two billion new customers will be brought into the formal economy – and have the things that we already take for granted, such as a credit record,” concluded Gates.

At the end of a conference sometimes marked by gloomy prognostics on topics such as a cybercrime, it was an uplifting message on which to conclude.

For more Sibos 2014 coverage…

Are the Costs of Regulatory Reform Too High?
Apple Pay, Cyber Risk are Game Changers
Is Corporate Transaction Banking Almost Here?
Will Banks and Businesses Embrace Bitcoin?
SWIFT Chief’s Three Key Lessons about Payments


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