Fintech is the next frontier, we need to tap it for a better world

The Central Bank of Kenya (CBK) and the Monetary Authority of Singapore (MAS) recently co-hosted 2,000 participants from 43 countries at the first-of-its-kind Afro-Asia Fintech Festival, dubbed “Fintech in the Savannah”.

They included more than 100 world experts in finance technology (Fintech), 55 exhibitors and 110 university students. A global hackathon was also launched for Fintech entities.

A decade after M-Pesa’s 2007 launch, a study confirmed that mobile money had played a direct role in reducing extreme poverty — primarily by facilitating small business growth and improved financial behaviours, especially savings.

The Fintech sector in Asia is growing exponentially. In 2018, over one-third of all venture capital Fintech funding was directed to Asia — excluding the $14 billion (Sh1.4 trillion) raised for China’s Ant Financial Services — and Asia was home to six of the world’s 29 Fintech “unicorns” (venture capital-backed private companies valued at over $1 billion).

SUSTAINABLE DEVELOPMENT

Fintech is one of the hottest sectors for investment. That Africa and Asia are home to 85 percent of the poorest people suggests the importance of Fintech in expanding economic opportunity.

But, there is no guarantee that this will happen and the direction Fintech will take depends on who designs it, and for what purpose.

Last year, I was honoured to be asked by the United Nations Secretary-General António Guterres to serve on his Task Force for Digital Financing of the Sustainable Development Goals (SDGs).

The task force is exploring how we can ensure the digital revolution that is rapidly transforming financial services can be harnessed to advance sustainable development.

It’s important to note how much has changed in the 12 years since mobile money took off.

MONEY LAUNDERING

Along with mobile technology, Fintech now encompasses Artificial Intelligence (AI), machine learning, Big Data, the Internet of Things (IoT), blockchain and other technologies.

It’s making financial services more efficient and more individualised and rapidly moving us towards cash-light economies.

The transformative power of Fintech is readily apparent. The transformation could be good or bad.

Consider illicit financial flows. “Dark money” is not moving as stacks of cash furtively stuffed into sacks; it is laundered digitally through the world’s financial system and the amounts are not trivial.

The task force’s data partner, Refinitiv, told the almost 100 diplomats and senior officials at a recent UN High-Level Political Forum in New York that $2.4 trillion in proceeds from the illicit economy will move through the global financial system this year and only one percent of it may be recovered.

CONSERVATION

The good news is, even as digitalisation makes illicit flows easier to execute, it also makes suspicious patterns easier to spot and disrupt.

Even a marginal increase in recovery rates could go a long way towards financing the SDGs of improving health, education and other essential social services.

Our friends in Asia provide one of the most compelling examples. Ant Forest is an app developed by Ant Financial, whose CEO is my colleague on the UN Task Force.

Ant Forest users earn points by tracking their carbon-light behaviours: Taking the bus instead of the car earns you points; riding a bike earns you even more points; turning off lights earns you points and so forth.

When you amass enough points on the app (and social network friends can watch each other’s scores), Ant Financial will plant a real tree on your behalf.

GROWTH

More than 500 million Ant Forest gamers have planted more than 100 million trees.

Inspired by Ant Forest, GCash Forest launched last month in the Philippines. Could we do something similar in Africa with our land or our iconic wildlife?

The festival bolstered Kenya’s place as an emerging regional Fintech hub. Still, more remains to be done to capture benefits by sharing our experiences and learning from others.

Dr Njoroge is the Governor of the Central Bank of Kenya. [email protected]