Big tech companies think they can make a lot of money from the world’s unbanked

No cash required.
No cash required.
Image: Reuters/Bobby Yip
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It sounds coldly capitalistic, but the world’s unbanked are becoming less of a philanthropic opportunity and more of a commercial one. Startups were already targeting the more than a billion people (pdf) who don’t have have a bank account, and now big tech companies are increasingly vying for their business. Americans without a bank will be able to deposit money into a PayPal account and spend it with a Mastercard. Amazon is trying to deepen its business in Mexico by launching its first-ever debit card there.

People outside the formal financial system—who may be poor, young, or recently immigrated—don’t have a way to safely save, borrow, or insure themselves (let alone hail an Uber). They’ve been overlooked by banks because it’s hard to make money on these customers using traditional models. Technology companies, however, crave scale, and many of the unbanked have mobile phones, which offers a way to tap these potential customers.

It’s worth remembering that cash is still king. Even in China, where it’s hard to get a taxi in major cities without a WeChat app, there are rural populations that haven’t made the leap. Coins and banknotes are still used in 85% of payments globally. You hear this figure bandied about at fintech conferences and in press releases, because tech execs are betting it is going to change quickly. Where banks see the difficulty of bringing the unbanked on board, tech companies see vast room for growth, especially when it comes to payments. China shows that people can get on board with electronic payments in a very short period of time.

And while profit is the ultimate motivation, providing bank accounts and more reliable ways to move money to the financially disadvantaged is almost unequivocally a good thing, according to Stone Atwine, who has worked in the payments software business in Kenya and Uganda and is building a mobile-only banking service for Africa called Eversend. “The disadvantages are many and they’re heavy,” he said. “You can’t do anything without financial services.”

What to watch for next week

  • Monday: Bank of America reports earnings. The company released better-than-expected earnings the previous quarter, so we’ll see if it can keep it up.
  • Tuesday: Goldman Sachs reports earnings. It will be the company’s first report since it emerged that president David Solomon will eventually succeed Lloyd Blankfein as CEO, which is sure to be a talking point during the conference call.
  • Wednesday: Morgan Stanley—you guessed it— reports earnings. Market volatility can be great for trading desks, but not always for brokerage arms (paywall).

The future of finance on Quartz

Kathryn Haun peered into some of the darkest corners of the cryptocurrency world, and emerged optimistic. In a wide-ranging interview, the former assistant US attorney for northern California also dishes about the insider who tipped her off to rogue agents stealing bitcoins via the Silk Road illicit marketplace.

A major bank is actually using blockchain for international money transfers. Santander is among the few major financial institutions to go live with the extraordinarily hyped technology.

Safaricom is partnering with PayPal in Kenya. They are collaborating on a new service to enable Kenyan customers to transfer money between PayPal and Safaricom’s M-Pesa mobile wallets.

If bitcoin mania spreads like a disease, Barclays thinks the fever has broken. Using infectious disease models to forecast crypto price movements, analysts believe the “idea epidemic” is fading—for now.

The future of finance elsewhere

China’s Ant Financial is in talks to boost its fundraising target to at least $8 billion. This implies a valuation of some $150 billion, which is up from $100 billion in February. In other punchy valuation news, Recode reports that London-based international payments startup Revolut could be valued at about $1.4 billion in a new funding round.

BlackRock’s Aladdin computer system is linked to around 10%, or $20 trillion, of the world’s financial assets. You might say the system, which debuted in the 1990s, was one of the first fintech firms.

Artificial intelligence isn’t poised to take over banking. A Financial Times survey of 30 major banks signals modest efforts to apply machine learning and limited progress so far (paywall).

Adyen, a Dutch company that processes payments for the likes of Airbnb and Netflix, is mulling an IPO. The fundraising could value the firm at as much as $11 billion, according to Reuters.

Money transfer start-up WorldRemit expects to turn a profit next year. It has partnered with telecoms firm Lebara, which offers pay-as-you-go SIM cards designed for migrant consumers.