Together We Can: A Decentralized Vision for Financial Inclusion

Payment and transaction costs in financial inclusion are often overlooked hurdles that a payments infrastructure platform is trying to get right.

This post originally appeared on Stellar’s blog.

In this post, our contribution to Financial Inclusion Week organized by the Center For Financial Inclusion, we’ll share Stellar Development Foundation’s (SDF’s) vision for achieving financial inclusion globally.

We’ll do this by first outlining how we define financial inclusion, which we think is an important place to start. We’ll then describe our philosophy and approach to enabling. Finally, and most importantly, we’re honored to present three guest posts by companies actively building financial inclusion solutions around the globe, powered by Stellar.

What is Financial Inclusion?

“Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.”World Bank

Financial inclusion is the science (or art) of designing financial products and services that meet individuals and communities where they are. At its core, the movement is about localization, and requires entrepreneurs who are acutely sensitive to things like cost, culture, and connectivity when designing their solutions.

Personally, I’ve had first hand exposure to the importance of ‘meeting local needs’ in designing financial products and services. I’ve seen first-hand a statewide default on microfinance loans, driven almost entirely by cultural misalignment – in this case, sending male loan collectors to female-only borrower groups in conservative Muslim villages. I also helped form a functional village bank that used paper and pencil for its record keeping, and a metal box with three locks and three key holders as its vault. And it worked beautifully. Localized, relevant solutions are essential to move from aspiration to execution in the financial inclusion space.

But at SDF, we believe there’s something else.

Inclusion, for us, also means equal access, not just to products, but to the global marketplace. It means enabling greater economic participation. It means local service providers connecting their customers to the global economy – sourcing the best rates, goods and opportunities, and seamlessly delivering them through an accessible and relevant platform. For us, economic participation is fundamental in defining financial inclusion.

And this is where we believe blockchain is enabling a paradigm shift.

Our vision for Financial Inclusion

To truly achieve financial inclusion, we envision a world in which local fintech entrepreneurs utilize Stellar as their back-end infrastructure solution. We believe this will shift the playing field for financial inclusion innovators in three key ways:

Increase go-to-market speed:

Stellar provides an alternative to building your own back-end, both as an account management system and as a payment rails. This dramatically reduces the cost of launching a new product, as well as the time to market, reducing barriers to entry. This means more innovation and increased specialization. And all of this is delivered while simultaneously leveraging the scaling economics and continuous development common to open-source projects.

Reduce cost of products:

Those familiar with financial inclusion know that at its core, it often comes down to cost. The cost of account setup, transaction processing or lending are often too high given potential revenue, forcing businesses to walk-away, or operate at a loss. With Stellar, an account costs $.40 and transactions cost $.0000025, dramatically changing the calculus for businesses that service lower income households and lower revenue enterprises.

Enable access and interoperability:

One integration enables access to a global marketplace, that’s the future with decentralized financial protocols. With Stellar, companies can connect to a global network of regulated financial services counterparts, and transact over a modern, instant and low cost payment rail. Any asset or currency is tradeable in Stellar — creating interoperability between every participant, regardless of whether users save and spend with Naira, Pesos, airtime minutes or a new digital currency token.

The Future of Financial Inclusion in Practice

The Stellar community is full of inspiring projects building the financial products of tomorrow. Many of these projects simultaneously focus on services for the underbanked, a living and breathing incarnation of the theory presented above. Take a few moments to check out three initiatives working in the Caribbean, U.S. and southern Africa, respectively: Seamless, Finclusive, and Wala.

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