Financial Illiteracy is more common than you think
Following on from Part 1 in this series, Ireland Blockchain Week. Jane, Sofie and Sorcha share their background and how they got into blockchain. They also discuss the ramifications of financial illiteracy and how we can use technology for financial inclusion to support those that are vulnerable.
Here is part 2 of the conversation:
Bridget Greenwood: I just saw yesterday in the FT advisor, that there is a gap between the knowledge of financial advisors and ESG issues.
Not only is there a gap, but clients are leaving to find advisors who can help with this. Also this week I saw that in Holland, that the Friends of the Earth and other charities and partners took Shell to court and have won.
Shell is now court mandated to reduce their carbon emissions by 45% because left deregulation and left on their own.
They weren’t doing the job.
It’s wonderful to have these conversations and actually seeing you all re-imagining what the future should look like and be able to build that. And then Jane, we would love to hear from you as well.
Jane Thomason: Thank you Bridget, what an amazing panel.
I don’t know how to describe myself, but I feel like I’m just this global cheerleader for all these amazing people that are building these incredible things. And then trying to tell their stories in language that the general populace can understand. I think I’m a cheerleader. I think I’m a diviner of the future because Bridget you’re right, we are re-imagining and recreating the future all around the world as we speak.
Then the other thing that I am is a storyteller who tells it in words that people who are plain speaking can understand. I believe that the pandemic is charging us to have a major rethink of the global economy.
If it’s anything it’s a pandemic of inequality and it has bought into stark reality, the issues that we have neglected people, we have neglected the panel and we have this economic system that drives pursuit of profits above all else and we have an opportunity to really redefine that.
What I’d just like to say, hopefully I’ll get a second chance and I can talk about some of the things I’m working on thinking about is that we really have an opportunity.
And we have seen, because the pandemic forced people to shut down, forced people to go digital, forced people to rethink what they were doing, forced people to figure out how they could earn an income when they couldn’t actually go out and participate in the cash economy.
But now the question that I have for you and for all of us is how do we do that?
Our global institutions have not been great during the pandemic. Many of our governments have not been great during the pandemic.
Can we actually now think about the promise of distributed autonomous organisations to be able to address this issue of sustainable finance and create those incentives to be able to get people to participate and to think about.
We think about carbon credits and we’re blockchaining those and so forth, but why don’t we think about women’s credits?
Why don’t we think about poverty credits?
Why don’t we think about sustainable development goal credits and tokens and so forth.
This technology that has this incredible power really reimagine how we have those conversations, how we build communities, how we connect people and how we incentivise people to do the kinds of things that we know matter.
Bridget Greenwood: And that talking about things that the pandemic did, it definitely lets us know that we are all globally connected, but our local communities are really, really valuable and SMEs are hugely valuable.
Sorcha I would love you to introduce yourself again. Without Joyce and yourself, we wouldn’t be here having this incredible discussion.
Sorcha Mulligan: And indeed you. We all play a part in this.
There’s a grace cross-pollination story across the entire panel here,
which started out with Bridget and The Bigger Pie back in 2019 for me, where I met Jane, I met Jannah, I met Victoria.
Jane introduced me to Tokenomics on ETO-system and Jason, my fellow co-founder is in the crowd here. We have partners on the panel as Sofie Blakstad, and Hiveonline. Hughbon is in the audience – Deadline and many more.
It’s a great collaboration story here. And I’ve been with The Bigger Pie since around the same time in 2019. I am a steering committee member with Joyce and I’m just delighted to see so many people here.
And thank you all for so much of your engagement and support and all the energy is still here at the end of the week of Blockchain Ireland week 2021.
And we’ve had so many sessions and conversations, which included Jane, in the healthcare panel just the other day. There’s a synergy in terms of gaps in systems and I’m a systems thinker and rather than been forced to rethink systems that Jane just mentioned but prompted so many people in COVID. Me and so many of us here at the table have been rethinking these systems for years, if not decades.
It’s 2016 that I got into FinTech after working for a decade in financial services. Victoria was a decade in law. Sofie’s from a finance background. Jannah is from a finance background.
Once you start looking at the gaps in one system, i.e. The monetary system, you see the faults in the economic system and then in the political and policy system, and then agriculture and the food system comes into it. And that impacts healthcare.
Where do you start if you’re stuck in the macro and how do you become relevant and how do you solve problems?
Well first of all, you study, you research and then you find people.
You find people through events like this. You find people through social media, through conferences, word of mouth and referral and introductions.
I started speaking with Jason Curry and Tokenomics in early last year. And I was just over overwhelmed by the amount of work thought that had been put into the proposition.
I was delighted to join the team has as a co-founder at the time.
And we’ve been working in stealth mode for the last year building systems of systems, with a focus on the agricultural food supply chain and starting off with micro farmers and small holder farmers in Ireland.
For those of you who are outside of Ireland, we’ve got Asia Pacific, we’ve got the States, we’ve got all over the world here today, all across Europe as well.
In Ireland, agriculture is one of our most important industries and we’d be very well known for it across the world. We’re seen as a very green economy but I think you need to look a little bit closer at the numbers. We might be green, but we are very monoculture.
We are only 2% of our agricultural industry is organic and we’re quite behind Europe in that front. This is the problem that we want to solve and how do we solve it? Now our government and our Irish pharmacy association put a program together back in 2018 to address the issue of that 2% and how to boost it and farmers and small holders and large farmers from across the country were advised to participate. But 75% of applications we’re rejected because of a biased point system. It’s not that the will isn’t there.
The will is there, it’s just the infrastructure isn’t.
Sofie is building infrastructure from scratch in Africa. We need to rebuild or restart with the infrastructure that we have on its innovators like Tokenomics and ETO systems, the teams that I’m part of, and indeed other teams.
We have the origin chain networks in Fiona Delaney and Ireland. We hope to be working with Origin Chain networks in a few years time, if not sooner once our platform is progressed to that level. We have AgriLedger and Genevieve Leveille who I’m actually on a panel on later this afternoon at a hackathon. There’s Cultivate Vatty. In the USA. There’s a Baeza network in Spain, which are an insurance platform for small holder farmers based on blockchain and using cube satellites to monitor agricultural crop from space which is phenomenal.
All of these partners, but just fitting in different elements and the beauty about blockchain technology and the decentralised finance and the peer to peer network world is that we’re so accustomed and tuned into working in a different way and working from a far that it just comes completely natural to us.
We don’t have to meet face to face.
We can just continue in business.
We just need to know more people that know each other and that just happens over time.
As I say we’re addressing the problem of, helping SMEs to be digitised through blockchain infrastructure and become more visible in the national infrastructure contribution towards the sustainable development goals.
Again, that’s just one industry agriculture where 75% of the contributors are invisible because they’re not accounted for. Then that has a knock on effect because if they’re not accounted for for their good behaviors, then they’re not actually visible to financial services. They can’t access the funds that are available, particularly from banks because of their credit processes.
We’re looking at green bonds based on blockchain. We’re looking at asset tokenisation, crowd funds so much in there.
I’m going to hand it back over to Bridget because everybody else needs to say more, but please, if you’ve got specific questions follow up and we’ll have conversations afterwards.
Bridget Greenwood: We should have a whole conference on this rather than one hour.
One of the things that I’ve very much noticed is if you’re invisible to the system, if there isn’t record keeping of you, then
your ability to progress to financial empowerment is taken away from you and that seems to be the story that everyone is sharing.
Sofie I’d love to know a little bit more about, how you rolled out technology where there was no infrastructure, there’s no literacy and there is no technology.
And what are the lessons that we can learn from you to be able to apply to the other situations?
Because I’m sure when you’re talking about many of the vulnerable people, people who are displaced or who are living in areas where the language isn’t their first language.
Literacy becomes an issue, not necessarily for them in their first language, but maybe where they’re staying.
Sofie Blakstad: I have to say, before we started in Africa, we did actually start with the products in Denmark. And one of the things we learned from the Danish builders, this is the most digitised nation on the planet.
Danish builders don’t use their mobile device as much either. It’s not just a developing economy problem. As others have mentioned that the farmers are excluded wherever you are.
First off, how do we tackle it?
Well, we’ve used existing social bonds and Jane mentioned tokenising, what I call natural and social capital. That’s a big part of it.
We use existing structures such as cooperatives and the savings groups, which are all over Africa. Cooperatives are the key driver of many African agricultural economies.
We use those structures to enable people who are members of those groups to register, to have identity and to build up a record of their transactions with the group and also the groups transactions with buyers so that they can build up both a personal and a group identity.
We do that through measuring financial transactions, but also other kinds of commitments.
For example, in a savings group, do the women shop to put money in every week.
That is a commitment that they make in a farm, in a cooperative. We measured their commitments to the cooperatives to deliver different types of crops, which in turn also builds up a picture for the whole group about what crops are going to be available.
The buyers can pre-buy the crops and then there’s money going into the system and the whole thing is much smoother and more transparent and takes out a lot of the middlemen, which I know is a thing, in agricultural, wherever you are. Where you’ve got middlemen buying crops at a low price at the farm gate and taking more of the profit from the farmers.
You mentioned literacy as a key barrier.
Something we do is we exploit the slightly better literacy of the people who are either authority figures or social leaders in these groups and ask them to enter data on behalf of people who are not literate.
But I have to say that even people who are not literate tend to be reasonably numerate.
Especially if they’re in business as all of our customers are.
We share the numbers with the people who have some kind of device so that they can check that what’s going into the system is accurate and reflects what they’ve told people. We do have some checks and balances there as well. Of course the assets themselves know who they belong to. We can make sure that they’re going to the right people.
For example, in a situation where a corporative is issuing a voucher for a sapling to a farmer. That farmer doesn’t necessarily need a device. They can go to the merchant with their identity and their pin number, and the merchant can use those rather they can log into the metrics device with those credentials, get their voucher redeemed and they never have to touch a mobile device at all and they don’t have to own one.
It’s complicated and it’s not intuitive, but it’s something that we’ve been able to prove works and we’d be really excited to bring us back to the global north and places where people are more digitally literate, because I think the opportunities are so much greater.
Bridget Greenwood: When it comes to the communities that you’re serving, Victoria and Jannah through Orora. What are the challenges that you face there?
Victoria Thompson: Well, to pick up on that. I think the big challenge really is identity because when you think about money, what is money?
Money is, it’s value, it’s promises and value and trust.
I’ll do X, you give me Y and here’s some money that’s backed up by a central bank to say that this is good. This is a good promise. This has value okay and the network has it.
It’s really thinking about all of those things and mixing identity because ultimately, identity through your passport or your driver’s license or the things that we think of as identity credentials, give us access to this world of value and promises and give us access to the things so we can do the things that we want to do.
If we have for example, a digital identity in the UK. The things that Orora are trying to do would be tremendous for here and a lot easier.
If we had access to real digital financial infrastructure issued by the central bank that was out there for people to innovate on top of, our life would be a lot easier at Orora.
From my time in Asia, working in Singapore when I worked for the development bank in Singapore, that’s what’s quite interesting they’re light years ahead in this. When you look at also in India, what’s happened in FinTech there because the work that’s been done on digital identity, whether there are there issues with what they’ve done, that’s really powerful as well.
Because identity and linking that to the entitlement, you don’t necessarily need to know who you are but you need to know that you have a right to access that. I think there are some fundamental pillars in the way some of the systems operate at the moment that are preventing that.
It’s looking to technology, looking to how we can overcome those and asking those really hard questions.
How can we help the vulnerable?
When we sat there and thought about developing our wallet, well if somebody is being domestically abused and they haven’t got the ability to take all of their identity documentation with them.
When they feed that sector, how do we get them into the system?
How can we have somebody that says I will support you, I will vouch for who you are and I will trust you.
How can we do that?
If you’re a homeless person and you can’t get into the system because you haven’t got a permanent address because you haven’t got a job, you haven’t got all of these things that is all stacked up to say, “I can trust you.” Then how do you do that? They’re the key things for us.
Then there’s regulatory barriers because let’s be honest, the financial system the way it’s set up to help the big institutions.
I used to work in a big institution. I lobbied lot to keep that, that way as well. There is a real to get into being able to have reserve accounts, clearing accounts, and all these things that they say you have to have to be a payments institution or alert any money issue.
They’re all there to supposedly deal with the trust and deal with the issues that come with the responsibility of being a financial institution. But actually there’s really clever ways with technology.
You can show what you’re doing and that’s the power of blockchain for me is the access to the data that can be used to inform that trust.
And really empower people to think and do things in a different way.
With what we’ve been able to develop, we can show literally from when the donation comes in, how it’s allocated by the charity, how that then goes into the wallet and what people do with the money that’s in the wallet. Completely transparent.
We had a discussion the other day with a charity that’s a food bank and they were talking about the fact that a local authority didn’t know how to distribute money that had been given by central government to the children that should have been fed and have free school meals.
Didn’t know how to do it. There’s absolutely zero way. The schools didn’t want to do it. Nobody wanted to do it.
Nobody wants to take ownership.
The local authority just bundled up all the money and gave it to the food bank and said, “go and buy some food and you figure it out. You don’t need to tell us what you’ve done with the money. We don’t need to know. We trust you. You go out into the community and do it.”
How is that actually solving the problem? How can we work?
And that’s ultimately what we want to do. We want to be able to give that transparency and trust, help people figure out how they get access to the things they need? Because that’s really what we need to do.
It’s never a technology issue. Technology you can always figure out.
It’s about the people, it’s about getting into the system. It’s about knowledge and trust and value.
Bridget Greenwood: And once you say it’s not a technology issue. It is interesting to understand a bit more or maybe Jannah you can speak to this, about what the digitisation of assets and tokenisation looks like.
How are we able to use the technology to replace transparency and get the funds to the right people that we’re not able to do with the current system? Can you speak a bit more general about what that looks like?
Jannah Patchay: Sure. I think it can build on what Victoria’s already said there. As she’s mentioned that the biggest obstacle for us has not been the technology, it’s been dealing with financial and payments infrastructure that by its very nature creates these problems of financial exclusion.
We’re trying to solve a problem with financial inclusion but we’ve got to go through the same payments infrastructure that is set up to creates these barriers in the first instance, which is really challenging.
And we’ve had to do some seriously creative thinking around how we restructure our wallets and what it’s actually doing and things like that.
That comes on to, for example, what the digitisation of money can provide for us. To give you one example of a digital asset and other people have mentioned things like stable coins and central bank digital currency and the chats as well. I’ll pick up on that.
With central bank digital currency, again, it’s not just about taking the existing infrastructure we have and the existing forms of money we have and just digitising them because the problems are really more fundamental than that.
The banking and payments infrastructure that we have today, grew organically over many decades.
At each stage it’s been limited by not only the current technology constraints, but actually the technology constraints of decades past. Whilst wheelbarrows of cash are not being exchanged at the end of the day. We have a payments infrastructure in the UK that assumes that we are better as cash are being exchanged at the end of the day, which introduces all sorts of inefficiencies at every stage.
Opening hours from 6:00 AM to 6:00 PM on weekdays only that creates the need for multiple payment systems and types of settlements, reserve accounts and headaches that we’ve got to work with.
The introduction of central bank digital currency gives us an opportunity to reimagine what society needs from money. Because money ultimately is not just about enabling the economy. It’s enabling society to function and that the economy doesn’t work unless you have a functioning society really.
If we can again, take a blank sheet of paper and re-imagine.
What are the requirements that we actually have of money? What are the functions that we need money to perform?
And this could be quite wide ranging. We want money and we want means of transmitting money from between senders and receivers that are financially inclusive. For example, the government may want to ensure that a new payments infrastructure is able deliver better policy delivery. Helicopter money, things like that.
There’s potential impacts for taxation, which some people get very excited about. It’s not really my key area.
But there’s lots of things that we could want money to do that would help society function more smoothly. And then if we take those requirements and we look at the technology that we have today, we can actually implement something that meets those requirements.
That’s the real revolutionary aspect of central bank digital currency and digital money.
Enabling you to do things that actually meet the requirements that people have of money, rather than just digitising the existing type of money we have and taking along all those legacy issues with it.