Mobile technologies can produce both new revenue streams and social dividends.
For enterprises concerned about network security, identity verification has become a top-of-mind issue in an era of ubiquitous cyber-crime. But for millions around the world with no valid identification, standard computer access and identity authentication measures such as passwords pose a formidable barrier to not just public services, but also to the formal economy and traditional financial institutions.
When BioConnect, a Toronto-based biometric firm, launched seven years ago, its goal “was to solve the big problem of identity” posed by entities like banks that require customers to provide traditional paper documents to open accounts, explains vice president of strategic marketing and global alliances Bianca Lopes. She cites two telling statistics: according to CISCO, there are now 50 billion digitally connected devices globally, but there are also 2.5 billion human beings who are not considered people because they don’t have ID. “These people can’t enter the system,” says Lopes.
BioConnect’s technology suite allows the firm’s customers to use a range of biometric identifiers — facial expressions, iris patterns, even cardiac rhythms — to identify users. Lopes sees the technology as key to providing mobile banking services in developing countries where many people have a smart phone but no physical way of connecting to a financial institution. “The technology allows these systems to see these people, so they can become part of the economy,” she adds.
For Canada’s rapidly globalizing financial technology (fintech) sector, such stories reveal the ways in which these mobile technologies produce both new revenue streams and social dividends.
Fintech firms have the capacity and the technology to develop widely accessible, competitive services that support socially positive activities instead of just boosting the banking sector’s profit margins, says Mogo founder Dave Feller. “Platforms that provide consumers with features like real-time updates on their credit scores result in an overall financial awareness and produce social benefits in the form of fewer personal bankruptcies and reduced consumer debt. The more financially fit we are, the more likely we are to contribute,” says Feller. “It has a ripple effect on society.”
Outside Canada, the potential is even greater, particularly among the estimated two billion people globally that currently have no access to banking services, according to the World Bank. While traditional banking services are unattainable, mobile banking is certainly within the realm of possibility. California-based market research firm, The Radicati Group, projects that 84 per cent of the world’s population will be using mobile technology by the end of 2018.
“What if these people could access financial services online or through mobile devices?” asks Dinaro Ly, director of MaRS FinTech. “The result would be increased financial literacy and improved social inclusion on an international scale,” he adds.
In order to go global, fintech ventures need access to international advisors who can help them gain an understanding of the local business landscape, assess market fit, and secure customer opportunities.
Goldmoney, a fintech platform with a broad social goal, already has international traction. For several decades, gold has held its value much more consistently than all sorts of currencies, both strong and weak (while it fluctuates, overall gold has risen 10% per year against the Canadian dollar for 15 years running).
But gold hasn’t been widely available as an investment vehicle in developing nations because it trades in minimum denominations that preclude small purchases, says Darrell MacMullin, CEO of Goldmoney Network. MacMullin’s firm enables users to create savings accounts through which they can buy even a few cents worth of gold at a time. Founded in May 2015, the fintech startup now has 1.3 million accounts in 150 countries, with combined deposits worth $1.9 billion. George Soros was an early investor. “He liked the idea of providing upward mobility for two billion people around the world,” says MacMullin.”
Impak Finance is hoping to take the fintech-driven social dividend concept one step further. The firm, which was founded a year ago, will allow consumers to open savings accounts and direct their funds to organizations or companies that require loans to finance a range of socially or environmentally beneficial activities and businesses. “The project is to create a bank that will be a catalyst for the social impact ecosystem,” says co-founder Paul Allard, adding that it will begin lending funds next year and introduce consumer savings accounts in 2018.
The company, which has raised $1 million in lending capital since October, relies on a more holistic risk algorithm to evaluate the creditworthiness of borrowers, but it also provides depositors with a say in the sorts of firms that they’d like to back. “You choose the sector where you want to see your money at work,” he says, citing sectors such as cleantech or bio-agriculture.
Canadian fintech firms have some novel solutions, but if they hope to have greater social impact, they must leverage international partnerships.
As a global innovation hub, MaRS is a gateway to international markets for Canadian companies. Take the recently announced partnership between MaRS and NTT Data, the systems arm of the Japanese telecom and information technology giant, which promises to provide local fintech firms access to the Japanese market.
Under this partnership entrepreneurs working in the fintech sector will be invited to participate in a global business challenge that offers startups the opportunity to present solutions to economic problems like population decline and aging, environmental destruction, depletion of resources, and the rising cost of healthcare.
Winners will receive business development support from NTT Data to run a proof of concept, with the objective of commercializing their technology in the Japanese market.
“In order to go global, fintech ventures need access to international advisors who can help them gain an understanding of the local business landscape, assess market fit, and secure customer opportunities,” says Ly.
In addition to partnering with NTT Data in Tokyo, MaRS has established a network of co-working spaces in key locations such as San Francisco, New York, Singapore, London, Shanghai, Tokyo, Sao Paulo and Hong Kong to give Canadian startups a base in these vital markets.