Money20/20: the Future Is Blockchain, China and Financial Inclusion by Matt Marino Published on 26 October 2017 in linkedin
Money20/20, the largest fintech conference in the US, concluded yesterday in Las Vegas. As with prior years, Money20/20 is focused on how consumers and businesses manage, spend and borrow money. This year there were 11,000+ attendees from 5,000+ companies attending 300+ presentations in four days. Whew!
There were many announcements, including WePay’s recent acquisition by JPMorgan Chase, which will accelerate the growth of online platforms with instant merchant on-boarding and payment processing without friction or fraud.
In addition, the larger, publicly traded companies were looking to flaunt their payments dominance. VCs were looking for the next hot thing. Startups were...well, looking for attention.
There were three key themes that resonated throughout the 2017 conference:
Big banks are starting to leverage blockchain. Visa announced a new product, called Visa B2B Connect. It’s a "new platform that Visa is developing to give financial institutions a simple, fast and secure way to process B2B payments globally". They’re partnering with Chain, to build B2B Connect, using Chain Core, an enterprise blockchain infrastructure that facilitates financial transactions on scalable, private blockchain networks.
It’s not just Visa: two-thirds of major financial institutions are working on blockchain-based products for deployment sometime in the next three years. The potential here, of course, is cost savings. Most international bank transfers cost several percentage points of the total transaction value. If you use Western Union, expect to pay up to 8%. PayPal charges around 3.5%. A blockchain-based transaction could be much, much cheaper. BitPay, for example, charges just 1% for any transaction anywhere in the world.
China’s growth will turn to dominance. China will overtake the US by ecommerce payment volume in 2018. The scale and rate of growth is unmatched by any other country. With 1.4B people making US$5.5 trillion in mobile payments last year, China’s fintech industry is setting a global example. Consumer-led and government backed, China’s appetite to invent and embrace new technology shows no signs of slowing. Thanks to the formidable speed, skill and scale of Chinese invention, many of the world’s fintech platforms look to China as the benchmark.
Even with their continued growth, nearly all major western platforms have struggled in China. Google has just 1.45% of the search engine market share, Amazon has less than 1% ecommerce market share, eBay retreated years ago, Twitter, SnapChat and Facebook are all banned. The Chinese market is truly unique and ruthless to outsiders. Money20/20 is hosting its first China focused conference in Hangzhou next year.
Lastly, we were reminded throughout the four days how every aspect of Chinese commerce dwarfs the US. For example, Alibaba processed 175,000 transactions per second on the peak time of ‘Single’s Day’ last year. That’s 3 times more than what VisaNet is capable of. Tmall, Alibaba’s B2C marketplace ships 12 million packages a day. That’s 10 times more than Amazon.
Financial inclusion is not just a social imperative, but a huge opportunity. Ten years ago 85% of the world’s payments were cash and check. Today it's 83%, so despite all the new technology, electronic payments have only captured an additional 2% in a decade.
In addition, ten years ago 2.5B people were unbanked. Today that number has dropped to 2.1B, so only modest progress in integrating more people with financial services.
One of the key reasons for the lack of conversion is that most new payments innovation has been focused on providing access vs enabling usage. This explains why some of the new Asian payment platforms (e.g. Alibaba, Tencent, Baidu) have become so successful. In total, full financial inclusion globally could drive $7 trillion in incremental benefit.
Better still, access to financial services opens doors for families. It enables them to manage and save their money while empowering them with knowledge to make sound financial decisions. Access to financial services enables the poorest and most vulnerable in society to step out of poverty and reduces the inequality in society.