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The world's most financially disenfranchised are now being targeted by big tech companies as commercially viable opportunities. In recent news, Mastercard started offering PayPal accounts to the unbanked while Amazon equipped them with their first-ever debit cards.
So far the too disadvantaged have been largely ignored by banks because the institutions saw no opportunity to make money off of them. This has resulted in a situation where cash is still used in 85% of transactions globally, often at a cost to the most vulnerable.
Bill Ready, EVP and Chief Operating Officer at PayPal, told TechCrunch that there are billions of unbanked worldwide who are forced to spend 9.5% of their income on interest and fees.
Ready said part of the reasons behind targeting the unbanked are philanthropic. “For folks who don't have bank accounts, for folks who don't have credit and debit cards, we want to give them something so they're not turning to prepaid cards, check cashiers and payday lenders,” he said.
Last October, The Bill & Melinda Gates Foundation, in cooperation with fintech startups, developed an open-source software designed to create payment platforms suitable for the unbanked. The code dubbed "Mojaloop" increased the interoperability between financial institutions and mobile payments platforms.
Kosta Peric, Deputy Director, Financial Services for the Poor, at the Gates Foundation, said: "Interoperability of digital payments has been the toughest hurdle for the financial services industry to overcome. With Mojaloop, our technology partners have finally achieved a solution that can apply to any service, and we invite banks and the payments industry to explore and test this tool.
"Just as the internet revolutionised digital communication, open-source solutions like Mojaloop can spark innovation and democratise access to digital payments, empowering billions of new customers and driving massive economic growth in developing markets."
Recent events in China, are proof that electronic payment adoption can happen quickly and effectively. Will the rest of the world follow?