The Global Democratization of Finance
By Bradley Hook & Adam Traidman
Technological advances, a changing global paradigm, and the COVID-19 pandemic have combined in unprecedented ways to alter the way we use, move, and invest money. Whether the focus is on emerging economies and the unbanked or new ways to raise investments from a global pool of potential backers, we are living in an epochal shift as dramatic as any in human history.
Major opportunities lie ahead for small and mid-sized banks and fintechs, particularly in developing countries. New ecosystems of digital financial products and capabilities promise to upend the traditional balance of power between global super-banks and Tier 3 and 4 institutions.
NFG and BRD have joined forces to develop tools that enable all stakeholders to capitalize on these opportunities and prosper. Technologies like ours help businesses implement innovative and low-cost financial offerings to reach new markets and consumers who want to know their transactions are safe and secure.
As we look at the global marketplace, we see the trends shaping the most significant transformation of financial service delivery since BankAmericard, the first revolving-credit card launched in 1958.
On the demand side, generational wealth transfer in the coming decade could surpass $15 trillion globally, according to analyses by Wealth-X. At the same time, global economic expansion is widely expected to resume, bringing financial security to a growing share of the world’s population. Increased educational and career opportunities will bring more women into the workforce, fueling this trend.
At the same time, hundreds of millions of people live in cash or barter economies without access to or need for financial intermediaries. As more of these unbanked individuals look to own property, securely invest in financial assets, remit funds internationally at reasonable cost, access credit to start a small business, execute sizable transactions with counterparties, or save for retirement, their need for financial services will grow.
On the supply side, large banks face prohibitive compliance, regulatory, personnel costs in opening offices to serve these customers. The barriers are acute in the developing world, where much of the new opportunity will occur. Even a giant like Bank of America is only in 36 countries. Russia’s largest, Sberbank, is only in 18.
Smaller banks and fintechs have fewer constraints, but many are hampered by outmoded technology and lack the capital needed to upgrade. But here lies opportunity in the form of a disruptive solution of extraordinary power and elegant complexity: blockchain.
Blockchain is a data-security technology that stores transaction data on thousands—sometimes tens of thousands—of servers throughout the world. Coupled with sophisticated encryption, a well-designed blockchain system is essentially invulnerable to manipulation or hacking. Most people recognize blockchain as the underlying technology for Bitcoin. Less well-understood is the significance of the next-generation distributed ledgers and their implementation of scripting capability enabling the creation of smart contracts — allowing a set of code to act as the trusted third party in complex transactions like escrow.
Blockchain, digital currencies, smart contracts, and the ecosystem surrounding them can provide users anywhere in the world with access to a virtual bank and the ability to execute safe, secure financial transactions independent of brick-and-mortar banks. As small and medium-sized banks and fintechs are able to offer digital currency and blockchain-based financial services, they will unlock access to a growing share of the emerging financial-services market.
The only limitation is the ability to design, build and manage a bespoke blockchain and the constellation of transactional capabilities it can support—in short, a whole new architecture of design that will leave the old structures and systems behind, along with everyone who is still tied down to them.
This is precisely the challenge that our two companies have joined forces to solve. NFG brings a well-developed suite of digital capabilities—including digital identity, digital security, and digital currency—as well as traditional banking services such as custody, payment processing and credit delivered over a digital platform. In addition to its market-leading crypto wallet, BRD has built Blockset, a digital asset toolkit enabling financial institutions to implement secure, scalable, and compliant banking solutions in nearly every country across the globe in a highly cost-effective manner.
Together, we can help banks and fintechs to tap into huge new market opportunities by offering customers cutting-edge financial products and services on a smartphone. A few key features are absolute privacy, total security, ease of use, portability, and AI-level compliance with all jurisdictions built right into the technology, including smart contracts and secure ID. NFG’s smart infrastructure will guide users at any knowledge level anywhere in the world in a safe and secure manner, helping them unlock access to the global financial system.
As the world brings COVID-19 under control, economies will start moving again. Businesses and consumers will be looking to move money they had on ice back into the market. There will be unprecedented opportunities to help millions around the world overcome poverty and live healthier, happier and more productive lives. We’re building a new ecosystem that will give everyone the chance to grow and prosper in ways our parents could never have imagined.
Bradley Hook is Chief of Staff at NEST Financial Group, collaborative financial solutions in a single digital ecosystem. Adam Traidman is CEO and Co-founder of BRD, a global company that’s bringing blockchain-enabled financial services to the mobile generation.