Financial Inclusion with Wade Arnold and Michael Schlein

Financial Inclusion with Wade Arnold and Michael Schlein

The Chris Hood Digital Show
The Chris Hood Digital Show
Financial Inclusion with Wade Arnold and Michael Schlein
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Financial inclusion is a concept that focuses on the availability and equality of access to financial services for people around the world. Unfortunately, an estimated 6 million households in the United States and 2 billion people worldwide do not have a bank account and rely exclusively on paper currency. In this episode, Chris Hood welcomes Wade Arnold, CEO and Co-Founder of Moov Financial, and Michael Schlein, CEO of Accion, to understand the importance of financial inclusion and the social impact of FinTech and money movement.

“We can find ways of reaching people we’ve never reached before. So I’m very optimistic. Unfortunately, poverty is increasing, but digital acceptance is accelerating. We can emerge from the pandemic and accelerate our path to a more inclusive world.” – Michael Schlein.

Mobile banking and digital payments have been significant in developing countries, where traditional banking services can be scarce or prohibitively expensive. In Sub-Saharan Africa, for example, more than half of adults cannot access a bank account, but mobile money services now accounts for 70% of the world’s $1 trillion mobile money value. The success of mobile banking and digital payments has inspired innovations in other areas, such as microfinance and insurance.

AI is also being used to improve financial services risk assessment and fraud detection. By analyzing large volumes of data in real time, AI can quickly detect and respond to suspicious activities, such as fraudulent transactions or account takeovers. This can help reduce financial losses and improve the security of financial services for all users.

“We’re utilizing AI to bring down the unit economics of being able to send a transaction, and that’s allowing it to be more accessible to everybody.” – Wade Arnold.

Financial inclusion aims to provide individuals with the necessary tools to manage their finances, make payments, save money, and access credit. It also helps individuals and businesses participate in the financial system, contributing to economic growth and reducing poverty.

“We have to get more sophisticated about this because this is the way, again, these tools are super powerful in reaching people we’ve never been able to reach before, but we also have to begin to understand the consequences of them.” – Michael Schlein.

Digital payments and embedded finance allow individuals to make transactions without cash, providing a safer, more convenient, and more efficient way to conduct financial transactions. However, despite the available technology, financial institutes still need to catch up in providing them.

“[The pandemic] was this incredible forcing function into the digitization. But that same forcing function, although reactive, to keep the old customers happy, has proactively changed our industry to serve more people.” – Wade Arnold.

In this episode, you will hear:

  1. How technology is revolutionizing global financial systems to reach underserved people worldwide.
  2. Insights into data and data analytics that support better access to financial services.
  3. How to change money movement processes and policies to help people get earnings faster.
  4. The need for trust and security to help move people from paper currency to digital cash.
  5. The disconnect between embedded finance and financial services consumers can access today.

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00:00:00
CHRIS HOOD: Financial inclusion refers to the availability and equality of access to financial services. It means that financial services are responsive and responsible for meeting customers’ needs and leads to positive outcomes. Approximately 6 million homes in the United States are without a bank account, and worldwide, an estimated 2 billion people rely entirely on paper currencies to better understand financial inclusion and the social impact of fintech and money movement. Joining me today is Michael Schlein, CEO of Accion, and Wade Arnold, CEO and co founder of Moov Financial. I’m Chris Hood. And let’s get connected.
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00:00:47
FEMALE VOICE OVER: Connecting. Access granted. It’s the Chris Hood Digital Show, where global business and technology leaders meet to discuss strategy, innovation, and digital acceleration. 54321 your digital evolution starts now. Is your host, Chris Hood.
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00:01:21
CHRIS HOOD: Welcome to the show. Let’s get right into it and meet our guest. Michael, would you please share a little bit about yourself and Accion?
00:01:28
MICHAEL SCHLEIN: Sure. My name is Michael Schlein. I’m the CEO of Accion. We’re a global nonprofit that’s been around for over 60 years, dedicated to creating a fair and inclusive global economy. We grew up in microfinance. More recently, we’re we’re very active in investing in early stage fintech companies that are using new technologies to reach billions of people who continue to be left out of and poorly served by the global financial system.
00:01:53
CHRIS HOOD: Great. And Wade?
00:01:55
WADE ARNOLD: Hi, I’m Wade Arnold, and thanks for having me, Chris. I’m the founder and CEO of Moov. And Moov is a network of networks payment processor in the United States. We also jokingly say we’re the most popular fintech on GitHub. We’re also maybe the only one that’s not a crypto company. But all those low level payment rails, ACH, wire, image, cash, letter, and all the different ISO standards, we open source and have this incredible community that surrounds that.
00:02:24
CHRIS HOOD: Great. I can’t wait to talk about this. Financial inclusion is so interesting to me. And what’s really interesting is that you both have roots in financial inclusion, but you’re coming at it from completely different ways. Would you mind just sharing your personal definition of financial inclusion and what that means to you?
00:02:46
MICHAEL SCHLEIN: Basically, we take for granted that we have credit cards, ATMs, debit cards. You can get insurance for your home, for your health, for your business. You can get loans to go to school, to buy a home and to build a business. And we take for granted that, generally speaking, you get paid monthly and your bills come monthly. Our vision is that everyone should be able to take all of that for granted. But for 2 billion people, they have none of that. They are invisible to that, and it is invisible to them. They have none of those tools. And if you think about those tools, those tools make your life much, much easier. So we have the ability to make people’s lives easier, and yet billions are just left out of it. Our vision is to create an economy that works for everyone, where everyone has the tools that they need to achieve their dreams.
00:03:36
WADE ARNOLD: So we come from a very bottom up approach. So financial services in general has always been somewhat of a black box. How does the debit card network work? How does the credit card network work? And typically the answer is, that’s really hard. Pay the big vendor and don’t worry about what type of tariff that’s putting on the economy. And so at Moov, we’re really excited about freely sharing that information, making it very easy for small businesses to leverage the existing payment rails inside of the United States and leverage the technologies and capabilities that really the largest companies already have, whether that’s Walmart or Target or Amazon. But providing those same services and technologies to SMBs through our partners and really increasing the velocity of money without lending so that they can pay their employees faster, buy more inventory sooner, and hopefully explode the economy in that segment of the market.
00:04:35
CHRIS HOOD: So if we think about maybe investing or maybe in a broader sense, focusing in on FinTechs and startups, how does that investment fit into both of your goals?
00:04:46
MICHAEL SCHLEIN: We’re trying to change the world. And we do think that early stage fintech companies, double bottom line, mission oriented companies that are a great way of doing that because, like Moov, we are living today in a technology revolution. Your life, all of our lives, the lives of your listeners, are changing so rapidly. And all of that technology has enormous consequences on how we can reach 2 billion people who have been left out. If you think about global poverty, it used to be that the distances to reach people were perceived as insurmountable. Today, there’s no distance that’s insurmountable. It used to be that the transaction sizes were too small to be commercially viable. Today, there’s no such thing. It used to be hard to know your client remotely. But today, with data and data analytics, we can know our client well and give them the tools that they individually need. So this is an extraordinary moment. And we as a nonprofit, we are an early stage investor. We’re willing to take risks on business models and in parts of the world where no one else will. And then what we do is we’ve had a great success in helping them grow to significant scale. But we have a seed portfolio and an early growth stage portfolio. In between the two portfolios, we now have seven unicorns.
00:06:10
WADE ARNOLD: Exciting. That’s awesome. So for us, what we see happening with fintech investment is more tailored or more specific go to market strategies. If you really think of traditional financial services in the United States, something that was mentioned early on was we assumed all these things. Well, most financial institutions assume their customers really have the same needs. And so the big differentiator was more geographical. And now you have no geographical boundaries from a goto market aspect. So we’re starting to see really exciting places where no longer do you need to have a paycheck that comes every other week, no longer do you have to have a house in order to get financial services. A lot of these aspects of the industry were just assumed as the gateway to get into the US financial services market. And that’s where I see the innovation taking place, is how do we serve these unmet needs that have been prevalent since the existence of the United States? They just haven’t been served yet.
00:07:14
CHRIS HOOD: Michael, you mentioned a lot of different types of technologies that are rapidly changing the landscape of how we interact with money. And so if we think about this and break it down, what are some of those types of aspects or qualities that you are looking for specifically when investing in new fintechs?
00:07:35
MICHAEL SCHLEIN: Broadly speaking, data analytics, leveraging mobile phones has really been transformational. Now everyone holds in their hand a tool that can provide financial services. So if you look at the last ten years, the number went from 3 billion people who were left out and excluded, and now it’s down to 2 billion people. So we have made a lot of progress globally, but the next 2 billion are going to be harder to reach than the last billion. So when you really look into who they are, they are small holder farmers, single family, one acre farms, they are women. There still is a very large gender gap. And we’re increasingly interested in, of course, small and micro businesses, which is where we’ve focused for most of the history of Accion. There’s a lot of new technologies. So, for example, I’ll give you two of our companies leverage global satellite data, which in the last several years, the quality has gone up enormously and the price has plummeted. So these two companies, one focuses on insurance and one focuses on lending for small holder farmers. And so from satellite data, they can see this is in rural Kenya and now in ten countries across Africa. They can see when there’s a drought, they can see when there’s a flood, they can actually monitor soil condition, they can monitor cloud coverage, they can provide agronomic advice to very remote smallholder farmers. We’ve never been able to ensure that kind of remote smallholder farmer before in an efficient way. And now with this kind of technology, we can do that’s. Just one example. I can give you dozens.
00:09:15
CHRIS HOOD: You know, Michael, the last time we talked, you shared a story which really stuck with me, and it was about farming. And when we think that the majority of those individuals, these 2 billion people who don’t have access to bank accounts are actually leveraging cash or some sort of paper currency, you talked about how a farmer has to walk yes, several miles to make a payment on something.
00:09:42
MICHAEL SCHLEIN: I’m impressed you remember that story. So, generally speaking, you and I get our bills come in monthly and we get paid monthly. And that is enormously convenient. But for hundreds of millions of people, specifically farmers, they get paid once a year, maybe twice a year at the time of the harvest. And they have to make that money work all year. And yet they lack a safe place to save. That’s another one of these things that you and I take for granted, a safe place to save. But for billions of people, they don’t have that. Plus, you’re totally right, they live in a cash world. So with each transaction, you and I are building our credit history. They are not building anything. They are invisible and they’re doomed to stay invisible. And you’re absolutely right. That woman may have to travel 3 hours to make a simple cash payment, to keep the lights on or to keep her kid in school. She’s a farmer. So if those 3 hours, she’s not getting paid, if she’s not working on the farm. And yet we all know that there’s technology today where she should be able to do that on her phone. And so bringing that technology to those locations is a lot of what our work is about today because we can make a difference. We can really reach these people for the first time in history. We’ve never had the tools that we have today.
00:10:58
CHRIS HOOD: And over on the startup side, what does Moov look for when thinking about new clients and partnerships?
00:11:05
WADE ARNOLD: We’re really selling through software platforms that are the back office of industries. And so the common thread is how can I get capital to my small business and how do we get capital from that small business to my vendors to my wage workers who do my independent contractors as quickly as possible. And we’re trying to alleviate that wait time that normally maybe you’re waiting for credit card processing for a week on one end in order to pay your wage worker with that money or waiting to buy new supplies for your company. So whenever we see that kind of complex flow of capital, which every business has very big businesses, you have lines of credit in order to overcome the wait period between money in and money out. That’s where we really thrive as a company. And for the customers we partner with, that’s a huge differentiator for them. The old adage cache is king is still very relevant in every single small business out there.
00:12:05
CHRIS HOOD: One of the other things that I know, Wade, you focus a lot on is that developer ecosystem that you’re building and trying to build communities of scale that represent this financial transactions that Moov is focused on. You share a little bit more about that.
00:12:24
WADE ARNOLD: Yeah, a unique aspect of Moov is a has our open source projects. But really that give first mindset goes through everything we do. So yes, open source libraries, we also have a Slack forum that has over 4000 people in it. That just ask questions about some of the vernacular as a nerd in technology and a nerd in payments. Things like KYC don’t mean very much to most people if they’re new to the industry. And this is an entire pillar of the financial services world, and yet it’s just one little acronym. So we have the slack community where all these questions are free to be discussed. There’s no salespeople that are involved. We’re not trying to sell our product. We are trying to help people understand the industry. And then last but not least is we’re a two and a half year old startup, but we’re also going into year three of something we call fintech devcon. It’s get together. Over 60% of the people that attend it are using their job training credit in order to come there and learn. No sales pitches, but people just sharing roadblocks and obstacles and how they overcame them in order to bring their product to market. And people really are leaving that inspired. So this year august Austin, Texas. So love to see you there.
00:13:44
MICHAEL SCHLEIN: If I can just pick up on some of the themes that Wade and really Moov are part of is a trend that we’re very excited about, specifically as a way of reaching people who have been left out. And that is embedded finance. And if you think about it, he was mentioning, people don’t even know what KYC is. Well, it used to be that you had to go to a financial service provider to get financial services. You had to go to a bank. In our context, you would go to a microfinance institution or you’d go to a fintech. But what we found out in the last few years is that the key to unlocking financial services for anyone is data and data analytics. And today every company is a data and data analytics company. And therefore every company can be a financial service provider. And that cuts both ways. On the one hand, that’s tremendous for reaching people we’ve never reached before. On the other hand, as Wade was saying, you have a whole bunch of people who don’t know their customers who are now providing financial services. And so this is the new world that we have to adjust to. But it’s very, very exciting, again, for reaching people who’ve been left out.
00:14:51
WADE ARNOLD: Yeah. One of the things I’m most excited about from a technology standpoint is really over the last five years is the first time financial services has adopted things like cloud computing. Big data and cloud computing is from 2006, it’s 2023. And all of a sudden it’s innovative in order to get to the cloud. But it’s not about being in the cloud. It’s about lowering the unit economics in order to provide these services. And so if you think about an IBM Z series mainframe on a raised floor and you need one per financial institution in order to offer up that service, all of a sudden it’s really expensive to have something as simple as a checking account because of the capex cost in order to run that service. You compare that to what you can do with cloud computing and modern technologies. Now all of a sudden, you’re unit economic to provide that exact same service is an order of magnitude or more cheaper, allowing you to serve markets that were previously underserved because it’s now cost effective for you to go to market in those underserved areas.
00:16:01
MICHAEL SCHLEIN: Wade you just very articulately explained a lot of why we’re doing what we’re doing in the sense that big data cloud computing have been around for a while, but now it’s being embraced. That’s exactly why we, as a mission oriented nonprofit focus on early stage fintechs because they’re the ones that can build their whole company around this new technology. I used to work in a very large bank. It’s not that easy for an existing institution to really be innovative. But these early stage startups, they build a whole company around these new technologies. It’s exactly why we focus there. Plus the point about cloud computing being available anywhere is why we can find these great innovative companies in emerging markets on the ground. Like today, you don’t have to go to Silicon Valley to be a fintech entrepreneur. You can be on the ground. And we invest in companies that are solving real problems in the emerging markets. And all the teams that we invest in are local. But again, a lot of that is the advance of technology that allow them to operate anywhere.
00:17:11
CHRIS HOOD: Obviously, data and data analytics in the cloud are all fundamental when we start thinking about innovations in this space. But we obviously can’t avoid having the question around artificial intelligence, where is AI coming into play when we start thinking about these financial inclusion activities?
00:17:30
WADE ARNOLD: For us, specifically, there is a payments flow, but it’s what you do around the transaction that really adds a lot of cost. So whether that’s anti money laundering, anomaly detection, what transactions do we actually need a human to review. Computers are fantastic at this and learning models are so simple and accessible to actually implement at this time versus a decade ago in order to bring those tools to bear. And so again, you’re utilizing AI in order to bring down the unit economics of being able to send a transaction and that’s allowing it to be more accessible to everybody. If you really think about what’s the fear of switching from sending a check or utilizing cash, it’s all of these other things that can go wrong. And so by increasing kind of the durability of electronic payments and increasing the ability for consumers to have confidence in that, that they’re not going to be scammed and the money’s not gone. Those are tools that we can use computers to help with, rather than having the four story building of people double checking every transaction in a workflow engine before the money set out of the financial institution.
00:18:51
MICHAEL SCHLEIN: I completely agree. The general question around artificial intelligence, and again, data and data analytics is enormously helpful to reach people that we have never been able to reach before. There’s obviously the new excitement around chat, gbt, and generative artificial intelligence, and I think that’s still quite untested and certainly is untested in the mainstream world, much less in the base of the pyramid when you’re dealing with the most vulnerable people in the world. But AI. More broadly, I think Wade is totally right. And just to go a little further, it’s not all positive. It’s complicated algorithms and data analytics generally. So, I mean, increasingly, our lives are driven by algorithms. What I buy, what I read, what I see, what I watch, our whole lives are increasingly generated by algorithms, but algorithms can be biased. I’ll give you an example. In the emerging market world, how you use your phone is often a proxy for are you likely to repay a loan. And as compared to the United States, where we use our phone, and then you get a bill at the end of the month, most of the rest of the world prepays their bill, and then when they run out of electricity or minutes on their phone, their phone dies. And if you’re the type of person where your phone dies, often, you’re probably less likely to repay a loan. But if you’re the type of person that always recharges your phone and always pops up your phone, you’re probably more likely to repay a loan. Makes some sense. That’s what the algorithms say. But you scratch the surface just a little bit more than that. Turns out that even among people living in poverty, men have their own phone, women have the family phone. So guess what? The women’s phones tend to run out of power and run out of minutes. And so we have now systematically built out algorithms that discriminate against women. We have to get more sophisticated about this, because this is the way, again, these tools are super powerful in reaching people we’ve never been able to reach before, but we also have to begin to understand the consequences of them. I think we’re just scratching the surface here.
00:21:08
CHRIS HOOD: Not only that perspective, but I would also assume that there’s other areas where fintech has maybe not downsides to financial inclusion, but may have some challenges that you’ve learned along the way. What are some of those lessons learned beyond just the diversity aspect?
00:21:30
MICHAEL SCHLEIN: Very, very fundamentally, moving people from cash to accept digital technology and digital cash is a huge leap of faith and requires you to build some trust. If I told you tomorrow I was going to pay you in bitcoin, generally speaking, you would be a little worried. You’d be a little anxious, like, what do I do with it? Is it volatile? Do I trust this? Can I go buy my food with this? What is this when you ask someone to move from cash to digital, it’s as anxiety provoking as if I asked you to get paid in Bitcoin. There’s just a lot of fear and uncertainty. So I think one of the huge issues is just building trust. And the way you do it is just like anything else. You do small transactions and then you see that it’s reliable and then you see that you can use it and you build that trust. So trust is an enormous issue, and especially in the vulnerable populations that we deal with, some of them this fear of technology, there’s social issues, there needs to be the right balance between tech and touch.
00:22:37
CHRIS HOOD: Wade, I think some of that trust carries over in your world as well. I know just from traditional financial institutes, they have constantly come back and said, we can’t make that change in the technology stack because it might break and we can’t have something break. Right. Those types of trust issues are in your world as well.
00:22:57
WADE ARNOLD: Absolutely. So one of the things that holds back innovation is just always change. So any regulatory body, the easiest thing to do in the United States OCC is keep on doing what you did before, and you have different regulations that are really designed to protect consumers. But at the same time, there’s always that trade off of adopting new technology. So specifically cloud computing. There used to be a rule in the Ffic It Examiner’s Handbook that the OCC went and looked at financial institutions and they wanted to be able to say, which hard drive is this personally identifiable data on? That was part of the audit. Go, physically show me which drive this is on. Now, let’s be honest with Raid and Rain and Sam’s, nobody actually knew which drive it was on, even when that data was on prem. But it becomes a roadblock in order for adopting. If you can’t point to which hardware it is, you surely can’t point to which Google data center that hard drives on or Amazon Web services. So some of those pieces that are put in place for safety really are going to take a change of technologists that understand that trade off between adopting new technologies and really limiting kind of financial services from being able to adopt them. It’s funny, like another one off the top of my head is multifactor. So explicitly multifactor is called out as an out of bound message. So guess what? We all use SMS in order to do that because that’s what the regulation is. We really should be using vital keys or authenticator apps or other ways to biometrically make that multifactor piece. And so there’s always this line between explicit regulation and really implied guardrails that allow us to innovate but still keep consumers safe.
00:25:04
MICHAEL SCHLEIN: Those issues are amplified even more in emerging markets, at least in the US. You do have regulators who have some resources who can try to tackle some of these issues. I used to work at the securities and Exchange Commission. And Wade, you’re totally right. Many regulators like to answer the same question ten times in a row and answer it the same way. Regulators generally are not innovative by nature, although I do think that has changed and has changed in the US. I think today innovation does get rewarded and they recognize that things are changing so fast that they need to be innovative.
00:25:39
CHRIS HOOD: Wade, how much of this, though, is the institutional side of it competing against the consumer expectation? I would think that when we think about this trust and this challenge of adoption, the consumer is adopting those technologies at a much quicker pace than the institutions are. And how do we keep up with that?
00:26:03
WADE ARNOLD: Yeah, I think that the easy answer is do what you did yesterday. Right? So if it’s not broke, don’t fix it. But the reality is it is broke. And so I think the acceptance that financial services could be better, financial services needs to serve everybody. That financial services is is not something that you, you know, have to have a car in order to go to a branch in order to be a participant in in a world where we have 5G globally. I think those are the questions that have to be asked of how can we change this industry? How can we serve people better? You just think about, like, the Pandemic and what that did in order to force change in financial services. The amount of things we didn’t need our quill anymore in order to sign a piece of paper, in order for a wire to go out because you couldn’t physically go into the branch any longer. It was this incredible forcing function into the digitization. But that same forcing function, although reactive, in order to keep the old customers happy, has proactively changed our industry to serve more people.
00:27:14
MICHAEL SCHLEIN: I’ll pick up on that because you’re totally right. I’ll tell you a story. During the Pandemic, 160 governments, that’s most of them created over 400 cash transfer programs to reach the poor during the Pandemic to give them life saving aid, and they reached 1.1 billion people. And overwhelmingly, that was digital. And overwhelmingly, those people were being reached for the first time. And that is an enormous digital acceleration that happened during the Pandemic. And then you mentioned consumer expectations. Well, you know, again, you know that farmer who used to spend 3 hours making a single payment to keep the lights on? Well, now she also knows that why can’t I just do that on my phone? I do think expectations have changed like all of us. Like who waits on lines? You just use your phone. That’s true for everyone. So one further point. I think the digital acceleration that we saw in the last few years is very exciting. Now, on the other side of it is in our lifetimes, we have seen the greatest reduction of global poverty ever over the last several years. Over the last several decades, poverty has just gone down and down and down and down and down, until the last three years, where, for the first time, that poverty is going up around the world. So you put those two things together. On the one hand, the need for our work is greater than ever because poverty is going in the wrong direction. But digital acceptance and digital innovation has accelerated so much. You put those two things together in a lot of our work is we’re trying to help the poor through digital tools. And I think this is an incredible moment in human history where the importance of our work has never been greater and the potential impact of our work has never been greater.
00:29:06
CHRIS HOOD: Earlier, you talked about embedded finance, and I think if we take a look at that from a consumer perspective, I think the very definition of what a financial account even is has shifted. The younger generation is not familiar with a banking branch. It used to be the status symbol was, hey, I have a credit card. And now it’s like, I have a phone because my account lives on the phone. We are seeing an increased amount of embedded finance happening across multiple industries. I often argue that Starbucks is a retail company and a financial services company because they have loyalty rewards points, and you can go and you can basically scan your phone and buy a cappuccino. I think these definitions, as they start to evolve, will also impact how we have to build technology to keep up with them. Because clearly, as you said, from a COVID perspective, they are rapidly changing, and we have to find ways of changing with it.
00:30:12
MICHAEL SCHLEIN: Have you seen those what do they call that? The Amazon go stores where you just walk in and you take what you want and you walk out and you don’t even recognize it, but you’ve paid for it? That’s embedded finance, and it’s so seamless, and it’s very exciting, but you’re totally right. All of a sudden, you’re getting financial services from Amazon. We’ve invested in a company in Brazil that does a variety of things, but think about food delivery, like an Uber Eats model in Brazil. It’s called I food. These small mom and pop shops use this food delivery service to deliver their food. This company works with that platform and then can make loans to those small mom and pop shops because they see exactly how much food is being delivered. And it’s all embedded and it’s all seamless. And it’s also packaged with not just working capital, but also other tools that that small mom and pop restaurant need to run their business. That’s the good news of embedded finance, because I think we can reach people in a different way and reach them in a more seamless way. The downside is you now have. Non financial service providers providing financial services who don’t know, as Wade said, they don’t know what KYC is. They don’t know what AML is. It’s a foreign language. So I do think that’s the upside, but also some of the downsides involved with embedded finance.
00:31:36
WADE ARNOLD: No, from a consumer expectation standpoint, I think the embedded finances people just want to have it at that moment of need. You literally can go to US bank’s website right now, and the first account is a checking account. I have four kids. None of them know what a check is. It doesn’t exist. So the disconnect between what we even call these products versus how the consumer interacts with them when we’re still calling something a checking account, shows you how big the disconnect is. You really think about, like, merchant acquiring for a small business. It wasn’t until 2010 with Square that you didn’t have to show your last six months of your bank account information, number one. Number two, your physical address of your business. That was an underwriting requirement until 2010. The most ingenious thing that they did at Square was a new way of onboarding these merchants that were small businesses that didn’t have a physical retail presence and didn’t maybe even have a separate bank account. That was a business banking account. Yes. The dongle and the point of sale device and all that was very innovative. But it was really this ability to underwrite people who had never been underwritten before in order to accept digital transactions. And I think that’s the type of change that really fintech and innovation is bringing to the market is new ways of going after these underserved markets, and then it’s a land and expand game. So Block is obviously a much different company than where they started in 2010 today. And I think all those different pockets of underserved are great wedges into new products and new features, and over time, you can expand to more traditional financial services for those highly loyal customers.
00:33:34
CHRIS HOOD: If we start to look towards the future and bring all this together, 6 million households in the United States or without a bank account, 2 billion. Michael, as you’ve said, worldwide. What are some of your top goals, and what do you think the future holds for financial inclusion? How are we going to get there?
00:33:53
MICHAEL SCHLEIN: I do think that in our lifetimes, we can create a truly financially inclusive world. And again, last decades, we’ve reached a billion people. I do think the next 2 billion are harder to reach, but I think we can do it. And it’s everything that we’re talking about. It’s leveraging this extraordinary moment of digital innovation. We can find ways of reaching people we’ve never reached before. So I’m very optimistic. And again, if you think of this moment where, unfortunately, poverty is increasing, but digital acceptance is accelerating as well, I think we can actually emerge out of the pandemic and accelerate our path to that much more inclusive world.
00:34:32
CHRIS HOOD: From a Moov perspective, what are some of your top goals and where do you think Fintech is heading over the course of maybe the next three years?
00:34:40
WADE ARNOLD: I think so far, a lot of financial services is mandated how people pay or receive payment. So the loan application system will only use Ach. Why can’t that be pushed to my debit card or pushed into my cash account? Giving consumer choice of how they pay and get paid and being able to have faster access to capital, I think changes the world. And so, if I’m a wage worker and I get $400 in cash at the end of the day at 02:00 A.m., the technology exists, the clearinghouse and fed now to pay that person electronically so they don’t walk out to their car and potentially get mugged with all this cash. And now they have to go to an ATM to deposit it. The ATM puts a 24 hours hold on that capital versus the ability to be paid electronically into their bank account, so then they can go fill up gas and get home or spend the money the next day. It exists, it’s just not evenly distributed throughout the economy today. And so those are the tools that we’re excited about, is how do you get money to people faster that they’re already receiving, just maybe in an inefficient way.
00:35:58
CHRIS HOOD: I think the future is very bright, and I really respect both of you and what you’re trying to accomplish. Thank you so much for spending some time with us today. I really appreciate it.
00:36:09
MICHAEL SCHLEIN: Thank you. Great to be part of the conversation.
00:36:11
WADE ARNOLD: Thanks, Chris
00:36:12
CHRIS HOOD: And thank you for listening. If you like what you heard, please subscribe to the show and take a moment to leave a review. Your feedback helps us improve, allows us to bring you more great content, and supports us to reach a wider audience. Then of course, share this episode with your network. If you have any questions or ideas for the show, connect with me throughout social media at Chris Hood Show or visit online at Chris Hood.com. Until next week, take care and stay connected.
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