Opportunities and challenges for the financial inclusion of the other 2/3 of the world. World Bank estimates are staggering. Infrastructural and competitive obstacles are real both on the pay-in and pay-out sides, but could be surmounted by digital technologies and mobile penetration. Hint: shortening the long and inefficient supply chain for both cash- and prepaid card-based remittances. Biggest opportunity: using cryptography-based distributed ledger technology to unearth the $10 trillion of value hidden in the world's underground economies and thus solve Hernando de Soto's mystery of capital. Now THAT is financial inclusion.

1. Of the 7 billion people alive on the
planet, 1.1 BILLION subsist below the
internationally accepted extreme-poverty
line of $1.25 A DAY.
The Economist

2. Adult population with NO USE OF formal or semiformal FINANCIAL SERVICES

3. Official Development Assistance
Foreign Development Aid
Remittance flows are
LARGE and GROWING

4. • Average total cost of sending money to Africa in 2013-Q2  11.79 %
• Cost of sending money to Africa in 2013-Q2  2.94 % more expensive than
the global average of 8.85%.
• 10 most expensive corridors  all intra-African, with 6 of them originating in
South Africa.
• Most expensive countries to send money to are those receiving mainly
• from other African countries –Malawi, Mozambique, and Botswana.
• Cheapest markets to send money to  Egypt, Liberia, and Somalia.
• Commercial banks continue to be the most expensive type of provider.
• Bank account services are the most expensive method of transfer.
Send Money Africa – July 2013 (The World Bank)

5. Underdeveloped infrastructure
Limited competition
Regulatory obstacles

6. 1
2
3
4
4a
5
6
7
S
R
Current Supply Chain
Cost
incurred

7. 1
2
S
R
Next Generation Supply Chain
(digital treasury & settlement)
Cost
incurred

8. S
R
Last Generation Supply Chain
P2P Transfers (already possible today)

9. 1
2
3
4
5
6
7
Prepaid Card Supply Chain

12. “Virtual currencies promise to benefit
commerce on many levels, from serving
the unbanked to new financial
products. I challenge our innovators:
devise c r e a t i v e s o l u t i o n s to prevent
virtual currency abuse.”
FinCEN Director Jennifer Shasky Calvery

13. Financial Action Task Force
Groupe d’Action Financière
(FATF-GAFI)
Special Recommendation VI
Each country should take measures to ensure that persons or legal entities,
including agents, that provide a service for the transmission of
money or value , including transmission through an informal money or
value transfer system or network, should be licensed or
registered and subject to all the FATF Recommendations that apply to
banks and non-bank financial institutions. Each country should ensure that
persons or legal entities that carry out this service illegally are subject to
administrative, civil or criminal sanctions.

14. [x] ANONYMITY  product has to dissuade the bad element, never
attract it.
[y] COMPLIANCE  product and operations cannot be in violation of
any applicable laws and regulations (the “form” or “paper” side of
compliance).
[z] SUBSTANCE  what is written in their policy must actually be
implemented. Businesses must be run with integrity,
responsibility and control.
Anonymity = Anathema
Anonymous identification No value limits Anonymous funding
No transaction records Wide geographical use No usage limits

15. Underground economy

16. • The Shadow Superpower (Robert Neuwirth, Foreign Policy)  System
D (“Debruillards”)
• Informal (“extra legal,” “black”) economies  $10 trillion in aggregate
• The Mystery of Capital (Hernando de Soto, 2000)
• Mystery  failure of assets to serve as capital
• Problem  credibility of rights transfer at a distance (i.e., ability to
engage in binding contracts)
• Smart contracts  jurisdiction-free contracting mechanism
• Distributed asset ledger for everyone, EVERYONE, around the globe

17. @JuanLlanos
Thank you!