Carlos Monteverde On The Possibilities For Blockchain & Fintech To Create Positive Social Change
Carlos currently works on global projects in inclusive finance which relate to digital banking, financial inclusion, fintech, future of finance at the World Economic Forum, alongside some of the world's foremost private and public sector experts in financial services. Prior to the Forum, he was a management consultant for Ernst and Young.
Before that, Carlos worked at the Global Reporting Initiative, Columbia University and the Centre for Independent Studies. He also has been collaborating with Mifos X, a fintech company promoting financial inclusion.
Further, Carlos co-founded the digital ad agency LIFE Communications, with companies like P&G, Renault-Nissan and Unilever in several marketing projects. He is also the Founder of social venture TopEcuador 100, a digital community which develops the delivery of mentorship programs about politics and citizenship representation and was nominated as a one of the 100 Visionary Leaders by Real Leaders Magazine.
He is a graduate of the University of Sydney in Australia and Columbia University of the City of New York. Carlos speaks 4 languages and has lived in 4 continents.
Carlos discusses a range of ways blockchain and distributed ledgers will disrupt existing systems, he shares insights into key issues affecting our younger generations and provides advice on creating social and environmental change.
Highlights from the interview (listen to the podcast for full details)
[Tom Allen] - Could you please share a bit about your background and what led you to working with the World Economic Forum? [2:37]
[Carlos Monteverde] - I'm originally from Ecuador and my hometown is Guayaquil, a place of actual perpetual summer, which in my opinion is a great place to grow up. I am now however based in New York City, and it has been around eight years of being in and out of the Big Apple. Overall, I've lived in six different countries. Incidentally, Australia is my favourite one.
On your second point on what led me to the World Economic Forum; it is interesting that you ask me this, because it actually comes up quite frequently in some of my conversations and it all started when I was in graduate school. By then, I had an opportunity to do a research fellowship at the Earth Institute at Columbia University and the particular research project was around the MDGs, the Millennium Development Goals. These were the predecessors of the Sustainable Development Goals and this project was within the director's office of this institute and the director is a person named Dr. Jeffrey Sachs, which is a world renowned economist and an expert in sustainable development.
I know that he is a current advisor, special advisor on SDGs for the United Nations Secretary General and to me that was an incredibly rewarding experience. From the experience, I built some credibility in working with the World Economic Forum, which led me to work with them. The hiring process was very competitive with thousands of applications for certain positions and I'm actually the first and only Ecuadorian working at the forum; something that I am particularly proud of. Regarding other milestones, I been selected to do the Global Shapers Programme of the World Economic Forum, a US delegate of the Australian and American leadership dialogue, a member of the advisory board of Economies Without Borders and a few other accolades. I would describe myself as a very global citizen and speak four different languages.
On the Innovation Panel recently held at the Impact Conference, Jock Fairweather stated that 'blockchain and the decentralisation, anonymity and speed that it brings is gonna be the biggest change maker for social that we'll ever see.' So given your background and your exposure in that environment to financial and monetary systems and your work at Mifos X, do you agree with Jock and if so, why? [4:57]
Well yes, I actually do agree very much with him.
The potential for the blockchain and distributed ledger technology is very vast and it doesn't only apply to financial services, but to multiple industries.
The reason that a lot of people who speak about blockchain immediately think about financial services, is because most of the applications, the most developed applications have been created in that particular industry. For example, you have things like asset management and the trade processing and settlement. Traditional trade processes within asset management can be expensive and risky and each party in this process, such as a broker or a settlement party gives their own records, which creates significant inefficiencies and room for error. So the blockchain ledger in this case reduces that error by encrypting the records. At the same time it simplify the process while cancelling any need for intermediaries. Then you have other things within finance like claims being processed by insurance providers. In this type of process, there's huge room for error. So the blockchain in particular provides this perfect system for risk free management and transparency. The other thing is that this is a very labour intensive process. The blockchain with its encryption properties allows insurers to capture the ownerships of assets and simplify this process in order to reduce premiums and actually increase access of insurance. Then you have things like payments and really cross border payments and companies like Abra and Transferwise and Beatspark that are actually powering their transactions with end-to-end blockchain and particularly this one, the global payment sector, it is again very error prone, costly, open to money laundering and terrorism financing and on top of that it takes days sometimes to send money across the world. So blockchain can facilitate that process and there's not only start ups doing it, but big financial institutions like Santander Bank. All the way back to 2004 it was one of the first banks to merge blockchain to a payment app, enabling international payments 24 hours a day, clearing the next day.
Then you have the other applications besides financial services where you have small appliances and how this device could be connected to the internet and the blockchain, protecting your ownership as well as enabling interoperability. You have supply chain sensors that gives companies end-to-end visibility on their supply chain and their condition and location of their supplies as they're transported around the world. The blockchain in particular stores, manages, protects and transfers this smart information. Another big field for this is what we know as smart contracts, which are essentially contracts, which are digital and that they have an embedded, "if this happens then that" code, which essentially gives them self execution.
In real life what happens is that an intermediary ensures that all parties follow through on the terms and the blockchain avoids the needs for third parties, but also ensures that the participants know the contract details, and the terms are actually automatically implemented once conditions are met.
In this particular case, you can use all sorts of situations from things like financial derivatives, insurance premiums, property law, crowd funding agreements, which of course a lot of social entrepreneurs are working on. Beyond the actual movement of money, you can have things like applications in health care, where you could have your personal health records be encoded and then stored on the blockchain with a private key that only gives access to very specific individuals, or you could share them in a much larger blockchain, so that certain particular treatments based on your type of genes could be replicated in a completely different part of the world or a person with a similar disease.
It's really, really wonderful and the possibilities, at least today, are endless. You have things for potential government, where for example you could have private individuals confirm their votes when they are counted and they confirm who they voted for and this saves money for the government, and then you have things like open data and how this, again, improves the transparency around the government. Things like vested responsibility and how for example if a particular government has offered a certain policy to the electorates, then the contract could specify the electorate's expectations and electorates would get paid once they do what the electorate demanded, rather than what the funders decide. And this case it opens amazing possibilities for all kinds of sectors.
Yeah, absolutely, well it's certainly going to be really interesting to watch as it unfolds and particularly from the lens of creating this positive social impact we'll certainly be keeping an eye out.
What do you believe then are the biggest trends in Fintech at the moment and how do you believe it can be used to effectively empower the world's most disadvantaged citizens? [10:34]
There's a few things. The first one is that at the beginning, Fintechs were seen as the enemy that were going to disrupt the incumbents. What has happened is that, yes, Fintechs have materially changed the basis of competition in financial services, but they have not substantially changed the competitive landscape. What is happening is that big financial institutions are actually partnering with Fintechs, so that they can benefit from a particular niche market or a particular market segment strand, that the big financial institution has not exploited. The Fintechs, yes, they have seized the initiative defining, redefining I would say the direction and shape of innovation in essentially almost every sub sector of financial services. Then again reshaping customer expectations and setting new and higher bars for user experience and that's one thing that you can see that through innovations like rapid low adjudication for example, Fintechs have shown that the customer experience bar set by companies like Apple or Google or other large technology firms can be met in financial services as well.
The other thing is that, talking about these big technological firms, even if Fintechs are seen more as partners now by big financial institutions, these institutions are actually increasingly resembling and are dependent on large tech firms to acquire critical infrastructure and differentiating technologies. Like what Amazon web services is doing for many banks. Then you have this arrival of new technologies like AI and how that would disrupt the industry and redefine talent; the definition of talent really it's evolving from a traditional, let's say financial wealth manager to a programme algorithm in this case.
To answer the second part of your question is that you see things like Fintech and blockchain essentially for internal and cross border payments in Sub-Saharan Africa, where you have a huge market for that, where you can essentially provide and provision lower costs, shorten settlement time, provide a better user experience, create alternative credit scoring methodologies, so that people are more willing and actually can access more financial services and credits and insurance and loans. To give you two examples, one is B-Pesa in Sub- Saharan Africa which has been working on this as well as Unocoin in India. Again, it drives people to more detail based financial services, which are cheaper, faster and more convenient for the underserved.
There's definitely a revolution happening.
There's definitely a really, really interesting window for opportunity to where it's catering for the unbanked.
As a US delegate on the Young Leadership Dialogue, the YLD brings together young Australian and American leaders from government, enterprise, education, media and civil society to engage in issues that concern today's youth and future generations. What have been identified as some of the key issues of concern that will affect youth and future generations? [14:08]
Well, I think that there's two salient issues that were identified.
The main two concerns were the rising inequality; income and social inequality, as well as the influence of climate change.
This is not really surprising, but then again they were two of the most prominent concerns that we discussed and the role of the US and Australia being in the forefront of innovation for some time and the unique role in addressing these concerns. One thing that was mentioned, was that climate changes is not only seen as the phenomenon creating global warming in this case, but a catalyst for more direct adverse consequences, like a global pandemic or the erosion of our lands for food production. Then, on the other hand, the second point in regards to inequality.
We see younger generations for the first time essentially in human history, being considered less wealthy than their previous generation; than their parents and it's ironical considering that us millennials, (I consider myself one), are the most educated generation on average.
So it's really concerning how you can see this balance derive from many different sources. Some of them would discuss their heavy college debt, high housing cost, high health care cost, that put a dent in the prosperity of even highly educated millennials. It's funny in a way how you have this irony between being very educated, but somehow poorer than your parents.
So what do you believe needs to be done then to best tackle some of the issues that affect these younger generations, such as that rising difference that you've been explaining to us? [16:33]
I think on the first point, on climate change, there's a couple of things that are very apparent.
We need 100% renewable energy. I think we have realised that that's the way to go. That's the future. We have the technology. The energy could be provided entirely by the sun, the wind, other safe, renewable sources.
The second point to help is that I've been working in financial services for some time and you can see that the flow of money also matters, and the flow of money towards fossil fuels and nuclear projects. It stands in the way of a clean and safe and secure future for young generations and the generations to come. So, working on the financial side and how investors avoid or withdraw from certain polluting projects in this case, I think is also something to promote.
The third one on the climate change issue; to me is that we have the technology, we have the resources and the expertise to solve this, but then again, all we need and it's so essential, is political action. The barriers holding us back are really political.
They're not technical, they're not economic and really as an after thought, but as a primary, in this case young people being engaged into politics, is something that should be prioritised.
On the inequality issue, I think it's more complicated. There's a few different things, like investing in human capital by spending on high quality education, subsidised job programmes and implementing more scholarships and programmes to enhance social mobility, so that people don't graduate with heavy debts. The other thing is that, at least in certain societies, expand certain healthcare benefits, so that people have access to quality and affordable health coverage.
Personally, I'm not a fan of taxes, but then again, you see things like huge tax loop holes that really benefit special interests, in this case, you see organisations making billions of dollars all over and paying almost nothing in taxes. Then there's other things like systemic barriers that are preventing social mobility. Things to tackle that. You could do college prep courses available in high schools or help with, at least in the case of the US, a path to citizenship for a lot of people that are in this sort of immigration limbo. Those are things that I personally think could help.
As a Young Global Shaper of the World Economic Forum then, what advice would you give to students or recent grads who are passionate about using their future careers to create positive social change? [19:49]
I'm glad you ask me that, because I think that's really important and my humble advice would be two things.
The first one would be to be bold, and the second one is to collaborate with like-minded people.
I think that, at least what I've seen is that world leaders always want to engage the youth, hear what they are saying and what they are thinking and what they would like to suggest for particular policies, but then again, when decision making really happens, I haven't seen a lot of influence from the youth when it really matters.
Some of that is actually changing. I think that's a good thing. You see in certain countries political leaders are younger and younger, but I think that also has to do with being bold, with taking the opportunities. With raising your voice and saying, "just because I'm young, it doesn't mean that I don't have anything to contribute." Because of that, I think that's the way to operate.
And the second thing is that, whether you are a social entrepreneur or an impact investor or you're just interested in creating social change, it really is that doing it on your own is very difficult.
My advice would be to create networks and communities, so you can collaborate with like minded people, because around the world there's always going be people who will try to say that your dreams are not going to happen or that you're an idealistic person and try to put you down.
It's very important to keep close networks and relationships with people that are your same wave length and will try to change the world.
Usually those that are crazy enough to think like that are usually are the ones that end up doing it. The more collaboration the better.
Would you like to share some inspiring projects or initiatives that you've come across recently, which are creating this positive social change?
There's a few that I read about recently. One of them is the Ocean Cleanup Project. This is a very large full scale deployment, developing advanced technologies to get rid of the world's oceans of plastic. This is a very significant endeavour estimated to clean up to 50% of this huge garbage patch that we have in our oceans. I think it's a very noble project and it's one of my favourites. Another really cool organisation that I came across is Girls In Tech and this is a global non-profit that is focussing on engagement and education of girls and women who are passionate about technology. Essentially teaching them how to code and support a framework that helps them advance in their careers in science fields.
I think there's a huge gap in terms of female empowerment in technology.
I think long-term, this will be very important, particularly as technical skills matter more and more.
And the third one is a company named M-KOPA, which is a spin off of a very popular startup in East Africa, whose name was M Solar and it actually came from M-Pesa, which is a ground breaking financial inclusion startup in that region. They have a very interesting business model, because they finance very small solar energy kits to customers that live on less than $2 a day. They are using the original M-Pesa digital payments infrastructure to sell $200 power systems that include a solar panel, two LED light bulbs, LED flash light, a rechargeable radio and adapters for charging and the kit comes with a two year warranty. Normally, people wouldn't be able to afford it, but they have such a fine financing system, where they pay a few cents every week to clients that are already in the network, that allows them to pay that. That really changes life in a way, because these are places with no electricity. Kids can't study at night, their families can't cook, it really makes a difference in the world and it doesn't only stop at solar power systems, but once they finalise the payments of that first kit, then they start offering other types of products with the same financing model. Small cell phones and small computers, a small TV, things that really have the ability to change these people's lives. Then again, in a way that is sustainable and that it ensures the long-term viability of the company.
We've heard of M-Pesa before, in some of the previous podcasts and they certainly are doing some ground breaking work, so it doesn't surprise me that this initiative is related, that's for sure. To finish off, Carlos, what books would you recommend to inspire our listeners? [25:29]
I would like to recommend three books and the first one is called Entrepreneurial You by Dorie Clark. I like it because it shows you a very practical way of how to actually make money doing what you love. Think about a social entrepreneur having incredible talent and noble ideas, but sometimes it's difficult to figure out how to get started, build a reputation in a new sector, in a new industry, developing those multiple revenues and bringing a steady flow of new kinds. The book is very easy to read, and it comes with very resource oriented strategies towards essentially leveraging your expertise and become an entrepreneur yourself.
The second one, it's called Before I Was CEO and it's by Peter Vanham. Peter is actually a friend and a colleage at the World Economic Forum and I like this book, because he interviews around 20 major global CEOs in very humanised way. It extracts perspectives and, yes, they have notable lives, but it talks about the moments of adversity, serendipity, breaking free from ties, going of the beaten path. It really struck me, because most of these individuals are really powerful and it talks about companies like Bain and Nestle and Heineken.
One thing is that they didn't really aim to be CEOs. It just happened for them in a way. The other part was that in my opinion, very interestingly, they were emphatic about keeping balance with work and family life. Personally I was not expecting that, but they were saying that at some point that always matters. It was a good message and a little bit outside of the typical CEO type of book.
The third one is called Emotional Intelligence 2.0, by Travis Bradberry and Jean Greaves and this book is phenomenal, because it really makes you aware of both yourself and your surroundings. People talk a lot about EQ, but what I like about this book is that it gives you very practical ideas for leaders, for social entrepreneurs, for managers to elevate yourself, but also reveal ways and very specific advice of ways to grow and develop in things that you probably haven't really considered. It's an easy read and it's very succinct and I like it because of the practical ideas.