Fortune Global Forum 2023: Cross Border Payments And The Path To Financial Inclusion
Emily Chiu, Co-founder and COO, TBD, Block, Inc. Dimitrios Dosis, President, Eastern Europe, Middle East, and Africa, Mastercard Moderator: Jeff John Roberts, FORTUNE
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00:00 Welcome to the stage, Fortune Executive Editor Asia, Clay Chandler.
00:04 Hello everyone and welcome back.
00:14 For those of you that are watching out in the foyer, in the lounge,
00:19 please come back in and join us.
00:20 We look forward to getting our great program for the afternoon underway.
00:24 There's little doubt that digital technology is reshaping the future of finance.
00:29 By leveraging innovation to create a more inclusive and sustainable financial future.
00:34 According to the World Bank,
00:35 two-thirds of adults worldwide now make or receive digital payments.
00:40 Technology is empowering individuals, it's broadening access to financial services,
00:44 and it's driving efficiency and competition in the financial sector.
00:48 But there are still some clear obstacles to overcome.
00:51 Please welcome Fortune crypto editor Jeff John Roberts to discuss these obstacles and
00:56 potential solutions.
00:57 Joining him will be two leaders in this space.
01:00 Emily Cho is Chief Operating Officer of TBD at Block.
01:04 And Dimitrios Dosis is President of Eastern Europe, Middle East, and
01:08 Africa at MasterCard.
01:10 Please welcome them to the Fortune Global Forum.
01:12 Jeff.
01:27 >> Hello everyone, thank you so much for joining.
01:29 I'm Jeff Roberts.
01:30 I'd just like to open with a quick couple questions.
01:33 Who here uses mobile banking?
01:35 How about Google Pay or Apple Pay?
01:40 How about cryptocurrency, Bitcoin or anything else?
01:45 Not so much, but everyone uses the first two.
01:48 And the reason I'm asking this are payments have changed a lot in recent years and
01:52 have made it a lot easier.
01:53 We benefit from it.
01:55 More time, more connection.
01:56 There's a lot of people who don't have access to this.
01:58 And for me, access to finance and payments is sort of like access to
02:02 infrastructure, like roads, like education, like healthcare.
02:05 It's something that can really help people.
02:07 But there's a lot of people of populations who don't have access to it at all.
02:11 And I think that really limits what they can do and where they can go.
02:14 So that's what we're gonna be exploring here today,
02:15 how to get these technologies into the hands of more people.
02:19 Emily, I'd like to open with you.
02:21 You're part of the division called TBD, which is part of Block,
02:26 which used to be called Square.
02:28 I think you probably all know it, this little payment rail,
02:30 this little farmer's market might have it to pay, company run by Jack Dorsey.
02:35 But Emily, tell me, what is TBD and how are you expanding finance to people?
02:40 >> Sure, so TBD is the newest of four businesses at Block,
02:44 formerly known as Square.
02:46 And we founded the business in 2021 in response to one of the most pressing
02:50 global financial challenges that we saw at the time.
02:53 And this is when the World Bank had just come out with a report citing that 1.7
02:57 billion adults in the world lacked access to a basic bank account.
03:02 And yet two-thirds of them actually have access to a mobile phone and
03:05 Internet connectivity.
03:07 And so the problem that we saw was that while the Internet had given us
03:10 amazing infrastructure to connect everyone to information,
03:14 clearly the world of money and payments hadn't kept up.
03:17 And this is the problem that TBD is looking to solve.
03:19 The Internet is missing an identity layer and it's missing a native value layer.
03:23 And through the power of decentralized technologies,
03:27 we believe we can make sending money as easy as sending an email in the world.
03:31 And this is actually something that we think is really exciting through the
03:36 protocols that we're building, where we can allow any individual and
03:39 institution to send money and
03:40 value cross borders in a way that's much more inclusive and affordable.
03:45 >> Give us an example of this in action, make it a little less abstract.
03:48 Who are you helping?
03:49 >> Yeah, so there's a lot of different people and
03:51 small businesses that we're already helping.
03:54 Take a person who's trying to send money across borders for
03:58 your average remittances use case.
04:01 Sending money to a country such as Nigeria is incredibly fraught.
04:05 Many times you don't have a US dollar bank account to even receive these funds.
04:11 It's expensive, it can cost upwards of 20% using a traditional remittances provider.
04:17 And oftentimes, we actually ran an experiment.
04:19 You went to four different branches only for them to tell you, return to sender.
04:24 Right, and through the power of digital currencies, and for us,
04:28 it's Bitcoin and stable coin that we're really focused on investing in.
04:33 You could send it at a fraction of a cost, it goes through.
04:36 We actually sent a transaction in 40 seconds.
04:38 And through our protocol,
04:39 we're bridging the world of digital currencies and legacy finance.
04:44 And so not only did we use the digital currency as a bridge, but
04:47 it landed in someone's M-Pesa account.
04:49 It landed in someone's bank account.
04:50 It meets people where they are today.
04:52 >> And this is primarily in Africa, right?
04:54 >> Today we are in Africa.
04:56 We are also looking to expand to LATAM.
04:58 The global south is a big focus for us.
05:00 >> Yeah, Tamisha, so I want to bring you in here.
05:02 MasterCard, I'm sure we all know, very famous brand.
05:05 In the US anyways, it's my credit card.
05:07 But I think a lot of people are not aware, MasterCard's a lot more than that.
05:10 So how is MasterCard promoting financial inclusion?
05:13 I assume you're not running around giving credit cards to people in
05:15 the global south.
05:16 I mean, you are, but what else are you doing?
05:18 >> Sure, thanks, Jeff.
05:19 And thank you also for having a MasterCard, that's great.
05:22 That is your credit card.
05:23 So MasterCard is all about connecting people.
05:27 It's about connectivity.
05:28 So for connectivity, you first need to have a digital identity.
05:31 Without an identity, there's no connectivity.
05:33 In the last World Bank report,
05:34 we saw that over 850 million people in the globe are still without an identity.
05:38 That's not good.
05:39 So we need to fix identity, that's number one.
05:41 On top of identity, as you said, we need connectivity rails,
05:44 which I think we started little by little building up.
05:47 We have cart rails, we have ACH rails,
05:50 we have your rails that you're building up.
05:53 So this is connecting people.
05:54 But I think for this to be successful, there needs to be value.
05:58 There needs to be value for the end consumer.
05:59 There needs to be value for the SME behind it.
06:02 Let me give you an example.
06:04 In Ethiopia, we started a program which is the FarmPass.
06:08 The FarmPass connects the farmers, the rural farmers, to a marketplace so
06:12 they can have a much better price point for their products.
06:16 So they don't need to go through intermediaries.
06:18 So you have a direct connection to a marketplace through those rails, and
06:21 you add value.
06:22 That's why people are connecting to them.
06:24 I think this is very important.
06:26 Rails without value are not worth it.
06:29 >> Yeah, that makes a lot of sense.
06:30 Let's step back one sec, though.
06:32 I mean, suppose we have a farmer who has money, they might keep it under their bed.
06:35 And unfortunately, inflation might destroy its value,
06:39 it's prone to be stolen and so on.
06:41 But they probably do have a phone, right?
06:42 Almost everyone's got a mobile phone, right?
06:44 So how do we kind of get it to the point where they can have something on their
06:48 phone that will work and solving that identity thing too?
06:51 Because the bank needs to know who they are.
06:53 So Emily, just take us through the process of someone who's in a very kind of
06:57 low technology, low income place.
06:59 How do you get that first step?
07:00 That seems like a pretty big hurdle.
07:02 >> Yeah, so we're all familiar with physical credentials in the world, right?
07:06 So if you have a driver's license, it's a physical credential that gives
07:09 an attestation of your ability to drive or operate a motor vehicle.
07:14 If you have a university diploma,
07:16 it's an attestation of you having graduated from a university.
07:19 Unfortunately, we don't have a great layer of identity on the Internet.
07:23 And scanning that physical driver's license or faxing that physical diploma
07:29 is not really a great tamper proof or privacy preserving way.
07:33 >> Right, and a farmer's probably not gonna have a driver's license or
07:36 a diploma.
07:37 >> Exactly, and the fact that so
07:38 many people are missing the basic credentials is a huge deterrent to
07:42 actually being banked in the very first place, right?
07:44 And so through a lot of new standards being set by the W3C,
07:48 which is open standards set by the World Wide Web Consortium.
07:53 There's actually really great ways to now represent your physical credentials in
07:57 a digital realm in a way that's scalable, in a way that can reach the farmer.
08:01 In a way where he can independently represent who he is,
08:05 in a way that is independently verifiable, privacy preserving, tamper proof, and
08:10 allows him to actually access the global economy.
08:13 So that's something we're really excited about is bridging trust, identity, and
08:17 financial access, and bringing all these things together.
08:21 >> I'm to be sure, so how does MasterCard solve this problem in terms of this
08:24 person can't, they might not have an ID, how do you get them to use
08:27 the financial rails if they can't prove who they are?
08:30 >> So here's the reality, many people already have a mobile phone.
08:33 And this is a great starting point,
08:34 because mobile operators are actually able to at least identify you, okay?
08:39 So there is, if you want a basic identification already there,
08:42 the question then becomes is, how do you first add value to those mobile rails?
08:47 Remittances is one of them, which I think is a great use case,
08:50 because similar to you, I believe, they cost too much, they're too slow, and
08:54 they're kind of archaic with the time they take to solve.
08:57 But then the problem also becomes,
09:00 how do you make those closed loop wallets effectively interoperable?
09:05 If you go to Africa, you mentioned M-Pesa, M-Pesa uses one wallet, but
09:11 then there is another wallet from another mobile operator.
09:13 How do you make them interoperable?
09:14 I think this is going to be super critical if we want to make sure that the farmer and
09:19 the people who are using those wallets can operate in the proper way.
09:23 >> That's interesting.
09:23 So using the mobile carriers, recruiting them to be part of it, and
09:28 I think standards too, a common standard.
09:31 Where does governments fit into this too?
09:33 Because my speaking, covering crypto, one thing I've learned,
09:35 governments are very good at identifying you.
09:38 They know that's what they're best at, they're terrible at technology.
09:41 So how can governments do a better job to facilitate this, or
09:45 who is, what's happening on that front?
09:47 >> Well, one of the things we're really excited about is actually partnering with
09:50 different authoritative sources of credentials.
09:53 So that could be your DMV to issue verifiable credentials,
09:57 where your driver's license is actually represented as an identity credential
10:01 that can unlock banking access.
10:03 Or different forms of your passport can actually be represented as
10:08 a verifiable credential also to unlock financial accesses or services.
10:12 And that's something that we're really excited into bringing into
10:14 the digital realm.
10:15 >> For us, governments are true partners.
10:18 And one of the things which for
10:20 partners like our governments are very important is safety and security.
10:24 What MasterCard does is we're using AI.
10:27 People only talk about AI with chat GPT, but you know what?
10:29 AI drives also a huge benefit.
10:32 For example, the last two years,
10:33 our AI solutions have covered over 30 billion in fraud globally.
10:38 This is a huge number that would have gone through.
10:40 So with the governments, we work together to make sure that we make safety and
10:45 security in our payments and across all our ways.
10:47 I think that's number one.
10:49 And the other one is obviously also making sure that when people identify
10:52 themselves that they are who they are.
10:54 And we also have cipher tools to make sure that when a transaction goes through,
10:59 for example, through a crypto wallet, that let's say the end sites of this
11:04 are not dodgy and they are the ones who they say they are.
11:06 I think those tools, AI, and making sure that the crypto transaction is being
11:11 passed through the right methods is what we're trying to help governments with.
11:15 >> May I say something?
11:16 Let's go back to remittances for a sec.
11:17 Because I've covered cryptocurrency and payments for a decade.
11:21 And that's something that just seems so hard.
11:23 It still seems like Western Union, no offense to Western Union, but
11:25 this notion of showing up with some cash at a store and then waiting three days and
11:29 some goes to another store and they get it.
11:31 I think the margin's like 5 or 6%, maybe it's getting better.
11:34 But why is that so hard to solve?
11:37 I've heard some people say maybe start with the B2B, that will figure it out, and
11:41 then let it trickle down.
11:42 But where are we?
11:43 I'm going to stick with you, Demetrius.
11:45 Where are we on that?
11:47 How is the technology improving?
11:49 What is missing to make that happen?
11:50 >> So let me give you a real time example.
11:52 I live in Dubai and I come from Germany.
11:56 So seven days ago, I wired some money from my bank account here to my bank
12:01 account in Germany using traditional methods.
12:04 And both of them were, let's say, seasoned banks.
12:07 It took five days for the money to arrive.
12:09 In between, I didn't know where the money was.
12:10 So I effectively called both banks and nobody could tell me where it is.
12:14 The only thing they told me is I need to have an investigation run to understand,
12:18 and it would take me two days to understand where the money is.
12:21 Luckily, it arrived.
12:22 So it's archaic.
12:23 The system of remittances with correspondent banking is archaic.
12:27 That's the problem, because the rails are just not interconnected.
12:32 You need to have, as you correctly said,
12:33 correspondent banks in the other part of the world that is holding the funds.
12:37 I don't think this is the way to go.
12:39 I think the way to go is to use other rails.
12:41 To use, for example, your rails.
12:42 To use the card rails.
12:43 To use interconnected ACH rails.
12:45 I think this is the only way, because the rails exist.
12:48 You do not need to rely only on correspondent banking.
12:51 You can go down to the other rails and really try to make sure people
12:55 understand the value, which is safety and security, which is speed, and also cheaper.
12:59 >> Yeah, I mean, Jeff,
13:00 the term global payments is a lie when it comes to the legacy financial system.
13:06 These are systems that were built largely in the 70s.
13:08 They're inherently domestic.
13:10 And it's a ledgering system that allows you to think that your money is actually
13:15 moving across borders.
13:16 This is the real, real innovation when it comes to digital currencies and blockchain.
13:21 Bitcoin is actually an internet native currency.
13:23 It's 24/7.
13:24 It spans borders.
13:26 It's really the first global payment system.
13:28 And I think those who are focused on the speculative aspects of it
13:31 miss that that is the true innovation of this technology.
13:34 >> Yeah, I entirely agree with you.
13:35 I cover crypto.
13:36 It has a dodgy reputation in some ways.
13:38 But I honestly believe the technology is superior,
13:40 because swift messaging system, ACH, great in the 70s.
13:44 But just like airports built in the 70s are badly out of date, this stuff is too.
13:49 But how do we persuade companies, consumers, and
13:51 governments to use blockchain, especially sort of a more conservative company
13:55 like MasterCard?
13:56 Do you guys touch blockchain at all?
13:58 >> Yes, absolutely, we do.
13:59 And for us, it's about giving the consumer choice.
14:01 We want to give the consumer choice to use blockchain.
14:04 We want to give the consumer choice to use the card race, to use ACH.
14:07 That's all it is about.
14:08 We are invested in blockchain.
14:09 We believe it's a future proof technology.
14:12 It needs to come with the right guard rails,
14:14 the guard rails in terms of safety and security.
14:16 But also in terms of data protection.
14:18 For us, data is in the center of whatever we do.
14:21 We need to make sure that if it's about you, the consumer, you own your data,
14:25 you control your data, you should actually benefit from the data.
14:28 And that's why you might be using some of the rails that we talked about.
14:31 And we need to keep it secure.
14:32 You own, you control, you should benefit, and we keep it secure.
14:36 >> Yeah, I wish we had more time.
14:38 We only have less than a minute, but I want to ask you both really quickly.
14:41 What trend or product are you most excited that we're going to start seeing
14:45 arriving in the next year or two that you think is the most interesting thing to
14:48 watch, Emily?
14:50 >> So for us, we're pioneering work around verifiable credentials, and
14:53 in particular, bringing verifiable credentials that can prove KYC and AML.
14:59 And when you talk about what it's going to take to bring institutions into the fold,
15:03 actually establishing a layer of trust and compliance is what I think is going to
15:07 unleash activity and liquidity like we haven't seen to date.
15:11 And that's something we're really excited about.
15:13 >> Makes sense, and Demetrius, very quickly on that.
15:15 >> I think we'll see much more biometrics.
15:16 I think biometrics is what will make the consumer experience easy.
15:19 I'd like to call it pay with a smile.
15:21 That's what we introduced now, and I think this will be the future.
15:24 >> Yeah, I can't wait to have this talk in five years.
15:27 I think we're going to be a very different place.
15:28 So please give a hand for the panelists.
15:30 Thank you very much.
15:31 >> Thank you.
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