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oly rents. For the next few years,
however, consumers will bene-
fit from prices driven down by
competition.
Digital security is already a
big concern. Even the Swift sys-
tem found itself vulnerable to
cyber crime when over $100m
was stolen from Bangladesh’s
central bank in 2016. India’s
Aadhaar has repeatedly been
charged with being susceptible
to data leakage through bribery,
which it has mostly denied. M-
Shwari in Kenya recently suf-
fered an interruption of service
because of “technical issues”.
But by and large, digital pay-
ment is safer than cash for the
low-income consumerswho are
the main users of mobile mon-
ey, according to Ruth Goodwin-
Groen, managing director of the
Better Than Cash Alliance.
Brave newworld
Privacy may be an even
bigger issue. As it becomes more
obvious that people are trading
their personal data for better ac-
cess to financial services, they
will worry about losing control.
The problem is most acute in China, where the government’s ef-
forts tobuild a “social-credit” rating system, rewardingpeople for
being good citizens, seem the stuff of dystopian fantasy. They
also feel uncomfortably close to credit scores derived from“alter-
native” data, with which China’s central bank and firms such as
Ant have been experimenting. In January Ant had to apologise
for havingmade opting in to a Zhima credit score the default set-
ting for users who opened a report on their Alipay activity over
the past year.
The greatest problem for financial
inclusion, though, may be the persistent
disparities revealed by the new Findex. It
shows that, for all the advances, the gap
between the number of male and female
account-holders has not narrowed over
the six-year period covered by its three
editions, remaining at nine percentage
points. Likewise, a big gap remains be-
tween richer and poorer households.
Among the richest 60%, 74% of adults
have an account; among the poorest 40%
the share is only 61%.
The Findex survey asked a question
designed to find out why those 1.7bn peo-
ple remain unbanked. The explanations
included cost and distance, the fact that a
family member had an account, lack of
documentation, distrust in the financial
system and religious concerns. But by far
the biggest reason, cited by two-thirds of
respondents, was having too little money.
To solve that problem, technology is es-
sential. But it is not enough. 7
2 application programme interfaces (APIs), they can offer their ser-
vices on banks’ platforms. So if they are going to be winners, it is
only by having curtailed their ambitions.
Mobile-network operators (MNOs) provide the infrastruc-
ture where more andmore of the financial system is based. Back
in themid-1990s, John Reed, then the chief executive ofCitibank,
sought amergerwith AT&T, realising, as he later put it, that “a net-
worksupplier and a content providerwould be a good combina-
tion.” But most MNO s are content to make money as dumb
pipes. And that revenue—essentially, fees per transaction for
transferring funds—will come under threat as competitors offer
free transfers, hoping tomake profits fromancillary services.
So what banks, fintechs and MNOs fear most are the digital
“platforms”—the colossi bestriding the internet and controlling
the apps and sites where most people spend most of their time
online. In a world where data rule, Google might be expected to
be king, but it insists it has “no aspiration to be a bank”. Facebook
in some countries offers payments on its Messenger service and
via its subsidiary, WhatsApp. It dabbled in using data to generate
credit ratings, but users found that creepy, so it stopped. Amazon
alreadyhas a substantial business lending to small firms using its
platform. A report in March that Amazon was in talks with
JPMorgan Chase to offer its customers bank accounts sent a fris-
son through the bankingworld. Amazon has data to drool over.
Chinese firms start with a huge advantage: the country’s
sheer size. They also benefit from a protected domestic market.
UnionPay, for example, became the world’s biggest bank-card
company, based almost entirely on the Chinese market, from
whichVisa andMasterCard have been largely excluded. Alibaba
and Tencent, aswell asUnionPay, are expanding overseas. As yet
their ambitions are directed mainly at the Asian near-abroad, as
well as at Chinese tourists and the diaspora. But they have big
ideas, deep pockets and a businessmodel that seems towork.
The biggest winners all round are likely to be consumers,
thoughwith a number ofcaveats. Four standout: market concen-
tration, security, privacy and inequality.
Concentration is a worry for the future. The fear is that net-
work effects will drive smaller payment providers out of the
market as platforms offering free transfer services undermine
their businessmodels and thewinners start demandingmonop-
The biggest
winners all
round are
likely to be
consumers,
though with
a number of
caveats
12 The Economist May 5th 2018
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