20201127 A friend asks…..

There is a huge development of fintech in Malaysia and on a function level it’s fine for urbanites. But in rural areas where mobile coverage is spotty, it leaves people without a means of payment.

In any case, it leaves people without a means to make the kind of low-value, person to person, payments that are the everyday use of money for many, especially in remote areas. Ultimately, there is the risk that they move to an informal, localised, tokenised system of payment or barter, both of which tend to be a driver of poverty not progress.

Also, the need for multiple wallets means that people have money tied up in several places which, again, has an adverse impact on the poor and, of course, there is what amounts to a tax because they must have an expensive phone plus access to a connection – and if confirmations are by SMS, that means they must subscribe or keep a balance on a prepaid phone.

And they also need access to electricity to keep the phone charged. Also, and this is not a pejorative, when the phone is the only thing of value, it will be sold by addicts to raise the money for drink or drugs. Or for even the most sensible of homeless persons to buy blankets and a hot drink in winter.

It’s all cost that no one is taking account of. On balance, it’s a terrible idea for the people in developing countries – and as we saw in the UK in relation to Wirecard, it was the poor, and those on benefits, who most suffered when a FinTech went belly up.

Remember that the biggest fintech providers in e.g. Malaysia are probably not who you think they are: it’s probably Shopee, Lazada, Touch N Go and Grab.

So, I’ve nothing specific to point you to but hopefully this gives directions to look in.