“Black money”—money derived from criminal activity—was the theme of the October 2 speech by the Governor of the Central Bank of the Netherlands during the European Banking Summit. His message was clear that the digitization of finance calls for smart algorithms to flag suspicious patterns. The scale of the “black money” problem is enormous. In 2019 alone, an estimated USD 2.4 trillion in proceeds from the illicit economy will be laundered through the world’s financial systems. If even a fraction of that money could be rechanneled towards a green transition, we would be a long way towards advancing the green SDGs. The Governor’s remarks also addressed “green money” but just not for a digital perspective, but SDFA had the pleasure of shaping that discussion at the Summit.
We explored the topic of green money in a digital economy through both a keynote address and a fireside talk on green digital finance with Antoni Ballabriga Global Head of Responsible Business, BBVA’s Global head of Responsible Business, Financial Services and Insurance Transformation Manager from Microsoft Natalie Pullin. The discussion was about use cases to show that green digital finance has moved out of financial service providers’ internal innovation labs and into the market. We discussed the tokenization of biodiversity assets, tokenized carbon-light behaviors as part of mobile wallets, and much more.
I’d like to share one particular case that offers a compelling illustration of how the next wave of green digital finance innovation is starting to integrate fintech with the internet of things (ioT), with clear social as well as environmental benefits. Global Mobility Service is a Japanese company with an explicit focus on the Sustainable Development Goals. They work around the world to find ways for people who make their living in mobility-based business (e.g., taxi drivers, freight movers) to build financial security. Meanwhile, in an attempt to fight air pollution, the Philippines was seeking ways to phase out that country’s 4 million diesel-powered tricycle taxis and replace them with electric-powered ones instead. Global Mobility Service discovered that most of the Filippino tricycle taxi drivers did not own their taxi. The majority faced the classic obstacles that made them non-viable customers for commercial bank loans (no credit history, erratic income, loan size needed below minimum threshold) so they were renting the taxis instead, at expensive prices that kept them trapped in poverty.
Global Mobility Service’s solution was to offer electric tricycle taxis which integrate IoT technology. Now the banks were suddenly willing to lend the drivers money to buy these greener taxis because the IoT significantly de-risks the equation. If a taxi driver fails to pay one month the IoT device automatically locks the vehicle. Once the payment is made, the vehicle is automatically unlocked. After three years the driver owns his taxi which means a significant increase in disposable income.
This is one clear case of the convergence of fintech and IoT paving the way for new forms of sustainable digital finance solutions. Another example is captured in the report we launched in collaboration with HSBC in New York on September 24th on the digitization of green bonds. Here the use case is for automating use of proceeds and proof of impact of the underlying green asset by deployment of IoT and fintech in integration. As 5G rolls out more IoT-powered fintech, constant innovation will blur the lines between finance and the real economy and between fintech and other sectors.
We are in for an even bigger transformation in the years to come. Let’s steer that transformation in a green and sustainable direction.