go to the student or team with the best overall entry. the deadline is january 18, 2018. mark your calendar and help us spread the word to student filmmakers. for more information, go to our website studentcan.org. digital technologies are changing access to financial systems in the u.s. and a broad. up next, an expert shares his data on the impact. this is about 90 minutes. good morning. i'm darrell west. vice president of government studies and director for the -- i would like to welcome you to our forum on financial inclusion. we are web casting this event live, so we'd like to welcome our viewers. and also those of you who have tuned in via cspan.

for those of you who are wishing to post comments during the forum, we have set up a twitter feed at #financialinclusion. so you're welcome to make any comments that you would like. so there are nearly two billion adults globally who do not have bank accounts. this makes it very difficult to access financial services, pay bills or transfer money to relatives. in addition, it is hard in those circumstances to be an entrepreneur when you are outside the formal financial system. it's difficult to gain access to capital or form a business when you lack basic financial services. but the good news is that many nations have made commitments to expanding financial services for the poor. they understand the financial inclusion is vital to economic development and social inclusion. as a result they are developing financial inclusion policies and

implementing a new frame works that encourage inclusion. so today robin lewis, john, and myself are launching our third annual brookings scorecard measuring progress on financial access and usage with the support of the bill in me lin d -- melinda gates foundation. the short summary is that we've seen progress on financial servi services in many places. there are efforts to help marginalized populations and this is happening through mobile money and digital financial services. we've got detailed suggestions from every country. we've also talked with many leaders in the ngo community who are active on financial inclusion and we're grateful for their support and their help along the way. to give you a more detailed sense of the highlights of our study, my colleague robin lewis will summarize the key findings.

robin is a research analyst at brookings. with that, i will turn it over to robin. >> good morning. thank you to darrell for those remarks. and our sincere thanks to all of you for joining us this morning. either here at brookings or vi alive stream. we are very grateful for your interest in the project and i'm looking forward to providing a brief overview of our approach and key findings before we turn it over to the panel discussion. so first i'd like to start with a brief overview of our project. as darrell mentioned, the financial and digital inclusion project or fdip was launched in the summer of 2014.

the purpose of the project is to provide policymakers, private sector representatives and the general public with information that can help improve financial inclusion in the fdip focus countries. why does financial inclusion matter? at the individual level financial inclusion matters because it provides pathways for people to improve their financial health which contributes to their overall well-being. beyond that, it is a key ingredient in advancing sustainable development goals such as poverty reduction and gender equality. soto support our overall objective, over the past three years we have selected a series of politically economically and geographically diverse countries and we have evaluated their progress toward financial inclusion through a series of annual reports as well as conversations with diverse groups of experts. so let's talk briefly about the reports that we are launching

today. this is the third annual fdip report and as with the first two reports we examined access and usage of formal financial services across diverse country contacts. so when i say formal financial services, we primarily focused on basic services since these are often the entry point to the formal financial system. including savings accounts and government to person transfers. for the 2017 report, we have distilled and updated the country profiles that we featured in 2015 and 2016. and in addition to these selected financial inclusion highlights and recent updates we have included some recommendations regarding key next steps for advancing financial inclusion. given the scope of our sample and the rapidly evolving nature of the financial inclusion vi m environment around the world, these lists are not exhaustive but we do believe they capture

an important snapshot of key developments for future growth. so moving to a quick scorecard interview, as darrell mentioned, one of the components of our report informed by our research on each country's landscape is a scorecard tool. to develop this scorecard, we included country commitment, mobile capacity, regular la tore environment, and the adoption of formal financial services. so in terms of our country's sample, we maintain the same list as in the previous year in which we added five new countries to diversify our sample. these countries included the dominican republic, egypt, el salvador, haiti and vet ma'am. we will dive into the dimension level findings, but for the most here is our preview of the scorecard. as you can see, the top scoring countries are generally

distributed across latin america and africa. although countries in other regions including the philippines also demonstrated strong performances as l. fwell. for the third year in a row kenya received the top place on our scorecard. with that said, a number of other top scoring countries including several in latin america have experienced lower levels of mobile money adoption to date but often have robust take up of innovative card based services as well as nontraditional access points such as banking correspondence. we think that this finding should be very encouraging to the financial inclusion community. because it demonstrates that countries with different political economic and geographic environments can effectively pursue different pathways for advancing financial inclusion. soto provide a better sense of what factors inform these

scores, we'll briefly with through some of the indicators across the four dimensions before we explore our findings. for example, country commitment indicators include the existence of comprehensive national financial inclusion strategies as well as specific financial inclusion protection frameworks. excuse me, consumer protection frameworks. these indicators help give us a sense of whether countries are willing to work collaboratively across sectors to make engagement to -- engagement with formal financial services a priority. moving to mobile capacity, we measured this because it includes indicators related to mobile infrastructure as well as the number and type of mobile money services that are offered. while digital financial inclusion services extend far beyond mobile money, these offerings can provide a very convenient affordable platform for those who are typical underserved to access financial

services. moving briefly to regulatory environments, we look at whether regulations, policies, or other guidance concerning electronic money and other forms of digital financial services have been issued. we also look at issues such as mobile money platform intra operability. which basically means whether customers of one service can send payments of another mobile money service. finally, moving to the adoption indicators, we focused on account adoption with both more traditional financial service providers as well as mobile money providers across underserved groups in particular. these groups may include lower income adults as well as women. all the data in this set is from the world banks global index database and we look forward to updating the data as the new data set is released. moving to the key findings.

so first let's begin with the country commitment dimension and touch on a few examples of countries progress. for example, mexico increased its overall score by 5 percentage points to join the top five countries. a couple changes -- released the national financial inclusion plan. the government of mexico also joined the united nations based better than cash alliance. moving to mobile capacity, el salvador is an example of a country that boosted its score by 5 percentage points over the past year by of smartphones which individuals can access mobile financial services. moving to regulatory environment, countries from across all of our major regions had strong performances on this

component of the scorecard. including peru, the philippines, ro wanda and india which all received the highest scores possible. for example, in addition to promoting mobile money intra operability in operability india has licensed several banks for under served individuals. next let's move to the adoption findings. the data and met tricks on the adoption of traditional financial services are consistent from last year and so among the new fdip countries, one example is the dominican republic which received the highest adoption score among those new countries. now let's turn to some of the key findings and calls to action in this year's report. so across our fdip countries,

one encouraging finding is there has been considerable growth and recognition that financial inclusion is not only important for individuals weal fair, but it can also contradict to economic growth and sustainable development goals including the ones i mentioned previously. so one interesting data point on this front is that as of this year all of the countries in our sample are members of financial inclusion oriented groups or networks. while membership in these groups is important and valuable, we also need concrete steps to emerge from their engagement. so this is where infrastructure investments and the regulatory components of the scorecard come into play. in addition, we also need consistent detailed data to track progress toward these goals. one example of a portal that enables countries to do that is the alliance for financial inclusions new data portal which is a helpful platform and we hope that more countries will

take the opportunity to include timely detailed data that is available for public consumption in order to help with knowledge sharing and accountability. moving to our next key findings, the intersection of finance and technology provides tremendous opportunities to accelerate progress toward financial inclusion. so basically fintec provides the innovative use of technology to design and deliver financial services on products. if that sounds like a really broad catch-all term, that's because it is. but this can help enhance the accessibility and the utility of financial services for consumers. and render the deployment of these services more cost effective for providers. so for example, in a july, 2017 report by the institute of international finance and the center for financial inclusion,

spanish bank is working with a chiliian fintack to extend credit to individuals who may not have a typical credit history that they have established. we're excited about these kinds of developments because they not only enable customers to access financial services, but they can also help it become more access si ible for individuals to use these services. so how are some countries taking fintack into account? one example is in indonesia whereas of august, 2016 the financial services authority provided an outline of guidelines for the local fintac industry. initially in south africa, it is -- a framework is expected to form part of the conduct of financial institutions bill in 2017. finally we encourage countries to amplify investments in cyber

security efforts and knowledge sharing in order to fully reap the benefits of financial services innovation. so with the proliferation of digital technologies, boundaries are blurring across traditional financial service providers as well as tech start ups and other groups. so while many of these fintech companies are nimble and cost effective they may not have the resources the infrastructure or the experience to ensure that the services that they help provide are safe and secure. with that said, of course banks are also not exemt frpt from th particularly whether they have t outdated or centralized systems. one suggestion that emerged was from policy makers as well as financial service providers to work with technical experts to essentially provide a set of menu options, to enhance cyber

security and provide technical assistance for implementing those solutions. so moving forward, we look forward to hearing from all of you regarding this year's report and scorecard as well as the 2015 and 2016 reports and we will continue our efforts to facilitate dialogue regarding important financial inclusion dwe dw developments and the outcome of the scorecard. we haven't addressed that up here. we welcome your feedback. and now thank you for listening to the presentation and i would like to invite our moderator john villasenor as well as our panelists.

thank you very much to darrell west and robin lewis for setting the stage here and thanks to all of you for taking time out of what i'm sure is a very busy schedule to help us with the dialogue on this really important topic. so the organization for the remaining portion of the program is i will introduce our two panelists and i will ask a series of questions and we'll hear their perspectives until approximately 11:00 and then we'll open it up to questions

that you may have and aim those things up no longer than 11:30. we may briefly introduce our panelists. immediately to my left is camille br camille busette. a senior fellow in government studies. she also has appointments here at bookings in the economic policy programs. camille has dedicated her career to expanding financial opportunities for low income populations. she came here from cgap to assist the poor where she served as the lead financial sector specialist. previously she worked for the consumer financial protection bureau, u.s. government financial services regulator. she was the inaugural head of the office of financial education. to her left is diego molano. diego is an international consultant in the area of digital transformation of

companies in government. he was minister of information and communication technologies through ict of columbia from 2010 to 2015. during his tenure columbia expanded all elements of the digital ecosystem. internet coverage extended to low income homes in rule areas, fiber optics and high speed networks expanded to all mu nins pal tees. every rural community with more than 100 habitats has a center. so we're very privileged to have these two panelists with us. i'm going to start off with an initial question that i'll direct to camille and then i'll have you a question for you, diego. for camille, as mentioned a moment ago you are the director of the race prosperity and

inclusion initiative. could you briefly explain why financial inclusion matters including low income communities and individuals of color. >> thanks for the question. really happy to be here discussing financial inclusion not only globally but certainly domestically. i think people are unaware of the fact that here in the u.s. we have 10 million people who are unbanked and another 25 million who are underbanked meaning that they really don't have access to the full suite of financial services and products. and what that means here is a couple of things. just generally, not having access to financial services makes it very difficult to save money. obviously. and to be prepared for emergencies but also makes it very difficult to start investing and creating a foundation for wealth creation. when we don't have that, particularly in the united states where leverage is really

important to building wealth and particularly important to transferring enter generational wealth, then not having the services and not being included in the formal financial system makes it very difficult to make strides. and you see that here in the u.s. because a lot of the people who are not formally banked tend to be people of color and communities of color. and in the u.s. we have a very large racial income gap as well as wealth gap. some of that is attributable to the fact that we simply do not include a lot of african-americans, latinos and others in the financial system toch. to give you a sense of that in the u.s., for the median wealth -- a accumulated by white households is 111,000 and for african-american households, it's 7,000. that gives you an idea of just

the disparity and why it's so important to have folks included in the formal financial system. >> thank you very much. diego, given your expertise and experience in ict, can you share some examples of ways that you have seen or expect to see digital technology transforming the financial services sector in columbia? >> thank you so much for the invite today. you know, as camille was saying, we have many, many, many challenges in terms of financial inclusion everywhere in the world. one of the main ones is infrastructure. how do you get banks to everybody? and through technology, that's the solution. that's what is happening. i'm sure that most of you guys know as the example in africa, many technology operators around the world moving in that

direction. but having access to technology is not enough. i mean, we are proving that in most countries. for example, in latin america, just around 50% of the people are internet users. although more than 85% of people are already covered by networks. why? because there is no application for them. when you ask them why you don't use internet? the answer is it is useless for me. it doesn't change my life. basically we have to work not only in the infrastructure but also in developing more solutions. and that's part of what the financial sector is doing. so the financial sector is starting to use this technology of course initially for payments and then, you know, some financial services. but not only that.

the future of that is huge. in digital identification, the impact in reducing poverty is huge. a huge initiative led worldwide on that and working on that as well is how you make sure people have an ied. if you see people today, the financial sector is the one that have the forward to create i.d. platforms for everybody. secondly -- most of the credit given in the whole world is based on land histories. now the financial sector has the power to move that to digital. and has -- and help people people to get credit easier. instead of going to all traditional paper estate owned

registries, the service can also move to digital and transform completely the way credit is given to them. >> thank you very much for both of your interesting perspectives there. so the next question is -- relates to the united states and our -- this is as robin mentioned, this is the third year in which we've been doing this. we've been -- our project has been structured specifically looking at a set of countries that robin alluded to a few moments ago. as camille reminded us, there's a very significant challenge here in the united states with, depending on how you measure it, some number of tens of millions of people either excluded from or at the margins of the financial system. and so it's a reasonable question to ask what can we learn. so i guess my question is, what can we learn now that we have this incredibly rich tapestry of solutions that are being explored around the world, this global effort to emproimprove to

system, how can we bring them to include inclusion in the united states. >> i'd really be interested in hearing your answer to that question, diego, but at least from my perspective, there are probably three areas where we can learn from the rest of the world. the first is in the regulatory arena, i think what's really interesting about the u.s. financial services regulation is it tends to be very sectoral. you have communications, the fcc. you have different types of financial regulators at the federal level as well as at the state level. and so you have a lot of sectoral regulation and it's really quite siloed. i think what's interesting and what has evolved in some jerusalem de jurisdictions is you see a melting of that and you see some of the -- i little bit more of a flexible regulatory approach.

i think that's actually really important. particularly as, you know, technology is evolving, it's important to have coordination, at least coordination with a range of regulatory authority, so in telecommunications as well as banking, et cetera. here i think we could learn -- that's one of the lessons i think we could learn. the second is, as diego mentioned, this interesting area of overlap between generating digital identification and account opening, which india of course has done really well. here, particularly for people who are under bank and have a significant documentation problems, digital i.d.s would be really useful. i think that combination of the digital identification as well as providing more opportunities for simple basic accounts, that is also something that we could learn from other places. and then finally i think a lot of the experiences have shown both here and in africa and

india as well as south asia is that there is a market for people who are doing very small frequent transactions. and i think we need here in the u.s., we need to revisit how it is we encourage innovation around that and how it is we regulate around that small but frequent transactions. >> thank you. thoughts for how the united states can improve our inclusion landscape? >> look, john, i'm not an expert in the united states. but that doesn't prevent me from answering. this is very easy. you guys in the u.s. have to go see what is happening in the world and go copy and paste. copy and paste. let, for example, fintech grow in the united states as it is growing in many, many, many countries. in asia, in latin america.

go copy the fintech build up that is presented in congress next week or two weeks in mexico. let's try to see how that framework can be implemented as well in the u.s. to tackle people at the base of the pyramid. the financial sector in the u.s. and everywhere in the world, the financial sector is focussed on rich people. they're happy with high margins. just very few backs in the world are concerned about people in the base of the pyramid. very few banks in the world are producing p producing pyramids with low margins. adjust the framework as we are doing in the developing world. >> thank you very much for both your comments. this is a question prime male for diego. as it relates very specifically to columbia. as everyone in the room knows, there's been recent accord in

columbia ending a decades long conflict involving fark. there's certainly a lot of optimism regarding the future of columbia now that that has been concluded. i guess my question is what do you think the impacts of that will be in the inclusion la landscape given this recent, in the historical context this very recent development? >> look, i think it is going to be a different country. we are going to move to a different level. completely after 60 years of war where we spent most of the budget in defense. most of the columbia an. we don't have to spend defense because we have a peace agreement. secondly, many areas, much of the country was a conflict -- was in the middle of a contact,

so developing business in those areas was very, very, very hard. so now we have the opportunity to develop business in those areas. thirdly, they have had a policy on how to encourage the growth of financial services everywhere. in 2010 when we dropped the policies on how to reduce poverty in colombia, we joined forces been the ministry and the finance ministry and we said let's first of all deploy infrastructure everywhere in the country. so today colombia is the best connected country in the region. we have fiber optics in almost 100% municipalities. that's key because that has to be, you know, part of the day by

day life of people in those areas. in those areas that were affected in the conflict. but also the gorman said we have to encourage demand. this is not only about the supply side of it. we have to encourage demand. so all this subsidies the gorman is giving today to poor people, that includes the subsidies for the former members and for the victims of the conflict. they are distributed through this new technology and through the new financial services. also in order to encourage the growth of that demand, the gorman also changed the regulation so new companies are now part of this game and the whole country thing, the whole country is going to change dramatically in the coming years. >> thank you very much.

so here's a question for both. i would love to hear both of your thoughts. what do you think the greatest challenges are that the financial inclusion community faces in seeking to contribute to the sustainable development goals such as poverty reduction and gender parity? what -- that's a huge question. we could have -- write a thesis on either one of those. to the extent that we can talk about it in a few minutes, your thoughts on poverty reduction and gender equality? obviously we're a long way from having enough poverty reduction and we're certainly nowhere near gender parity. >> i'll take a crack at it. i'm sure there are about 15 things that we could probably think of. let me just mention three. the first is i do think gender parity is continuing to be a very in transition problem. there are many reasons for that.

when we look at financial inclusion in general, women tend not to do very well. even in countries where there are large advances. there are going to be some exceptions to. that kenya being one of them obviously. but if you look at south asia for instance, very, very difficult for financial inclusion for women there. the second thing is, you know, i actually think that one of the challenges of financial inclusion is to figure out both at the country level but certainly the community of fill an tlo pifts as well, how is it that we link financial inclusion to economic participation and to social inclusion? and what are all the steps from getting, you know, included in the formal financial system to getting into the formal, you know, employment system to then moving and getting some kind of social movement and social mobility. i think those kinds of steps aren't well mapped out and you can stall at several different notes. i think that's a real problem.

and then the last thing is for the ultra poor, i still don't think financial inclusion is as relevant as getting people stabilized to the point where they can then take advantage of financial services. i think we still haven't really cracked how to do the kind of economic stabilization at a really sort of mass level. i know there are a lot of experiments when i was at cgap we worked a lot on graduation which is a kind of approach to stabilization but that needs to be a much larger scale to crack that nut i think. >> i think the main challenge is creating trust, especially with financial services. how you make these people that haven't had access to any financial service to trust a mobile form. we all do it here. but how you break that barrier

and create trust. create trust of saving money or, you know, or committed to pay interest a loan or whatever. that's the main challenge for me to expand financial services to reduce poverty. so how we create trust between consumerers and the financial providers and these new financial providers. and secondly, how we can create trust between those new players and the regulators. that's a tricky balance. we have to adjust the regulation but we have to have the right balance. in countries like colombia again, you know, having a huge traffic problem, laundering money is a key issue. regulators are not keen to open the door because they may have more laundry mechanisms. we have to create trust as well between the new players or the

new services and governments. and traditional banks, what we have found in many countries is that the tradition of regulation, it is too heavy for banks to go to the base of a pyramid. also, you know, not only having a new regulation for the new players, but a softer regulation for the current ones. that's key. >> and i'll take the liberty of briefly stepping outside of my moderator role. i can't help but mention we talk about trust that that's another reason why cyber security is such a really foun dagal padati of the equation, one in which my view has not gotten nearly the attention that it needs this this context. there are a lot of people that talk about it, but i think at ground level there isn't nearly enough cyber security. of course, if you're new to the financial system and one of your first experiences with it is

losing your money because the new solution you tried got hacked, then obviously that is exactly the opposite whof what want to have happen to build trust in these new services, new in the sense of from the perspective of the people who are adopting them. trust is a really, really important issue. so let me ask a question. this is really for camille. specifically your experience at the consumer financial protection bureau. given that, do you have any thoughts about how to advance consumer protection and privacy in this increasingly digitized environment through the con tech of financial inclusion? in other words, as we deliver these services but do so in a manner that provides the requisite levels of protection and globally even though your prm wo personal work happened to be in the united states on this? >> sure.

the consumer financial protection bureau is the newest financial services regulator in the u.s. it w it was created in 2011 as a result of the financial crisis. it governs market conduct in the financial services arena. so when i think about consumer privacy and consumer protection more generally, for people who are at the base of the pyramid, i do of course think about trust. but i also think that the kinds of people who are now -- who just getting into the financial system for the first time are people who aren't used to, you know, the marketing tricks, let's put it that way, or the ways in which their data may be used, et cetera. so they're just not really aware of the many ways in which a financial institution can make use of their data and can also

put them in a fairly precarious financial position if something goes wrong. like a loan isn't repaid, et cetera. so from just purely at the privacy level, i think it's really important to explain to people what it is they're getting into. there are many creative ways of doing that, using visuals. so i think that's really important. it's important for regulators to be at the forefront of encouraging providers to provide that kind of education. i think the second thing is that privacy standards can really vary country to country. they can vary depending on the sector of the financial services provider, so it might be different if you're in telecom and it might be different in you're in banking and different again if you're in fintech. i think there it's really important for regulators to

conduct meetings where they are not only talking to providers, but they're talking to, you know, consumer advocacy groups. they're also talking to other regulators about how you do that kind of coordination. particularly in areas like, in africa and south asia, i think it's very important to have a regional approach to that. there's a lot of people movement for jobs, for economic opportunity. and so i think it's extremely important to have a harmonized approach not only within the country and various sectors within a particular jurisdiction but across regions as well. >> thank you very much. i have a question for diego here. so as a reminder for the audience, we measured financial inclusion with respect to four key dimensions which were country commitment and mobile capacity, the regulatory environment and then actual adoption of the services. colombia received a perfect score on the country commitment

axis. so it would be interesting to know what are one or two of the things that colombia did to demonstrate this commitment to advancing financial inclusion? >> the first one is key policy. we issued all the policies to include everybody. secondly, deploying the tools. deploying technology so people can have access to it. colombia is also number one in technology affordability in the world. thirdly, the public private partnerships. that's a very, very important. we went to the financial sector and the traditional one and said look, we have to go to the base. what do you need? some regulatory adjustments both in terms of findings and telecom that we did. for example, just out of that,

just one bank, they deployed this product, mobile payment product for people at the base of the pyramid. now it is one of the largest mobile payment platforms in the world. more than four million people that didn't have a bank account now do have it through the mobile phone. they don't have to go to any bank branch to open an account. they can do it on their phones. and they can already pay, you know, e-commerce. they can do a lot of things. there are thousands and thousands of cash in and cash out points. so the traditional banking also played a very primportant role. for example, companies that that had this business of charging the mobile phones with money, so the prepaid cards and stuff like, that they moved also to

the payment systems, things to the new revelation. the penetration of payment services increased dramatically. but to increase the demand of payment services we also needed a new way to increase e-commerce policies. so colombia has joined very fast in terms of e-commerce. there are new players in the market that really adjust to the relative of colombia. there's a company, in colombia people are very, very lazy. people don't go to the supermarkets. it's a bunch of mom and pop shops. so how you really connect those mom and pop shops with the consumer? through this app. rugby is one of the largest e-commerce services in colombia and that really helps payment

systems grow. again, the government distribute the subsidies through those pages. >> this is a question for both or either. what factors -- of course we all know and have read the various factors that can impact and help promote financial inclusion. one way to look at it is to sort of organic view which is that the technology alone, you know, coupled with people doing innovations is going to take care of it and governments kind of, you know, aren't as important as some people might suggest because of what happened organ cally. another viewpoint would be more on the opposite end of the spectrum that governments need to be the central players in promoting financial inclusion. of course thep tn the solutions will follow. i guess i'd be interested in perspective on the relative importance of leadership, of

just simply letting the technology do its thing, of public private partnerships. what do you think i guess are the factors that are most fundamentally important or other factors that are overplayed in their importance or underappreciated in promoting financial inclusion. >> for me the main factor for the whole -- not only for this financial industry, but for the whole economy is talent. and we lack four types of talent. the first one is the engineers. so that's a problem every including the u.s. we don't produce enough engineers that really develop new applications using the -- for the new financial sector. the second type of talent that we lack are women in the industry and working women. this is not about gender equality.

this is about productivity. if women don't work, we are not going to be able to work -- to row the economy, period. that's very simple. and i nthink in most countries that are doing the government subsidies that focus on women, we've seen the positive results on that. empowering women to control the finance of homes. it's been very, very successful. but also we have to help them to really move to formal jobs everywhere. the third type of talent we need is that we have to change the whole location system. today an accountant that doesn't understand the chain, it is worthless. we have to develop -- >> there's some accountants who might disagree. >> for all of you accountants out there who don't understand block change.

>> you have to get retrained on that. that's key. that's key. and so if a doctor doesn't understand what big data is, they are not going to be able to work in the new medicine. so we have to change completely the way we locate people. every single profession, every single profession has to have a little bit of a computer engineer. and the four type of talent that we need is the leaders. we need leaders that understand this new economy and how to transform it into the detail business. that is also part of what we have to do in financial sector. >> in addition to what diego mentioned, i actually think having spent a couple years at cgap and worked on financial inclusion for a while, i actually think intentional government policy is a really big factor. i've come to kind of really embrace that and i think that's

very, very important. i do think also that coupled with that, though, you have to have an environment that encourages and simulates innovation. and that means you have to have a regulatory environment that also is enabling. but also providing some guide posts and guide rails for how the financial system can evolve to meet the needs of basically the pyramid of poor people n. additi. in addition, when we talk about people in financial inclusion we mostly talk about expanding access to financial services, but i want to just put a plug in for responsible financial services. i think in addition to the other areas that i listed, i think you do need to have at least the basic consumer protection framework. >> thank you very much to both of you. i may be telling many people what they already know, but a quick reminder, so block change is the technology that underpins things like big coin. big coin is merely one of many

applications. another term you may have heard is dlt, distributed ledger technology. this idea that you can take a large number of computers, no single one of which is trusted, but yet sort of create from that a network which in the aggregate behaves in a trusted manner. it's a fascinating technology which has implications certainly in the financial sector. but with also in many other applications as well. so i just want to make sure we're all on the same page with that. so this is probably a good time or i'll do a wrap up question and then we'll open it to audience questions. i guess what i'd ask sort of a future kind of forward looking question, you know, do you -- are you optimistic about looking at sort of what's happened the last five or ten years. certainly a proliferation of

solutions and we've seen new r mar -- numerical progress on the metrics. is there a risk we'll kind of plateau or fall back? what is your kind of candid view of the next five years and financial inclusion? >> i'm very optimistic. because we -- i think we have the tools. which is basically around technology. we have also young people. me lin ya millennials, they are fairly connected. they are innovative on how to use that technology. so i'm very, very optimistic that financial services are going to be growing to the base of the pyramid and becoming a critical factor. however, there are some risks. as you mentioned, cyber security is one of them. that's very, very important.

the second risk is how to manage consumer protection. that protection is very, very important, because that, you know, a breach of data protection or da ta privacy could really damage that trust. >> so i'm cautiously optimistic. maybe a little less optimistic than him. i'm optimistic that the covered will grow. the caution is around a couple of things. first is that i still think it's going to be very, very hard for extremely poor people to get into the financial services system and i just don't think we're cracked that. i think it's also going to be very hard for women. poor women in particular. to be included. and still i'm not aware of really big gains in some of the country wrs that has been a persistent problem. i think that's a problem. then i also am cautiously

optimistic because i think as you grow these services, there's also potential for scandal. there's -- and a lot of growth digitally offered credit services and that offer is, you know, opportunities for scams and all kinds of consumer abuses. i think also the fact that credit bureaus operate a little differently and that that might be opaque to consumers, also offers opportunities for things to go badly for them. and then finally, the advent of using social networking data to make credit decisioning is a little creepy and i think it needs some guide rails if we are to use that as a way of including more people in the formal financial service system. >> thank you very much. we'll open it up to any questions that you may have. so we have some microphones available.

in terms of if you have a question, just raise your hand. my one request would be if you could briefly state your name and which organization you're with. my other request would be to please ask a question. that will be -- and to do it rapidly enough that we have time to answer the question. anyone? the gentleman in the front. anyone else you can raise your hand and we'll get to you. >> thank you. larry, cheko communications. big coin, an advantage or disadvantage to this whole concept of inclusion? and two, it seems that america here in the states, we're acting at cross purposes. cfpbs under siege right now and i think it's been a wonderful consumer protection agency that's if not gone away with

will be castrated. plus the fact that banks have not been honest brokers and there's that trust issue that diego talks about. if you can address those. >> i actually might talk about the big coin. so i think big coin is really distinct from block chain technology and distributed ledger technology. the latter two i think have some potential to be really interesting in the financial inclusion space, particularly as diego has mentioned when you're talking about using property as a way of validating who you are, et cetera. so i actually think that there's a lot of potential with block change, distributed ledger technology that could be very useful to property claims and all kinds of claims and also just validating who has done what with money. and also just maybe making it a lot easier and a lot less

complicated to move money from point a to point b. i think there's opportunity there. on the cfpb, the cfpb has been a political football for a really long folks that work there are used to that. and it does seem like the political, you know, terrain right now is pretty complicated. so that it's not entirely clear to me that given the list of priorities that the current amendment wants to work on, that the cfpb would be at the top of that list. >> any thoughts? >> you know, i think in terms of detail currencies, very very positive. i think they're a must, especially to increase efficiency of central banks. but bitcoin, i'm not sure. so i think central banks have to, you know, learn how to

operate and regulate these currencies. it dramatically is going to improve the efficiency of the whole operation of money in the countries. but they have to work on a clear governance of those little currencies. and that's the problem with bitco bitcoin. if you go to a central bank in mexico or brazil and you talk to them about the currencies, you talk to them about bitcoin, they say automatically no, because they don't have any control of that. so creating the right currency is going to be complicated. but to create governance, you need to tell them to do that. you need the whole financial community to understand that so you have to again go back to my point of talent. if people do not understand what blockchain is, nobody is going

to support any initiative of moving to little currencies with the central bank, or very very few people. so in order to create that trust, we need people to understand the power of the new technologies and the security and the implications. and also the regulation. we are moving from static regulation to dynamic regulation. and that dynamic regulation is going to be based on algorithms. today, you know, a simple revelation in every part of the industry. the new economy is based on algorithms. the administration is going to be based on algorithms as whoel. you as a regular later is going to issue anning ing ning ing n regulation if you don't know what an algorithm is. we have to work hard to training

people in the new economy with these new tools. >> let me add a quick clarification, when we're talking there is sometimes opportunity for confusion. digital currency you could con strast th contrast that with paper. it's certainly possible to have to conceive of digital currency that is not distributed in the way that bitcoin is. digital doesn't automatically mean it has to be bitcoin. it is certainly true that bit ca coin is a class of digital currency. i think of them differently in the sense that i think that the governance issues relating to centralized digital currencies, right, in other words an entity like a government could issue its own currency and do it in a centralized way and still do it digital, that is very different from a government standpoint than a truly distributed currency like bitcoin. the other thing about bitcoin,

i'm a big believer in the potential of the blockchain. but i also sometimes see its potential overplayed. i don't think that blockchain is the solution to all problems. and so there are use cases where it's a great solution and then frankly there are some where it's not the right solution, even though there's some hype that suggests that it is. with that there is a woman in the back who had her hand up and we'll go to her. and then after that -- let's go to the woman first. >> hi, i'm from the philippines. one of the indicators mentioned is axis and usage. and those are two different distinct issues. it's so much easier to get signed up but not easy to get them engaged in the system. and part of that is what you were saying about trust and behavior psychology. for the 2017 report how good are

the countries in addressing this gap and in the experience what had been the trend to make sure that people below the poverty line are not only into the system but engaged and actively using it to leverage. >> the columbia question -- >> this is not only about again giving access to technology or the financial sector. also encouraging other applications using those financial services. that's key. so like ecommerce. how you really encourage the growth of ecommerce. how you develop applications for small companies so that they improve their productivity. and part of that is using those financial services. so the financial services by themselves are just basically payment systems by themselves. they don't move the needle. so you have to create the whole ecosystem of applications where they just play the role of

moving the money. but there is going to be other values from those applications. >> axis versus usage? >> i agree with the question. that's very -- has really been an issue. you can have a lot of access and we've shown increasing access. but typically the numbers are that about, you know, one-third of the people who are actually signed up, you know, use accounts and so there's a pretty big dropoff. so that means that for whatever reason they're not finding value and as diego says, it's about building value. but part of building value is really understanding what these customers need. and these customers are going to be very different from customers in higher segments. and typically the way financial services react to new customer segments is they take an existing set of products and try to move them downmarket and

without doing the research that allows you to know what the needs are and how you meet those needs appropriately. >> i guess i'll just add that you know, the good news is that we've sort of wised up, six or seven or eight years ago you would have found some people focused maybe overly on potenti potential access, the number of accounts created as a metric. but very few people in the financial inclusion community today would use that number alone as any sort of a global success metric. so what we often look at is for example, if you've done at least a certain number of transactions per month, then it sort of counts, you know, more than if you simply have an account that you've never used. it is a core question. so thank you very much. i guess the gentleman up here and then we'll go to the right and then to the woman in the back. sir, to your right. >> thank you.

i'm a consultant on legal and regulatory reform for ifi. another core question. i think diego suggested that high margins were an obstacles to finance. but has the experience been that all of these ngos in particular with what would be relatively high rates of interest for advanced countries make access to finance possible? in recent years we're talking about 2.5%, 3% interest a month and that get funders to fund microfinance. >> what i said was that the installation of banking was happy with the high margins. of course, you know, in an open economy, you know, you choose what business you want to be in. and but like what we're seeing, you know, when financial

inclusion is growing in places where the new companies are growing, you know, either they come from entrepreneurs or from te telecom operators or when they say let's tackle these new markets. as an example, i talked about wnb. let's innovate. let's join forces with the company. and that combination of the banks and the new commerce is very very important. they know the regulation. they know the business. so they have a lot of value to really build together. so companies like, banks and then columbia, they're working on creating alliances with this new commerce to tackle the base. and that's been successful. >> no, i would, you know, i

would agree in a couple of different ways with diego. first of all, i do think that at least globally it's very difficult for banks go downmarket and really service those people in a way that makes sense for them in a p and l perspective unless they're willing to engage and partner with people who can bring the cost of service down. you're doing a lot of little transactions. it's frequent. you know, if it's not digital, there's a lot of hand holding. and so that makes it expensive. and particularly if you're not going to tweak your product to really work for poor people, then it's going to seem very expensive. like the cost is going to seem extremely heavy. i think where there have been some innovations, actually east

africa. kenya. equity bank, for instance -- which is interesting. it's an interesting experiment. they're getting rid of atms and forcing people to use the mobile money, you know, products. and so that will be interesting to see how that works. clearly what they're trying to do is drive demand for that and try to figure -- and they've actually created that product for poor people. so i think, you know, it will be interesting to see how that works out. but you do have to create those products for poor people in order to figure out how you're going to work the margins and then you to figure out how you're going leverage technology partner to drive down costs. so i would agree with you 100% on that. >> so the gentleman in the same row. >> yeah. i used to be head of policy for

the ip industry in india. just before my question, couple of comments. we have found discussing the issue of inclusive finance is we need to distinguish between financial inclusion and inclusive finance. sfie sometimes it can actually be harmful. this is where one comes into -- into detail. you to get back into some of the fundamentals of when -- even issues like trust. a lot of people in countries like india and all over developing countries trust banks and financial middlemen less than they trust the mobile phone. so our feeling that in europe they don't trust the mobile phone, no. it's the other way around. it comes back to what you've just said, which is that the existing financial institutions are not geared and not interested generally to make the

change. and in india we've been trying for 10, 20 years and it was only when the new people just sort of two incomes or whatever grew that we've got atms and others. but i won't go into detail. we can talk later. my question to you is to what extent is the issue of identity, digital identity a critical factor in finance -- inclusive financial, financial inclusion. in india we've now put 1 billion people with biometrics and it's very controversial. on the other hand, should everybody have a social security number? it's really as fundamental as that. to what extent has that been a con strant in provistraint in p inclusion or not. >> i think it's been a huge con

trant, i constraint. in many countries people are very mobile. they don't have fixed addresses. don't have identity papers. all of those things that are required by banks to satisfy, know your rules et cetera. it becomes a real barrier. so i do think it's extremely significant. and i can't stress that enough. and you know, so i do think it's important to, you know, innovate in ways that will allow people who have those characteristics and that profile basically, which is that they're transient and don't have documentation to be able to sign up for bank accounts and other kinds of financial accounts. yeah, i agree. >> it is win of the main opportunities to grow financial inclusion. you know, the detail of identification, it is a way to track a person's life, you know,

to understand what they do if they are trustworthy or whatever. not only a person. an asset as well. which is critical. you know, most of the assets -- today. that that's opportunity. so if you give a loan for a person with a premium to buy a motorcycle or a car, you know, having detailed track of that asset is also important for the financial sector to increase the productivity of the financial sector. so i think it is critical. and there are different ways to really grow the intel id. one is which india is doing, a traditional initiative led by the government. so moving everybody. or -- but i think one faster way

to do it is to refinance the sector. so joining forces between the government and the financial sector to create a common platform of the intel i.d. >> and i can't help but respond to that when you use phrases like it's an easy way to track people's life. there are some people who would not necessarily celebrate that. >> that's true. >> just, it's a double edged sword. so you can imagine very reasonable fears, you know, of not wanting to be in a system like that if that information could be misused. i think we had a question in the back. >> over here, i think we had david. >> okay. >> hi, david mcgene. one of the areas that digital has not achieved is consumer to merchant payments. paymen payments may be made to the consumer digitally to get the customers or citizens used to receiving digital payments but then they go to -- the citizens

go to the agent or to an atm and go to the merchant. that seems like an undo cost and friction of handling cash. but somehow there hasn't been a demand to make electronic payments. do you see that as an issue in financial inclusion and if so, what can be done about that? >> i'm going to say i think it's an issue for ensuring that access to finance grows in terms of the number of services utiliz utilized, right? so i think there are a couple of different points. you need to have an ecosystem of merchants who are willing to obviously use the system. and in order to do that you have to have a platform, transactional platform that people can plug into. and in some places that exists and in some places it doesn't exist. in some places it could exist but it would be expensive.

and that kind of thing obviously, like a switch platform or some sort of platform like that has to be ironed out. i think that with the growth of ecommerce, we're starting to see movement in some countries. as you know, david, china and increasingly india are sort of at the top of that list. but i would imagine that kenya will come on board with respect to ecommerce. so i think there will -- you will start to get that critical mass of businesses that are willing to, you know, take payments online. and i think people will become more comfortable with that over time. but again, i'm not sure the ultrapoor or really poor people will do that because i think really poor people really cash is king for them. and i'm not sure cash is going to be out of the system as a result. >> that's exactly what happened

in colombia. we saw that 90% of them were cashed out in the next two weeks, you know, like, you know, massively in the first three days. so we understood that we needed to work with the local merchants, with the local mom and pop shops so they can have application using that money, that electronic money. but one main barrier here is the tax money. so those merchants are afraid of being taxed, you know. because this is an informal economy. you have to be really smart on what kind of applications so that they really feel comfort that th comfortable that they're not going to move into additional costs. even the tax costs. so we treated a lot of public/private partnerships to create the applications for the

merchants. we moved from 7% of smes connected in colombia to 76% of them connected. but the way we did it was apt creating the applications for them. we work with foot companies, with beer companies, all kinds of companies that we're doing business with those merchants to create an ecosystem. we improved a lot. we still have a lot of room to improve but we're moving in that direction. >> i'm really glad to see a question from this side of the room. i was worried i was going to be accused of bias towards one side of the room but now we've kwgot question. >> i hope it's worthy. so i hear a lot of measures about liquidity. how many transactions, you know, and that can be good or bad depends on what the results of the transactions are. i wonder, are there any

intermen experiments with those of working capital or building credit. could you have an account with 20% that they have to keep in for a while and it's put in real world assets that could be agated, a big index and people could develop collateral and then there could be another measure. does that make sense? >> in the u.s. there are products like that. interestingly in markets where you have a lot of payday lending. worked on products where you keep a certain paamount of the money in, you pay back a certain amount on the credit card, let's say, for instance. you build a credit card, increase your credit score as a result. and you can utilize the savings component as collateral for loans, et cetera. so those products do exist in

the u.s. there are other payment cards, for instance, that have something similar. prepay cards that have a component where you can save money. i think there is a recognition that just moving money in and out is not, is not the goal of financial inclusion. the goal of financial inclusion is obviously financial security. you can always have participation, et cetera. so there are, i would say, individual companies that have tried to provide those kinds of products that are useful for people who are trying to build credit or build savings. >> i'm seeing new companies doing that in the region. and that's key, again, of this woorl world. we have to let them grow and help them grow as well. so in the case of latin america, according to a regional report, there are more than 700 new

companies. and most of them are in this new alternative finance or payment systems. but there are like 15% or 20% of them, like a bunch of them, working on a how to create new ways of building credit records. and i think again, part of this is let them grow. let them grow. it is very difficult for regulators, very very difficult for the regulators to do that. but one way is creating kind of sun boxes. so let's create an environment where they can grow and we have kind of a special or flexible rules for you to grow. and once you have grown, you have a little bit of a maturity. everybody understands the business, the regulator and a it

could be issued to regulate the business. >> you put your finger on an important issue of how to measure these things. one thing people measure the existence of accounts because it's easy. how accounts are there. measuring transactions is a little harder. and then the sophisticated measures it's harder to get the data. there's not a one-to-one correlation. you can imagine someone who is very included who almost makes any payments from an account. they deposit things into the account. the balance goes up and they're savings, not actually spending. but if you decide because this person hasn't made a payment from the account in the last 60 days they're not included, that would be precisely the wrong conclusion. so your question gets at, by definition, impossibly to serve competition what do we measure. we've measured the easier things

but not always the ones that correlate with what we want. it's a great point. we have time for maybe one or two more questions in the back, please. >> thank you. i'm with fairfax county government. my question kind of follows on the data. you had mentioned early on the number of unbanked or underbanked people across the country in the united states. i'm wondering, is there a reliable source that if like a local government was interested to kind of know where their community was so maybe they could target actions in a certain way that they could drill that number down in a reliable way? >> you know, i'm not sure of more regional statistics. but the fdic is really the one that has traditionally done a study around unbanked and underbanked numbers in the u.s.

one suggestion i could make is that there is -- several cities have come together, cities for financial empowerment, which have coordinated their approach to financial inclusion. and so the main organization is actually based in new york city. i think it's co-chaired by somebody in new york city and then the county, the san francisco treasurer as well. and so that organization should have some statistics on the more regional level or at least the metro level. so you might be able to plug in there. >> one more last question and then we'll wrap it up. >> hi, i'm judy cochran with

s.i.l. international. and i really appreciate what camille had to say about addressing the ultra poor. and around the world, those who are the poorest of the poor often speak minority languages that aren't recognized by former financial institutions. and i wonder to what extent did this report take language into account with regard to inclus n inclusion. >> yeah, so i may be -- i'm not sure -- the short answer is we didn't pay a lot of attention specifically to the issue of language with the understanding, though, that in many places the financial services are developed with specific knowledge of the local languages. but as you say, in many of these communities, there are minority communities who speak languages outside. and that is clearly a barrier to

inclusion. and so that is another challenge. it's a great point and i certainly wouldn't claim that we've really addressed it. but it's a terrific point. in many many countries in the world we have this. great point. okay. i just want to express my thanks to our panelists and to all of you for really terrific set of questions from the audience and a set of perspectives from our panelists. we welcome any of you to go look at the report on the brookings website and thanks again for taking time to be here today. [ applause ]