May 11, 2022
How do you solve the biggest, hardest problems in the world? Usually, we just don’t. They persist. Today, though, we live in an age that’s putting powerful new technologies into our hands, opening up ways to make seemingly impossible solutions suddenly, theoretically, possible – if we can put them to use.
These are the challenges that get taken up by the Bill and Melinda Gates Foundation. In financial services, the foundation’s goal is to achieve full financial inclusion by bringing all the excluded people in the world’s emerging markets into the formal financial system… thereby unlocking massive gains in human wellbeing, everywhere. My guest today is a leader in that work. He is Kosta Peric, the foundation’s Deputy Director of Financial Services for the Poor, and in this episode, he talks to us about the art of how to do this uniquely difficult type of problem solving.
If you want financial inclusion, Kosta says, your first step has to be to bring everyone into the payments system, because that is the foundation layer for everything else, and because, as he says, it’s expensive to be poor and to have to transact in cash. However, changing payments infrastructure is hard, hard work. These are big, complex, entrenched systems, and they are intricately interwoven with other big, complex, entrenched systems. They also operate daily in nearly everyone’s life. You can’t shut them down while you overhaul them. And it all gets harder when you’re working in countries that have limited resources to work with. Even where new technology can clearly make things better –- can help everyone better, and can even help people who are excluded today – it’s hard to put it to use in the real world.
Kosta is the perfect person to solve for all this. In our conversation, he describes his former role as a technology executive at SWIFT (which is much in the news today regarding sanctions relating to the war in Ukraine). He figured out there how to innovate inside a complex payments system, and then he moved on to the even harder task of remaking payments systems from the outside, at Gates. Today, his projects are rewiring payment architecture throughout large swaths of Africa and Asia.
Kosta describes how the Gates Foundation operates, finding on-the ground stakeholders who decide what they need, finding the key gaps, and filling them. He explains Gates’ process of building open source tools that they call “digital public goods.” These tools, because they’re open source, can then be adopted by anyone, anywhere, at no cost, so that solutions can spread widely and can be scaled up easily. Kosta likens digital public goods to a can of tomato paste, which, with other key ingredients added, can form the basis of a meal. He explains how these systems grow through trust and through network effects, with philanthropic investment plugging market gaps that, when filled, allow the private and public sectors to solve enormous problems.
He gives examples of Gates payments solutions built on this model. One is MOSIP, based in India and working on digital identity. Another is Mojaloop, aiming to make payments easily interoperable and working regionally in Africa. And you’ll enjoy his story of how he felt when he was pitching a new project to the Governor of the State Bank of Pakistan and what has happened since, on track now to help 200 million people.
Our discussion covers a lot of ground. Kosta talks about the need to make identity authentication digital, especially if we’re serious about financial inclusion for women. He shares his thinking about the potential impact of central bank digital currencies (CBDCs), and also defi. He tells me about creating his first NFT. And he gives us his diagnosis for why financial inclusion strategies by banks always, as he puts it, “fail miserably.”
The technology already exists to massively mitigate all the problems we have in financial services and financial regulation. The hard challenges aren’t about technology, but rather about how to fit it into our human frameworks – our organizations, our legal systems, our politics, our cultures, our incentive designs, our habits of mind. The key to changing big things is to find practical ways to make the human parts work. Kosta wrote a book on how to do this called The Castle and the Sandbox. If you want to change the world, or even if you just want to help your own organization innovate, you can’t do better than to learn from Kosta Peric.
More about Kosta
A technologist whose interests lie at the intersection of technology, payments, and innovation, Kosta is deputy director, Financial Services for the Poor, at the Bill & Melinda Gates Foundation. He leads the Level One Project initiative to foster deployment of digital payment and identity platforms to serve the poor.
He is Chair of the Board of the Mojaloop Foundation, which hosts the Mojaloop open-source software making it easy and free to interconnect payment systems. He serves on the board of the InterLedger Foundation, the home of the open protocol for sending payments across the internet.
Previously, he was the co-founder and leader of Innotribe, the SWIFT initiative to enable collaborative innovation in the financial industry. At SWIFT, he was also the chief architect of SWIFTNet, the backbone worldwide secure network currently connecting 8,000 banks and 1,000 corporations, and servicing daily the world economy.
Kosta is the author of “The Castle And The Sandbox”, a book explaining how to foster innovation in established systems and companies.
More for our Listeners
We have terrific shows coming up, starting next with Sigal Mandelker, the former Treasury official who is now at Ribbit Capital. We’ll talk about Minority Depository Institutions with; Nicole Elam and Robert James of the National Bankers Association. We’ll have Circle CEO Jeremy Allaire coming back. And we’ll have Sunayna Tuteja, the first ever chief innovation officer of the Federal Reserve System – among others!
Last week AIR announced our plans for the ‘Anticorruption Solutions through Emerging Technologies (ASET) Global TechSprint.’ The event will be hosted by us and by the Bureau of International Narcotics and Law Enforcement Affairs (INL) of the U.S. Department of State, as well asthe Office of Terrorist Financing and Financial Crimes (TFFC) of the U.S. Department of the Treasury. The ASET TechSprint will bring together thought leaders from government, international organizations, law enforcement, financial institutions, fintech, academia and civil society to explore bold, practical ideas for using technology to combat corruption. Join us! We are looking for people to participate on a sprint team, volunteer as an expert, or simply register for the Inspiration Community to observe the action.
There are many exciting conferences this sprint. Make sure to join David at LendIt Fintech in New York on May 25! Next month I’ll be giving a keynote at the ABA Regulatory Compliance Conference, and I’ll also be back at the RegPac RegTech Innovation Summit. For those of you in or near Zurich, I hope to see you in June at the Point Zero Forum, a unique gathering hosted by the Swiss government and Elevandi, a nonprofit entity created by the Monetary Authority of Singapore (MAS) (I serve on Elevandi’s board.)
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