June 30, 2023
Among the people I admire most in the financial ecosystem are the ones who are modernizing infrastructure. They tend to be the unsung heroes, the ones who do work that is mostly invisible, but that has to happen in the background if we’re going to reap the benefits of the exciting innovations that win everyone’s attention. People all over the world are working, usually with very little fanfare, on setting data standards, creating new identity authentication tools, and figuring out how to share data securely across borders — to name just a few examples.
These efforts are like the storied infrastructure projects of old, the ones that have laid down the pipes for modern plumbing, or built the railroads and the cross-country highways, or strung the electricity transmission lines. Without these efforts, most of the other things we want to have in our lives won’t work.
Of all the digital infrastructure efforts underway in finance, arguably the most critical is the effort to update and rationalize payments systems. My guest today is Holti Banka, who is leading key parts of the World Bank’s initiative to make payments interoperable and fast.
We’ve done many Barefoot Innovation episodes on examples of how payments are transforming. From the invention of mobile money and the invention of Bitcoin, to the growth of cryptocurrency and the emergence of stablecoins, to the worldwide exploration of Central Bank Digital Currencies, the U.S. Federal Reserve’s fast payments initiative, and the innovation work of the Bank for International Settlements, to efforts like Mojaloop and the Gates Foundation’s payments initiatives in Africa, to the initiatives of the major cards networks, and much more — people are working everywhere on modernizing payments.
Among them, a subset — notably including the World Bank — is driving for payments reform with one specific goal: expanding financial inclusion. Years ago, the advocates for global financial inclusion — organizations like the World Bank, the UN, the International Telecommunications Union, the Gates Foundation, the Omidyar Network, and others — had the insight that payments system access is the foundation for full inclusion. They realized that, when every adult can connect to the payments system, they will be able then to access the rest of the financial products that people need, from credit to savings to insurance.
For centuries, of course, this kind of full connectivity was inconceivable. Banking services were delivered mainly through bank branches, which are expensive to build and operate, and other financial services had similar distribution methods. The poor were served by alternative providers, or not at all. Full access became possible a few decades ago, thanks to a non-financial technology innovation, namely the mobile phone. The World Bank established an initiative to enable every adult in the world to access a bank account or its equivalent by 2020. The effort fell short, but hundreds of millions of people have come into the formal financial system as a result of these efforts.
Meanwhile, the payments world overall has evolved into a complex patchwork of systems worldwide, with different forms of payments (cash, checks, credit cards, debit cards, wire services, remittances, crypto coins, and much more.) Different methods, speeds and ecosystems for clearing the transfer of funds, very complex risks, and massive points of friction and cost.
The World Bank is a key player in trying to rationalize this system. Holti’s project is an initiative of the Bill & Melinda Gates Foundation (which also funds our work at AIR on strengthening consumer financial protection in emerging markets). In our conversation, he describes the launch of their new Project FASTT. He explains the principles that will make fast payments work, including being open to both banks and nonbanks, making funds available instantly, and making the system work 24/7. He talks about the need for access to emergency funds and the impact on cross-border remittances. He tells us that central banks are the key players in making this global change happen. He also explains why financial inclusion goals require that payments be not only accessible, but fast too — something that is not intuitively obvious to many people (including, originally, to me). And he shares new, critical milestones his team has achieved, just this summer, on this indispensable work of building infrastructure.
Efforts like this take years. Again, they don’t tend to win the headlines, and yet, without them, none of the other technology changes we want to see can reach its full potential. That’s why I’m so glad to help shine a spotlight on the World Bank’s work.
Holti Banka is a Senior Financial Sector Specialist with the Payment Systems Development Group in the Finance, Competitiveness & Innovation Global Practice of the World Bank, based in Washington DC. His work covers different aspects of retail payments including fast payments, fintech, CBDC, national payment strategies, cost measurement of payment instruments, payments infrastructure interoperability, among
others. Holti has published in several academic journals, has spoken in several international conferences, and is on the Editorial Board of the Journal of Payments Strategy and Systems. He received his PhD in International Development/Economic Policy from the University of Maryland and his BA in Economics and Mathematics from Williams College.
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Our podcast queue is bursting with great new shows. We have an episode coming up with Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition. We also will be talking with Jessica Rusu, Chief Data, Information & Intelligence Officer of the Financial Conduct Authority in the U.K. We will have Lisa Rice from the National Fair Housing Alliance, Paula Hunter from Mojaloop, and many more. If you missed hearing our 200th episode, please do listen to it, and watch for a follow up show that will dig more deeply into the key themes our guests have raised.
Our AIR team has multiple TechSprints in the works. You can register to observe the July TechSprint with the U.S. Federal Housing Finance Agency (FHFA). We’re also co-hosting a July sprint with the Cambridge Center for Alternative Finance on how financial regulators can use AI-enabled chatbots to gather and analyze consumer complaints. And we have more sprints in development, including one on generative AI and a second in our series with the U.S. Department of State on anti-corruption. Exciting times!
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