Blockchain’s impact in fostering global financial inclusion: PwC

Blockchain technology is disrupting the global financial system and may help increase access to essential financial services for approximately 1.4 billion adults who lack a financial account.¹ As companies look to measure their social handprint — or their impact on society — quantifying the impact of their products and services on financial inclusion becomes important to address the changing technology landscape.

Our global financial inclusion framework introduces a structured methodology for financial service providers to use to help assess the ability of their solutions to foster financial inclusion. The framework enables businesses to measure gaps within existing financial solutions and identify strategic opportunities to help strengthen the capabilities of their offerings across four dimensions of financial inclusion:

Access: The ability of individuals, households, and firms to use available financial products and services – given constraints of price, distance, and time/effort
Quality: The appropriateness and suitability of the financial products & services, including how they are delivered and whether clients are aware/capable of using them
Trust: The degree to which customers can rely on digital financial products and services to be secure, private, transparent, and compliant with applicable regulations
Usage: Whether and how customers use financial services; based on observed consumption patterns and customer behavior

The role of blockchain in advancing global financial inclusion

For some financial solutions, blockchain networks may be a catalyst towards achieving a positive social handprint while also driving sustained business outcomes. In many cases, blockchains can be seamlessly integrated with traditional financial services to expand access to the digital economy. Our analysis of blockchain-powered solutions found that that blockchain technology demonstrated the ability to help fill in gaps of traditional solutions for financially underserved populations in the following ways:

How blockchain addresses financial inclusion barriers

Access

1. Increasing access by reducing costs: Affordability remains a key barrier for many financially underserved. A sample of 12 blockchain-powered payments solutions assessed across all jurisdictions offered transaction fees of 0-1% for cross-border remittances compared to average fees of 2.7-3.5% for traditional finance institutions (fee presented for sending money between the U.S. and studied markets).²

Quality

2. Providing innovative solutions that meet local needs: Financial services should be tailored to the local context to address specific barriers to financial inclusion. Blockchain technology can offer new opportunities for innovative solutions. For example, stablecoin-based wallets in Argentina are providing savers with a digital asset that hedges against inflation.

3. Increasing speed of payments: By reducing the number of intermediaries and simplifying transfer processes, decentralized public blockchain networks can settle cross-border payment in seconds. This speed provides significant value to the financially underserved, who need quick access to funds for daily and emergency expenses.

4. Providing interoperable solutions for businesses and individuals: Financial solutions often do not integrate across platforms, technologies and assets, posing barriers for businesses and individuals to provide or access different payment or savings services. With protocols establishing a universal set of rules for all on-network transactions, public blockchain networks can enable interoperability between on-network applications and digital assets.

Trust

5. Improving security and privacy by design: Distrust in financial institutions is a significant barrier to financial inclusion, often due to inconsistent security and privacy feature implementation by financial service providers. Utilizing advanced cryptography and secure consensus protocols, public blockchain networks are designed in such a way that makes it nearly impossible for malicious actors to tamper with network data.

How financial services providers can measure their social handprint

Building off of our blockchain sustainability framework, which enables organizations to understand how blockchain can decarbonize their technology stack, our global financial inclusion framework enables businesses to measure the capabilities of their financial products and services against a structured set of parameters and metrics that contribute to financial inclusion. The financial inclusion framework’s assessment process consists of the following steps to help organizations identify and address opportunities to build more financially inclusive solutions:

Coupled with PwC’s ESG experience, both our global financial inclusion framework and blockchain sustainability framework can help financial services providers design for inclusion and track outcomes to improve their social handprint and measure business performance.

Download Download: Enhancing the social handprint of financial service providers

Citations:

_{1. World Bank Group. (2021). Global Findex Database 2021. Retrieved August, 2023, from https://www.worldbank.org/en/publication/globalfindex/Data}

_{2. The team took a sample of 12 applications operating in Colombia, Argentina, Kenya, and the Philippines for which transaction fees were publicly disclosed. Based on publicly available data and conversations with customer service operators, the companies possess 0-1% fees when evaluating cross-border remittances from deposit to withdrawal. This was compared to the World Bank’s “Remittance Prices Worldwide” database for sending $200 from the US to the respective countries using traditional finance institutions. Colombia possesses a fee of 3.5% ($7.08/$200), Kenya possesses a fee of 2.7% ($5.35/$200), and the Philippines possess a fee of 3.3% ($6.65/$200). No data was available for Argentina, therefore we assume Colombia can be a sufficient proxy. (Note: fees do not include network provider, bank, or foreign exchange fees)}