A Fintech future for all? (SOMO)

Arguments

Maricá is implementing social policies based on technologies and institutional arrangements around the concept of solidarity economy

Supporting facts:

• Maricá is located in front of the biggest oil wells in Brazil

• The city receives high amounts of oil and gas royalties

• The city implemented social policies such as the public transport company providing universal free public transport, the citizenship basic income program, and the social currency Mumbuka

Topics: Solidarity economy, Social policies, Municipality of Maricá

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Maricá is experiencing a trend of economic growth and improvement in social conditions

Supporting facts:

• Between 2014 and 2021, the municipal tax revenue, without oil royalties, grew by almost 200%

• The number of formal jobs went from almost 9,000 in 2006 to more than 27,000 in 2021

• Through household surveys, they identified a reduction in poverty measured by the multidimensional poverty index (MPI)

Topics: Economic growth, Social conditions, Public services

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Vision for decolonial digital future involves a public project centered on local needs and people

Topics: Decolonial digital future, Technology, Public project, Local needs

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Report

Maricá, a city in Brazil, is actively implementing social policies rooted in the concept of solidarity economy. These policies aim to foster community, fairness, and inclusivity. The city has introduced initiatives such as universal free public transport, a basic income program, and a social currency system called Mumbuka.

Maricá’s strong economic growth is supported by significant oil and gas royalties. Situated near Brazil’s largest oil wells, the city benefits financially. Between 2014 and 2021, municipal tax revenue, excluding oil royalties, grew by almost 200%. This increase in revenue has allowed the city to invest in various sectors and projects.

The socio-economic landscape of Maricá has improved over the years. Formal job opportunities have increased from around 9,000 in 2006 to over 27,000 in 2021. This positive trend aligns with economic development and has reduced poverty as measured by the multidimensional poverty index. Maricá has a visionary plan for a decolonial digital future.

The plan emphasizes a public project that addresses local needs and aspirations. By focusing on marginalized populations in Maricá and Brazil, the aim is to bridge the technological gap and ensure inclusivity for all. Maricá serves as an example of how social policies, economic growth, and technological advancements intersect to create an inclusive and prosperous society.

It prioritizes solidarity economy principles and benefits from substantial oil and gas royalties. Through initiatives like universal free public transport, a basic income program, and a social currency system, Maricá is actively working towards reducing inequalities and improving the well-being of its residents.

Arguments

Fintech platforms like M-Pesa and Time Bank, while successful, may potentially cause detrimental impacts on African economies and societies

Supporting facts:

• Studies suggest that M-Pesa’s impact is less positive than thought, with problems including increased household debt and massive dividend flows to the UK

• Time Bank’s entry into the digital microcredit field has resulted in shifting local demand causing problems for local establishments and exacerbating household over indebtedness

Topics: Fintech, M-Pesa, Time Bank, Digital Colonialism

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Mumbuka Bank facilitates payments, loans, savings, and money transfer

Supporting facts:

• Mumbuka Bank is a publicly community-owned fintech platform

• It issues a digital currency, the Mumbuka, tied to the Brazilian real

Topics: Mumbuka Bank, Maricá, Digital Currency

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Investor driven fintech platforms have potential to exacerbate problems

Supporting facts:

• Over-indebtedness problem created in Kenya

• Massive over-indebtedness problem created by microfinance institutions

Topics: Microfinance, Investor driven fintech, Over-indebtedness

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The digital colonial model is based on exploiting technology, not labor

Supporting facts:

• The digital colonial model hardly needs any labor

• Most of the manipulation of the data in this model is done back home

Topics: Digital Colonialism, Natural Resources Extraction, Labor Exploitation

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A huge amount of value is created by switching over to finance as a digitalized service

Supporting facts:

• Most of the manipulation of the data is done in the areas like Silicon Valley or London or Frankfurt, Shanghai or Beijing

Topics: Digital Finance, Economic Value

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Countries could build their own locally based fintech platforms and reinvest the generated value

Supporting facts:

• The complexity of the technology is not a barrier

• The huge amount of value liberated can be reinvested into building economies

Topics: Decentralization, Fintech, Economic Development

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Report

Fintech platforms like M-Pesa and Time Bank, while successful, may potentially have detrimental impacts on African economies and societies. Studies suggest that M-Pesa’s impact is less positive than originally thought, with problems including increased household debt and massive dividend flows to the UK.

Similarly, Time Bank’s entry into the digital microcredit field has resulted in shifting local demand, causing problems for local establishments and exacerbating household over-indebtedness. One of the main concerns raised is the concept of “Digital Colonialism.” Investor-led fintech platforms may constitute a form of ‘Digital Colonialism’ and may undermine the progress toward sustainable development in Africa.

These platforms are designed to benefit the investors and the countries that own these fintechs. Former natural resource-driven colonialism and current fintech platforms show similarities in terms of profit generation, highlighting potential exploitation of African economies. Nevertheless, there are positive examples such as Mumbuka Bank, a publicly community-owned fintech platform.

It issues a digital currency tied to the Brazilian real and facilitates payments, loans, savings, and money transfer. Unlike profit-focused fintech platforms, Mumbuka Bank aims to support local citizens and develop the local economy. Its stronger understanding of local communities allows for better identification of potential businesses for support.

Another concern is the failure of brick and mortar microfinance due to commercialization, deregularization, and penetration by investors seeking high returns. The investor-driven fintech platform is on a similar trajectory, resulting in problems caused by over-indebtedness. Furthermore, microfinance institutions have created a massive over-indebtedness problem in Kenya.

These issues highlight the potential for investor-driven fintech platforms to exacerbate problems. The digital colonial model is based on exploiting technology, rather than labor. It allows foreign investors to take the majority of the value generated, under the cover of helping the poor.

This model hardly requires any local labor, and foreign investors are usually from major economic centres like Silicon Valley or London. Exploiting technology rather than labor raises questions about who truly benefits from the value created through fintech platforms in Africa.

However, the value generated by adopting finance as a digitalized service can be used as a public service for rebuilding or building up countries. Similar to education and health being considered public services in many countries, digital finance has the potential to become a public service.

Using the value generated for the development of countries helps not only in resolving poverty but also in building a stronger economy. To address the potential negative consequences and ensure a more equitable distribution of benefits, it is suggested that countries build their own locally based fintech platforms and reinvest the generated value.

This allows African countries to have greater control over their financial systems and direct the generated value towards their own economic development. Finally, the Maricá model and cooperative fintech platforms are presented as alternatives to the digital colonial model. These models are currently under consideration and review.

Choosing these alternatives may prevent taking the wrong path and facing negative consequences. In conclusion, while fintech platforms have shown success, there are concerns regarding their potentially detrimental impacts on African economies and societies. The concept of digital colonialism is a significant point of concern, and investor-led fintech platforms may undermine sustainable development.

However, examples like Mumbuka Bank offer a positive alternative. It is important to consider the potential long-term effects and explore alternative models like the Maricá model and cooperative fintech platforms to ensure more equitable and sustainable development in Africa.

Arguments

Predatory lending and over-indebtedness are among the challenges of fintech

Supporting facts:

• The use of ‘pay now, buy later’ applications can lead to over-indebtedness

• Predatory lending practices prevalent in the sector

Topics: fintech, debt, lending

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Fintech companies engage in aggressive data gathering for profit-making services

Supporting facts:

• Data from social media and other sources used for credit scoring

• Driving behavior used to calculate insurance premiums

Topics: fintech, data privacy, big data

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There is a lack of public fintech infrastructure

Supporting facts:

• Even the proposals for central bank digital currencies are distributed through banks rather than public infrastructure

Topics: fintech, public infrastructure

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Environmental impacts of fintech are often ignored

Supporting facts:

• Huge amount of servers required for cloud services

• Fintech encourages easy consumption and investment, contrasting the slow decision-making required for sustainable finance

Topics: fintech, environment

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Need for increased intervention by authorities in fintech applications

Supporting facts:

• Over-Indebtedness and fraud occurring even in higher income countries due to fintech applications

• Difficulty for the authorities to understand and manage the consequences of fintech applications

Topics: Fintech, Digital colonialism, Governance

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Report

The challenges of fintech are multi-faceted and encompass various areas. One challenge is the prevalence of predatory lending and over-indebtedness. The use of ‘pay now, buy later’ applications can lead to individuals accumulating excessive debt. Moreover, predatory lending practices are prevalent in the fintech sector, exacerbating the over-indebtedness issue.

This negative sentiment is reinforced by the evidence provided. Another challenge highlighted in the analysis is the aggressive data gathering by fintech companies for profit-making services. Data from social media and other sources are used for credit scoring, and driving behavior is used to calculate insurance premiums.

This raises concerns about potential privacy breaches and the exploitation of personal information. Furthermore, the lack of public fintech infrastructure is seen as problematic. Even proposals for central bank digital currencies are distributed through banks rather than public infrastructure. This suggests that the accessibility and inclusivity of fintech services might be hindered by this lack of public infrastructure.

Environmental impacts stemming from fintech are another concern. The massive amount of servers required for cloud services has environmental consequences, such as energy consumption and carbon emissions. Additionally, fintech often encourages easy consumption and investment, which contrasts with the slow decision-making required for sustainable finance.

These findings suggest that the environmental impacts of fintech are often disregarded. The analysis also posits that more cross-border and cross-sector cooperation is needed to address the challenges of fintech. Many countries lack the capacity to regulate fintech adequately, necessitating collaborative efforts to establish effective regulations and supervision.

In addition, the analysis highlights the importance of democratic scrutiny and public awareness regarding fintech services. It argues that there is a need for increased intervention by authorities in fintech applications. Furthermore, it emphasizes the necessity of raising public awareness and facilitating democratic discussions on the impacts of fintech.

This would enable individuals to voice their concerns to policymakers. On a positive note, the analysis suggests that it is possible to avoid being dominated by big tech or fintech applications. European laws are given as an example of interventions in fintech that have been successful in preventing dominance and promoting a more balanced landscape.

In conclusion, the challenges of fintech include issues related to predatory lending, aggressive data gathering, a lack of public infrastructure, and the often disregarded environmental impacts. The analysis highlights the need for cross-border cooperation, democratic scrutiny, and public awareness to address these challenges.

Despite the concerns, the possibility of avoiding dominance by big tech or fintech applications is suggested.

Arguments

The dominant fintech platform model is a problem

Supporting facts:

• Milford’s presentation pointed out the harmful effects of fintech platform models contributing to over-indebtedness and profit-seeking behavior

• The Maricar model is pointed out as a potential alternative to this

Topics: Fintech, Digital colonialism

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Report

During the analysis, two significant issues were discussed by the speakers. Firstly, they highlighted the detrimental effects of the dominant fintech platform model. It was extensively discussed how this model contributes to over-indebtedness and profit-seeking behavior. Milford’s presentation specifically pointed out the harmful consequences associated with this fintech model.

The presentation also proposed the Maricar model as a potential alternative to address these issues and provide a more sustainable approach. The speakers also emphasized the need for a decolonial digital future. Nandini’s thought-provoking question, “what does a decolonial digital future look like?” shed light on the necessity of changing the current digital space.

The analysis underlined concerns about ongoing digital colonialism, highlighting the urgency to address this phenomenon and create a more equitable digital landscape. Overall, the analysis brought attention to the negative impact of the dominant fintech platform model, which leads to over-indebtedness and profit-seeking behavior.

The Maricar model was proposed as a potential solution to these issues. Additionally, there was a strong call for a decolonial digital future, signifying the importance of transforming the current digital space to combat digital colonialism. This analysis provides valuable insights into these pressing issues and sets a foundation for further discussions and actions towards creating a more inclusive and equitable digital environment.