Personal Challenges of Financial Nomads

struggling with money

Half the world lives without the benefits of financial services. Most of us don’t understand what it means to be a “financial nomad” – living without full access to traditional banking – but the costs are great.

To put it in perspective, globally there are 4.5 billion adults who are eligible for access to financial services, yet only 2.1 billion have taken advantage of this and established relationships with banking institutions. Most of these people have basic savings accounts that don’t offer debit cards, checkbooks, etc. – what I like to call non-transactional banking – which means limited access to low-cost money transfers and bill payment options.

Hard and soft costs are high – in the US where 70 Million Americans are financial nomads, their families spend as much on high priced financials services – overdraft fees, check cashing, bill pay, high priced credit -as they spend on food. This doesn’t count the soft costs including travel time, gas, stress. This burden is on families that are already struggling to make ends meet.

Why don’t these people have bank accounts when most of them have jobs? They many times don’t have enough money to maintain a minimum balance or pay for the basic servicing of an account. In addition because their living on a tight budget they are much more likely to bounce checks or need to use overdraft. All this means higher fees including getting into a spiral of excessive fees that makes the bank account too painful and expensive.

For example, Bank of America offers an eBanking option which includes a very basic, relatively easy to access account. However, it requires a $12 monthly service fee unless a client enrolls in paperless and self-service banking via a Bank of America ATM or online portal. This is simply a checking account, and to add a savings account costs another $10 in fees each month. Thus, it can cost over $250 a year just for the privilege of accessing their money. Add to this, overdraft fees and bounced check charges and the amount can be significantly higher. This is access prohibitive to the financial nomad who simply can’t afford the expense.

Then, of course there are geographical challenges. Not everyone lives in a large city where the nearest bank is just down the block. Many financial nomads live in rural areas that are 50 miles or more from the nearest bank. More true in developing countries like India, but even in the US banks are closing branches in economically distressed areas. Add in distrust of banks, lack of documentation and the cost of getting to the bank, and well, many simply forgo doing so.

For many financial nomads, these fees and barriers lead them to rely on less beneficial financial services. Indeed, there are many services that are far more harmful to their financial health; payday lenders and overpriced check-cashing services being the most nefarious. For many, these services offer quick cash and a simple solution to their financial straits at the moment. With slick advertisements and confusing terms, payday lenders prey on the financial nomad with vigor. While the immediate need for liquid cash is met, the long-term cost is steep and ends up costing borrowers their financial peace of mind.

The cost to individuals, families, communities and economies is too high. But there is hope. Around the world innovators from new companies are developing new solutions many specifically targeted at the underserved. You can read more about this in my upcoming book Financial Inclusion at the Bottom of the Pyramid (like on Facebook for updates on the release date). Or preview some of the innovators stories by following the links below.

Link for Carol’s Facebook page

Link to Financial Inclusion at the Bottom of the Pyramid

Link to Mobile Beyond Podcasts of financial pioneers.

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What It Will Take to Make Banking for All a Reality


After working around the world in the extremely complicated field of emerging financial services, I am now of the opinion that addressing the challenges of the financially excluded may be easier than we are making it. From the beginning of traditional banking with its branches and deposit products, banks have only successfully served a portion of people. The percent depends on the country and conditions. For small African countries, banks can serve as little as 5% of the population; for some European countries banks reach almost everyone. But in most places in the world it is a mix.

Technology has given us new tools to efficiently reach and serve those who want to be banked. The physical branch is not important to most people, and since most people have mobile or online access to their bank, communicating with the bank has never been easier. That being said, in countries which have traditionally been cash centric (India, Africa, most of Southeast Asia, many Eastern European countries, and most of Latin America), many things need to happen to create the services and have them adopted.

Although the change is significant it is also desperately needed – many pain points exist including slow and expensive money transfer, security challenges of living and working with cash, business friction, extra travel time to pay for things, lack of an easy way to buy online… and on and on. So many pain points that good solutions will surely be adopted once the provider “gets it right.”

But what will make this all easy is something very boring – regulations. If regulators get the rules governing financial services right, there will be a Tsunami of new services in the area, and the best ones will be adopted and scale.  Here are the most important rules they need to get right:

  • Let Non-Banks Offer Financial Services. Allow responsible non-bank actors to provide financial services. Retailers, Telcos, online companies, and Fin-tech startups should be able to be licensed to provide various financial activities like load/unload cash, move money, hold funds in trust for others, electronically pay, and lend. Many of these non-banks are not only innovative; they have great assets like trust and distribution which can be effectively leveraged to reach and serve customers.
  • Lower the Barriers for Customers to Enter the Banking System. In many places in the world, people who want to open up a bank account have to go through a difficult process of identifying themselves and proving they are who they say they are. Long forms, id checks, and in-person meetings – all of these are intimidating and take time. It puts up major obstacles to people entering the banking system. Regulators can lower these barriers for newly banked customers and allow small deposits and basic services initially. Over time the financial services provider can graduate the information they have about the customer to collect more due diligence information.
  • Prevent Toxic Behavior by Existing Players. With the Internet we have seen the benefit of net neutrality and an open playing field. Without it, a large incumbent could have stifled innovation through tricky methods. This can and does happen with financials services. Put the necessary regulations in place to prevent this from happening. This will mean there will be more competition, which will increase options and lower prices. These regulations will need to be added to the telecom regulations and the banking regulations.

Once regulators do these three things, then the change will happen quickly. New services will enter the market, people will try them, the best services will be adopted, behaviors will change, and the transformation will begin. The pain points are too great, and the innovative spirit of new and existing businesses will take hold.

Now, there are many other things that can make it happen faster and better – high tech identification systems, real time ubiquitous settlement for moving money, and smart phones.  All of these will multiple the results. But I’m sorry to say those are insufficient without financial inclusion favorable regulations. That is where we have to start. And when it is in place, everything else has even more impact.

There will be even more information about the necessary enabling environment, technology pioneers, and a blueprint for the future of banking in my upcoming book, Financial Inclusion at the Bottom of the Pyramid. Like my book on Facebook to receive information about pre-sale and release dates.

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Three Fundraising Tips for Young Entrepreneurs

VC fundraising tips for young entrepreneursOne of the most difficult aspects of entrepreneurship is raising the capital required to get a business off the ground. For young entrepreneurs new to the business world, there are some ways to make the task a little less daunting. The most important thing to remember is that VCs invest in you. Even for the best business plans, they have to really believe the entrepreneur is smart, passionate, determined, and committed to making the company a success. Smart investors know that great plans fail or succeed many times because of the entrepreneur.

Wisdom teaches that fundraising is a process in which determined entrepreneurs can stack the odds in their favor. Here are three basic rules to have an unfair advantage.

The first tip is don’t be a lone ranger. Get a great group of advisors to help. These are the men and women who will help enlarge your network and facilitate access to the investors and people of influence that can help your business grow. Along the way, they will help advise you on your business plan and shore up any areas that are soft and need to be strengthened.

Once an entrepreneur is ready to talk to investors, the next tip is to approach a targeted set of investors – don’t let it be random. You will have already spent time preparing the best investor presentation possible and your advisors will have helped by pointing out the problems in a business plan, and they will pick it apart in ways you’ve never imagined. But now you are ready and you need to focus on those investors that are likely to fund your deal. They need to have money, like your industry, be comfortable with your stage, and have not invested in your competitors. So while you are getting your presentation ready, do the research and find out who are the 30 best investors for your deal.

Finally, when the time comes to talk to VCs, follow the “10-5-3-1” rule. Do new meetings until you have 10 great first meetings with your targeted VCs. Keep working on those “great first meetings” with VCs until you have 5 of them doing due diligence on your deal. Finally, don’t’ stop talking to those 5 due diligence VCs until you have 3 term sheets. Ultimately, secure the close with at least 1 VC wiring you money and helping you get your business off the ground and up and running.

I know how challenging it can be to raise the capital required to open a business. That is why I’ve been following these very same entrepreneurship tips since 1997. I am confident they’re effective, so if you want your business to have a fighting chance in the rough and tumble world of securing venture capital, you should follow them as well.

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What is a Financial Nomad?

financial nomads

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Life is a journey whose destination varies for us all. Where we end up in life is often the product of our decisions, choices and chance. There’s not a single path to follow and many people find themselves becoming financial nomads along the way.

A financial nomad works and earns wages to support their families, but forgoes the assistance of a financial services provider to help guide their journey. They choose to do this either because they don’t have access, or they don’t fully understand how important a financial service provider is to their overall financial health.

For financial nomads, the world of finance and investing can seem like a towering Aztec temple whose sides are steep, with a sacred yet intimidating appearance. Often, they don’t feel they can access the opportunities contained within because they fear the costs and learning curve it takes to enter. This is a belief that billions of people around the world share, and they’re robbing themselves of the reliability and stability that institutional financial services can provide.

Oftentimes, financial nomads use institutional financial services only when it’s the only option they have remaining. Negative experiences, the perception that they won’t have enough assets to receive service and the costs of financial services keep them from looking towards the future and putting money into savings accounts and retirement funds. This is to their detriment and keeps them reliant on even more expensive services, such as payday loans, which can cause considerable damage to their financial health.

The distribution of financial nomads isn’t even around the world. Industrialized nations with higher incomes tend to have fewer financial nomads than within developing countries. Clearly, income, age and education level plays a big factor in this, but it is also important to note that there are wide variations between urban, suburban and rural areas where access to financial services vary.

As studies show, those under age 25 and above 65 are the least likely to have financial services accounts. Further, those living in cities are more likely to have accounts than those living in rural communities. Then, of course there’s the gender difference, which shows that fewer than 40 percent of women have their own financial services accounts.

The world is full of financial nomads, but there are ways you and I can help make financial services more inclusive and accessible for these individuals, which I’ve discussed in depth in my upcoming book “Financial Inclusion at the Bottom of the Pyramid.” I invite you to ‘like’ my book on Facebook, to join the conversation on financial inclusion, as well as to be the first to know the release date of my book.

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Five Examples of Financial Inclusion

the M-Pesa is an example of financial inclusion

Source: Payment Magnets

Everyday, the world in which we live seems to spin faster and faster. While this increased pace is creating plenty of opportunities for success and achievement, it is also creating deep financial rifts between those “who have” and those “who live without.” This is a phenomenon occurring in developed and developing countries alike. However, in a twist from the norm, the developing world is showing the developed world how to bridge that gap and create societies with inclusive financial services that create long-term economic stability.

Here are five examples of financial inclusion that have provided citizens in various locations around the world with access to much-needed financial services.

1. With over 7,000 islands and an average daily income of less than $2 per day, the Philippines has embraced technology to bridge the geographic and economic distances within the country. Using a mobile network put in place by Smart Information Technology, Inc. (SIT), citizens are able to use their phones and bank cards for everything, including store purchases, online balance inquiries and making rent payments. If you are not a Smart telecom customer, no problem – their main competitor Globe offers a similar service.

2. Kenya’s Safaricom partnered with Vodaphone in 2007 to create the M-Pesa, a similar system to SIT’s. M-Pesa’s services are offered to customers who either by chance, geography, or choice, don’t have have bank accounts. The system allows clients to transfer funds using SMS messaging, as well as providing the unbanked a way to save, send and receive money with the push of a button. This is the most successful example of financial inclusion to date since this system has been adopted by over 20 Million people in Kenya, many who previously had no access to banking.

3. India’s history of commerce and institutional banking is long and distinguished, yet most of that money belonged to international investors and foreign governments. However, the IT revolution and changing global marketplace have begun to change that. Today, Indians are experiencing steady increases in their income and standard of living. To help encourage even more growth, the country has embraced the Aadhaar personal identification process. The system uses biometric markers, as well as a 12-digit Aadhaar number as a form of identification. This information can be used to open a bank account, linking an individual’s Aadahaar number with their bank, so they can access their money anytime and anywhere.

4. Just 10 years ago, one-half of Peru’s population was living below the poverty level and over 75 percent had no access to financial products or services. To help change this, GloboKasNet introduced an innovative system of “business correspondents” who provide low-cost financial transactions that are identical to those of a bank via local shops and businesses already established in the communities they serve.

5. Banking in South Africa has become easier than ever since Wizzit Ltd. formed a system for providing access to individual accounts via cell phones and debit cards. The combination of affordable, accessible and easily available services has made it possible for anyone with a cell phone (not necessarily a smartphone) to access their money and make purchases. Additionally, clients can go deposit funds directly into their Wizzit accounts by visiting any South African Post Office.

Together, these countries and companies have taken commendable leaps towards making financial inclusion a reality for nearly 1.5 billion people. In my view, that’s something definitely worth celebrating. I’ll be discussing this topic in greater depth in my upcoming book “Financial Inclusion at the Bottom of the Pyramid.” Like my book on Facebook for updates regarding pre-sale and release dates.

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Four Trends FinTech Entrepreneurs Should Take Note Of

fintech trends

Fintech is always changing, and there are some very interesting trends that are emerging this year. Where in the past, financial services have been targeted primarily towards wealthy clients, companies have begun to recognize that there are vastly underserved segments of the population — underserved segments that represent a tremendous potential for the growth and profitability of the financial service sector. As such, the following are fintech trends I believe are well worth noting.

  • Social Networks are Being Used to Reach Out and Expand the Customer Base. Underserved demographics dominate social networks such as Facebook, Google+ and others. These individuals are typically young, low income and members of minority groups. This makes social networks the ideal places for targeted marketing aimed at helping these people improve their financial portfolios.
  • Cash In/Cash Out broadly available and frictionless. Despite some claims, reports of the “death of cash” have been greatly exaggerated. While the use of cash is declining, nearly 1/4 of transactions are still conducted with bills and coins. Businesses realize this and are doing their best to facilitate a near-frictionless conversion to and from cash. This is imperative towards serving traditionally underserved consumers — 47 percent of whom prefer to use cash for their transactions.
  • Big Data is Being Leveraged. The sheer volume of digital information available is making it easier for businesses to track, store and analyze their customer’s habits. While this is raising privacy concerns, it is also making it easier than ever for fintech providers to customize their services to match the needs of their clients. This is unlocking access to credit and helping many underserved demographics obtain loans and improve their portfolios.
  • B2B2C is Making it Possible to Scale Up Service. Partnership is the name of the game, and these partnerships are making it easier than ever to reach out and expand services to underserved customers. Businesses have recognized that by joining together and offering complimentary service, they’re able to achieve tremendous growth. This is a benefit both for established and well-known brands who have the reputation to offer, as well as for smaller start-ups who have the clients.

I very am excited about these trends and will be watching them very closely. In fact, I would strongly suggest every fintech entrepreneur think about how they will impact their business.

I’d love to hear your thoughts on these and other fintech trends you’ve taken note of. Share with me in a comment below, or connect with me on Facebook, Twitter, LinkedIn and Google+

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“Spent: Looking for Change” Highlights the Challenges of the Underbanked

Spent: Looking For Change


It’s not easy to live outside the traditional financial system, and it’s not cheap, either. For millions of Americans, this has become a way of life that is dragging them deeper and deeper into debt and financial servitude. Fortunately, we live in an era where technology can be harnessed to eliminate the barriers to financial inclusion and it has never been more important to bring these barriers down.

Not long ago, I was asked to include my thoughts on financial inclusion in America for the film “Spent: Looking for Change.”  This documentary, produced by Davis Guggenheim and narrated by Tyler Perry, is well worth watching as the film follows four American families as they struggle to make ends meet. Indeed, it highlights the financial problems many face on a daily basis. From paying bills to managing practically usurious interest charges, their stories epitomize the struggles being faced by millions of Americans.

I consider it such an honor to be included in the making of this documentary, and I encourage you to watch it. It’s available to watch for free via The Young Turks’ on both YouTube and Hulu. From start to finish, the film highlights the financial problems and difficulties being faced by far too many American households. The film also presents a number of viable solutions; solutions that if implemented would go a long way towards stabilizing the economic foundation of our country. In turn, these solutions would create a future in which everyone has access to affordable financial services and the opportunities that such access provides.

I have always believed that America is a land of both opportunity and innovation. We’re a nation of thinkers, dreamers and doers. As Americans, we have a history of rising to whatever challenge may be presented to us. That’s why I am confident that together we can create solutions that will make true financial inclusion a reality for every American, regardless of their income or social status.

It is my view that achieving financial inclusion for all segments of the economy is the key towards generating a better future for us all. I invite you to watch “Spent,” and then join the discussion with me on Facebook or Google+ and to connect with me on both Linkedin and Twitter. The more we share our views and ideas, the greater the results will be as we work to achieve this goal.

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