The last three decades have been witness to an unprecedented level of globalization. A now-ubiquitous Internet has enabled real time flow of information between people, governments, and businesses. The food we eat travels across oceans. Even the device on which you’re reading this was probably designed and manufactured in two different countries and shipped from another.
The disruption to this global value chain caused by COVID-19 might seem like unfortunate proof that the world is flat, as Thomas Friedman posited in the book that swept the business world. But the thesis that globalization has made the world a level playing field with equal opportunity for all competitors is a fallacy.
It can be difficult for those of us who spend our days doing business across continents to recognize this reality. For instance, I’m an entrepreneur from India who just launched a startup in the U.S. That seems like an example of equal opportunity, but the truth is that I was able to jump over the spikes to launch a business in the U.S. because I first had a very successful exit from a business I’d founded in India.
For all the people like me that are building a new wave of unicorns in “emerging” economies, there’s an even larger segment of brilliant could-be entrepreneurs who can’t get their businesses off the ground because they don’t have access to the world of capital. Until the flow of money is as smooth as the flow of information, access to resources will remain tied to the region in which you reside.
Given our banking and financial services sectors haven’t changed a whole lot in a century, changing the flow of money may seem like a dream, but it’s not impossible. Plus, the potential return on investment is enormous.
I’ll illustrate using the iPhone as an example. When there’s a significant launch, it’s apparent to anyone worldwide that the price of Apple’s stock will go up. People would love to invest, but they can’t. Unless they’re in the U.S., the only thing they can buy is the iPhone. Using the same insight, investing in something like Foxconn, the Taiwanese OEM behind the iPhone’s manufacturing process, would give an even larger return. But there’s only so much that even the most affluent investors can do with this knowledge.
Another argument in favor of a globalized financial system is a case for which I can serve as an example. If I were to immigrate to the U.S., I would not have equal access to banking and financial services, despite having considerable resources from the sale of my previous company. Why? Because, regardless of economic status, immigrants do not have the same access to things like high-limit credit cards. We’re assessed higher interest rates on home and auto loans if we can get them at all. Even for high-earning non-citizens, economic barriers are deterrents to buying property, starting businesses, and maximizing their contribution to the economy by and large.
It’s a problem that affects a large population, and the traditional banking model has failed to resolve it. It can even seem the opposite, as big banks like Citi and HSBC exit markets where brick and mortar setups have been unprofitable, which has a disproportionate, negative impact on immigrants.
Lack of access to financial services also limits a person’s ability to manage cash flows, build savings and prepare for potential downturns. From a macro perspective, it prevents the sort of remittance activities that have the power to lift populations outside of the U.S. out of poverty, enabling them to become positive contributors to the global economy.
These are significant reasons to create a financial system with flat, equal access-to-all potential. The good news is that real solutions don’t need to be that difficult. They just need innovative thinkers from the fintechs of the world to help motivate the slow-moving legacy operators and join us in creating a cooperation framework. With the dedication to solving the problem, we can communicate across borders and oceans, sharing information along the way that mitigates risks. With more investment, entrepreneurship and wealth sharing, the whole world will benefit.
The author, Raghunandan G., is founder and CEO of Zolve.