How inclusive financial technology is rewriting the digital economy 

By Jaz Low

Dr Lo Swee Won, Node for Inclusive Fintech Lead at the Singapore University of Social Sciences, shares how the latest financial technologies can shape a more inclusive economy.

With Facebook rebranding itself as Meta, many people were introduced to the metaverse as an alternative way to explore their interests and connect with others. But aside from its recreational benefits, the metaverse yields practical economic advantages as well, which can benefit the financially underserved.

The goal of the Singapore University of Social Sciences (SUSS) Node for Inclusive Fintech is to study the latest and most relevant topics in FinTech for the benefit of society. Its work involves exploring the potential of the metaverse and blockchain to bring about financial integration and inclusion.

Dr Lo Swee Won, Node for Inclusive Fintech Lead at SUSS, highlights how these technologies are rewriting digital economies and opening up doors of financial possibility.

How the metaverse can promote financial inclusion

One of the projects under the Node for Inclusive Fintech is the Metaverse Lab, which looks at how this digital replica of the real world can promote greater financial inclusion. The lab hopes to study how the metaverse will revolutionise the digital economy and change the way people perform transactions.

Financially excluded populations refer to those without access to common financial services such as savings accounts, credit cards, and loans. These groups are unable to obtain the resources they need to pay for higher education, a roof over their heads, or any number of other actions that could help them achieve a better quality of life.

The possibilities of the metaverse as an economic hub are endless.

The metaverse represents a new avenue for retail as non-fungible tokens flood the marketplace. People are no longer limited to physical stores and online sites to sell their products.

Non-fungible tokens are assets on a blockchain with unique identification codes that distinguish them from one another. This makes any piece of digital art or limited-edition sneaker one-of-a-kind. Given that exclusive items are often expensive, therein lies the appeal of investing in these digital products.

For instance, creators can design clothes for virtual avatars and sell their products to metaverse inhabitants, earning income from the transaction.

Apart from non-fungible tokens, the metaverse allows people to enjoy leisure experiences in a different manner and perform financial transactions in this new space. “For instance, one can visit the metaverse version of the Harry Potter World that is located in London and shop around the theme park without having to move an inch from their desks,” Dr Lo shares.

How blockchain is transforming agriculture

Aside from non-fungible tokens, the Node for Inclusive FinTech is interested in exploring other uses of blockchain and how it may impact the economy.

For example, blockchain company Sentinel Chain turns the livestock of Myanmar farmers into tokens. The tokens contain information about the livestock, such as the age and weight of a cow, as well as the farmer’s identity.

Previously, farmers were unable to prove if an animal belonged to them. This meant that if a cow died unexpectedly, they would lose all potential profits associated with the livestock.

But now, the tokens legitimise cattle owners and allow them to buy insurance for their livestock. “Should a cow die, farmers need not worry about any lost income because the insurance will pay out. This is a warranty they were not afforded before,” Dr Lo highlights.

This technology also provides an added layer of security as blockchain transaction records cannot be changed, which makes malicious modification unlikely.

Hackers would have to alter the entire chain to change a single token because each record is connected to the previous and subsequent data sets. This means that any information pertaining to farmers’ ownership of livestock is pretty much set in stone.

How smart contracts will transform business transactions

Smart contracts are another example of blockchain technology transforming the economy. These are digital agreements stored on a blockchain and are automatically executed when predetermined terms and conditions are met.

“This is a quicker and more efficient way of doing business because there is no paperwork to process and no time spent reconciling errors that often result from manually filling in documents,” Dr Lo says.

Additionally, as all participants have access to the blockchain records, there is no need to question whether information has been altered for personal benefit. This helps to cultivate a high degree of trust and transparency.

Dr Lo mentions a case study where smart contracts automatically distributed digital assets like relief payments as part of monsoon recovery efforts. This initiative empowered people financially even during times of disaster.

In another example, smart contracts sped up and streamlined tax collection processes by checking if tax data tallied up with transactions made, Infosys wrote. This simplifies tax filing for those with poor financial literacy.

Students creating their own blockchain solutions

Besides learning from real-world case studies, SUSS has conducted workshops that train students in the coding of smart contracts and creating decentralised applications using blockchain technology.

One group of students helped small and medium-size enterprises take bank loans by digitising their physical collaterals into non-fungible tokens. A collateral refers to something pledged as security for repayment of a bank loan, like a house or a car. By locking the tokens up as a warranty, more people would be able to borrow money.

Another group of students allowed creators to mint non-fungible tokens on the blockchain and channelled part of the sales proceeds towards supporting young artists in underserved communities.

SUSS’ Node for Inclusive Fintech will continue to explore different uses of metaverse and blockchain technology so that more people will be able to participate in the digital economy and reap some form of financial gain. Inclusion is about having a voice, which financial technology will amplify.