Banking The Unbanked Internet of Things IoT

Bank­ing the Unbanked always refers to human beings and their enable­ment to par­tic­i­pate in the glob­al finan­cial sys­tem by pro­vid­ing them with bank accounts. In this post, I argue for bank­ing unbanked devices, i.e. machines, that are con­nect­ed through the inter­net — the Inter­net of Things IoT.

Glob­al­iza­tion has made our world a small­er place: through the inter­net we know every­thing what hap­pens some­where with­in min­utes, through air trav­el we can per­son­al­ly expe­ri­ence the other side of the world with­in hours. We, in this case, means the rich world. The major­i­ty of peo­ple, how­ev­er, may have access to the inter­net but is far from being able to trav­el around the world. How­ev­er, there are other means of enabling them to par­tic­i­pate in and get a fair share of glob­al­iza­tion — by bank­ing them; i.e. by pro­vid­ing peo­ple with­out access to the finan­cial sys­tem with either prop­er bank accounts, or with alter­na­tive means of pay­ment, such as the Libra project that Face­book has announced this sum­mer.

This idea orig­i­nates from my col­league with Bosch, Nik Schar­mann, who leads the Econ­o­my of Things project, and from a Datarel­la project in the field of bank­ing. As so often, evo­lu­tion­ary devel­op­ment is the result of com­bin­ing ideas from dif­fer­ent indus­tries, — or — a “cross-sectoral” approach.

Machine-to-Machine Trans­ac­tions

Hav­ing been active in the field of machine-to-machine com­mu­ni­ca­tion (M2M) for quite a time, and work­ing in sev­er­al projects includ­ing machine-to-machine trans­ac­tions, such as pric­ing nego­ti­a­tions and set­tle­ments between machines auto­mat­ed by smart con­tracts, I‘d like to point out the huge impact bank­ing the unbanked IoT will have on the glob­al econ­o­my. As Julian Simon claimed in his )con­tro­ver­sial) the­sis ot the „Ulti­mate Resource“ (The “ulti­mate resource” is not any par­tic­u­lar phys­i­cal object but the capac­i­ty for humans to invent and adapt), that there is no resource cri­sis since when a par­tic­u­lar resource becomes more scarce, its price rises. This price rise cre­ates an incen­tive for peo­ple to dis­cov­er more of the resource, ration and recy­cle it, and even­tu­al­ly, devel­op sub­sti­tutes.

Trans­ac­tion Costs Min­i­mized

And as Ronald Coase defined and described trans­ac­tion costs in his „The Nature of the Firm“: the lower the costs of organ­is­ing and the slow­er these costs rise with an increase in the num­ber of trans­ac­tions, the less like­ly the human being is prone to erro­neous behav­ior and the small­er the increase in human errors with an increase in the num­ber of trans­ac­tions.

The ulti­mate mod­ern way of bring­ing down trans­ac­tion costs is to have machines man­ag­ing all trans­ac­tions, with­out any inter­fer­ence of human error. That said, the Econ­o­my of Things EoT will most prob­a­bly be the best descrip­tion of our future glob­al econ­o­my, with inter­con­nect­ed devices man­ag­ing all eco­nom­i­cl hag­gling, nego­tioans and set­tle­ments — even dis­putes will be han­dled by machines, sup­port­ed by auto­mat­ed dis­pute res­o­lu­tion pro­ce­dures, such as smart con­tract based arbi­tra­tion.

Devel­op­ment Of World Pop­u­la­tions vs Con­nect­ed Devices

Let­ting devices, machines, or things par­tic­i­pate in eco­nom­ic trans­ac­tions can be described as Bank­ing the Unbanked IoT. From the per­spec­tive of the actu­al acces­si­ble install base and future growth, the eco­nom­ic impact of bank­ing unbanked peo­ple is neg­li­gi­ble com­pared with the impact of bank­ing unbanked devices, as can be seen in the two charts above and below:

Look­ing at Facebook‘s Libra project and com­par­ing its eco­nom­ic impact with Bank­ing the Unbanked IoT described here, we can con­clude that it makes much eco­nom­ic sense to work on the future Econ­o­my of Things. In my next post I will elab­o­rate more on our plans with Datarel­la of being an active part of this fas­ci­nat­ing jour­ney togeth­er with our great part­ners in the field of mobil­i­ty infra­struc­tures. And I will explain, why and how my Enter­prise Evo­lu­tion Pro­to­col model is a good frame­work for build­ing a sus­tain­able, eth­i­cal Econ­o­my of Things.

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