Leveraging Blockchain to Reach the “Unbanked”
This lack of access to the banking system affects black (13.8 percent) and Hispanic (12.2 percent) households at a significantly higher rate than white households (2.5 percent), furthering the racial and ethnic wealth gap in the United States.
Among the reasons given by respondents for not having a bank account, lack of trust in banks and a desire for more privacy were high on the list.
“There’s a low level of trust in general,” said Jonathan Skidmore, MBA’22. “Especially when it comes to data protection.”
Count Skidmore and Prof. Erich Schumann among those who believe blockchain technology can help bridge this trust gap with unbanked Americans – increasing their ability to build savings, access credit and generate wealth in the process.
Before graduating from the Master of Business Administration (MBA) program, Skidmore and a team of Brandeis International Business School students helped Schumann build a blockchain-based banking app during a field project course.
“The students contributed critical research and data analysis that helped focus the scope of the app,” said Schumann, whose financial consulting firm Global Atlantic Partners has worked with the business school on two field projects. “Their research also helps us anticipate future regulations in the digital banking space.”
A blockchain is a decentralized digital database where users can securely record transactions on a peer-to-peer basis. Although synonymous with cryptocurrencies such as Bitcoin, the technology also has the potential to disrupt traditional banking.
Users of Schumann’s Fincludio app – the name is a portmanteau of “finance” and “include” – choose which services they are interested in and which banks they want to do business with. Meanwhile, their personal data is stored securely in a digital wallet on their smartphone. After a user has selected a bank, the bank will only have viewing access to the personal data it is legally required to collect and verify.
“You have your information,” Schumann said. “We put it in a wallet, and it’s secured with blockchain technology. And you decide who you want to give access to your wallet.”
Schumann said the app will also benefit smaller community and regional banks. It is currently expensive to verify customer identities using traditional technology in compliance with state and federal laws, giving an advantage to larger banks with better systems and more resources. Fincludio could help even the playing field, he said.
“I recently conducted a six-week course with representatives from 30 community banks, and only two understood blockchain,” Schumann said. “I was surprised by this. But what will happen if they don’t adjust? They will lose market share.”
In addition to learning more about a new technology like blockchain, Skidmore was eager to hone his consulting skills on the field project. His work focused on examining banking regulations in both the US and the EU
“It was an opportunity to get real-world experience that I added to my portfolio,” Skidmore said. “I got an insight into the daily tasks of a consultant – building presentations, communicating between your team and the client and refining your work.”
