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Rachel O’Dwyer (@Rachelodwyer) researches emerging markets at the intersection of data, mobile networks and payments from the perspectives of sociology, anthropology and political economy. She has written about new financial technologies and their social use in publications such as Ours to Hack and to own and the Money Lab Reader. She is a research fellow at the CONNECT Centre for Future Networks and Communications at Trinity College Dublin. We managed to get a hold of her while she was at the art and technology festival Transmediale in Berlin and talked to her about the promises of financial inclusion in the global south.
What is financial inclusion?
netzpolitik.org: The United Nation‘s World Food Program now wants to use blockchain as a weapon in the fight against hunger. A pilot project in a refugee camp in Jordan is said to be extended throughout this year. That’s not the first time we’ve been hearing claims like this when we talk about new technologies. In your work on the development, use and social implications of financial technologies, – blockchain being one of them – have you encountered these claims?
Rachel O’Dwyer: Yeah, absolutely. Claims about using blockchains or other kinds of technologies as a mechanism for social change are connected with a broader history of work around information and communication technologies for development or for the Global South. Blockchain in particular is situated within a broader project towards what‘s sometimes called „financial inclusion“, where they can group the community that is sometimes called the „unbanked“. I suppose that emerges from a perspective where the majority of people in the Global South today have access to mobile communications but don‘t actually have access to a bank account. Therefore, things like remittances or access to credit can be quite difficult.
netzpolitik.org: Besides cutting costs, one of the proclaimed goals of the UN program is to establish profiles of people that might count towards or develop into a credit history that can be used to identify individuals and assess their trustworthiness.
Rachel O’Dwyer: Yes. Again, because of the lack of bank accounts, there‘s also maybe a lack of data supporting people‘s creditworthiness. Generally, credit rating is based on your bank accounts and loans that you‘re taking out and whether you‘ve repaid those over time.
What we‘re also seeing is that some of these fintech companies are developing new kinds of algorithmic credit scoring for the „unbanked“ which often draws on smartphone adoption in particular. So they are coupling together data from existing payment systems.
netzpolitik.org: Could you elaborate on that?
Rachel O’Dwyer: Over the last decade, there‘s been the rise of mobile payment. So people who maybe didn‘t have access to a bank account or to finance are using mobile phones as a technology for global or domestic remittances and as a way to pay for bills or pay for things on the go.
Companies then are using the data that is being produced by these mobile payment platforms like M-Pesa and coupling that with peoples social network use to create new kinds of algorithmic credit scoring. We‘re not really clear about what the actual metrics of these systems are, what kinds of data points are significant. But obviously they include things like whether or not you’re saving money in M-Pesa, what your payments are like, who you’re sending money to, who you’re receiving money from – but also your social networks and what they are doing.
And also, all sorts of data points that seem obscure, but apparently aren‘t – like how you even charge your phone can have an impact on these credit ratings. There is little transparency around what sorts of actions, or what kind of data is significant to producing these kinds of scores.
I guess, my perspective on a lot of this is quite cynical in that I feel as though in a lot of cases, companies who are looking to develop different kinds of innovations for the „unbanked“ and the Global South are motivated not so much by the actual social good but by creating basically new kinds of financial markets.
netzpolitik.org: The argument of empowerment through financial inclusion is often referring to individual payments that can make individual lives better. You’ve made a broader argument, saying when talking about money, there is a dimension that goes beyond individual payments.
Rachel O’Dwyer: Bill Maurer, who is an anthropologist of money, has a very concise way of speaking about money as a technology. He says that money is both a token and a rail. So it‘s a bearer instrument, or something that circulates, that tells us something about the price, that can be circulated from hand to hand. But it‘s also this infrastructure on which those tokens circulate. In a publicly mandated money like dollars, or euros, or sterling, that system is your central bank. With the increasing proliferation of new kinds of digital payments, that rail infrastructure is increasingly private platforms. It can be social media platforms or mobile network operators. Safaricom, a telecommunications provider, is very significant with M-Pesa. So who owns the rail becomes very important.
The social use of blockchains
netzpolitik.org: One of the initiators of the World Food Program’s blockchain project publicly fantasized about the potential use of smart contracts within humanitarian aid, basically saying that your food allowance might be automatically tied to conditions like regular school attendance of your child. What kind of an authority is this?
Rachel O’Dwyer: Orwellian? I don‘t know, it is terrifying, isn‘t it? It‘s not only that you gather this data, but it becomes actionable in some way. As you say, your access to some kind of basic human right like food or shelter could be coupled to all these other kinds of conditions, which is very worrying.
netzpolitik.org: People regularly talk about blockchains as a tool for the decentralization of power. In the face of these developments: Were those hopes misplaced?
Rachel O’Dwyer: I think it is a key point. Because historically, (laughs) – we‘re talking about four or five years – in the kind of the early iterations of blockchain, like the Bitcoin blockchain, we were talking about a decentralized and public ledger. What we‘re seeing, increasingly, is a push towards what are sometimes called „permissioned“ ledgers – private ledgers where there is a reemergence of private actors who control it. I suppose a lot of the articulations of blockchains that we‘re seeing now are permissioned, which means that not everybody has access to the data, has control of it. So blockchain becomes almost a buzzword for basically just any kind of private database.
netzpolitik.org: Start-ups, companies, humanitarian actors, but also the World Bank or the European Commission sometimes say: „We have to be quick and just experiment“. But we are talking, as you say, about very complicated and partly intransparent systems whose issues with security, privacy and their potential for surveillance are not easily and quickly resolved. How can we understand this?
Rachel O’Dwyer: It‘s interesting. In one way, the pace of things actually being up and running is quite slow. This year is the tenth anniversary of Satoshi Nakamoto‘s white paper which describes a blockchain and yet we haven‘t seen very many systems that are actually using blockchains. We‘ve always seen these proof of concept ideas about how it might potentially be used. So maybe the pace, even though it seems quite fast, is actually quite slow.
In terms of your other question how people can critically engage with these systems. I‘m not sure what the answer is. I guess it‘s a question of trying to push forward dialogue. It‘s a complicated system in some ways, but in other ways we can understand it as being a distributed database that has certain properties like a certain amount of verifiability, transparency and immutability and try and go from there. Maybe part of the public engagement with this is demystifying it and having more conversations before these things are moved beyond a proof of concept stage. Obviously, we‘re having these conversations at transmediale with a lot of artists and designers. Potentially, those kinds of ways of creatively innovating or telling stories can be a way for people to engage. But the answer is that I don‘t really know.
The role of cash
netzpolitik.org: Financial technologies are sometimes tied to the vision of a cashless society where transactions and markets become frictionless, supposedly empowering individuals. In terms of what we have disussed so far, isn’t this promise overly simplified?
Rachel O’Dwyer: I think you hit the nail on the head in terms of what is problematic there. We‘re seeing this push of governments towards cashless societies. They argue, I suppose, that this is going to be much more efficient. In the last year or two we have this massive demonetization push in India, where the 500 Rupee note was basically made redundant overnight. China also pushes towards cashless societies with the intodruction of Union Pay. In Europe, Sweden and I suppose the United Kingdom are at the forefront of that. But cash has various kinds of utilities in that it is largely anonymous. So it facilitates all of these transactions that are to some degree anonymous.
There are various different initiatives to push people away from cash and maybe make people ashamed of using cash as well. And that‘s kind of being bolstered by various fintech companies within investment and digital payments. But I suppose, the problem then with digital payments is that all your transaction data is then being recorded. That data can also be coupled to other kinds of data – your personal data, your biometrics, your demographic data or your social network data which is was we‘re seeing with some of these new algorithmic credit scoring systems that we spoke about earlier. They are using then all of this data to make decisions about us and those decisions might be „Are you a terrorist? Are you creditworthy?“ What we‘re seeing is that these systems aren‘t necessarily neutral in any way. But that they are actually reproducing existing credit castes and reproducing existing inequalities.
netzpolitik.org: Thank you for the interview!