Fintech Looks Like the Achilles Heel of Global Corruption

[According to one Harvard professor, the world is getting better. Perhaps this is partly driven by the impact of fintech on global corruption.]

[3 min. read]

pablo escobar corruption fintech

The world can be a tough place.

In my courses on International marketing, I spend an entire class period talking about corruption around the world. What’s the difference between a full-on bribe and slipping someone $20 as a lubricating payment to expedite your application?

I talk about how different cultures perceive these with varying degrees of acceptance. What is blatantly dishonest to one is just the way things are done (and really NBD) to another.

How does corruption impact humanity?

In the course, I introduce the class to the Global Corruption Perceptions Index released by Transparency International.

Global Corruption Perceptions Index 2017 for Fintech Article

This world map illustrates how countries are perceived in terms of their tolerance and support of corruption.

I heard Utah-based VC, Paul Ahlstrom on the Sales Founders podcast discussing the impact of fintech especially in the developing world (which you may notice also tends to have a high perception of corruption).

Paul drew the interesting correlation between global corruption and global poverty. By comparing these two maps, it isn’t hard to distinguish a rough correlation between corruption and poverty.

2007 World Poverty Map

Paul makes the case that graft and the flow of money fueled by corruption is thwarted by the adoption of fintech tools for moving money around electronically.

This makes sense to me. If I was pulled over in Mexico, for example, I would not expect the officer to whip out an iPad with a Square Reader attached so he could take my pay-off via credit card.

I’d love to see the memo on my statement for that transaction.

Nor would I expect to get shaken down for ransom payments in bitcoin (although that’s not unheard of).

What do the trends for poverty and corruption look like?

I’m not suggesting that big fintech startups have these aims explicitly in mind.

Maybe they do.

But I expect they are out to make a buck by solving problems for people just like any other company. Messing up the financial infrastructure for corruption is just an unintended bonus.

In fact there is some evidence that rapidly emerging fintech is a challenge for regulators and watchdogs to keep up with. And corruption seems alive and well (here are two notable examples from Mexico and Argentina).

Maybe there’s an argument to be made that these examples of corruption would be unknown to the public if not for the rise of technology.

Whether intentional, related, influenced, or coincidental to the growth of fintech in regions with a history of corruption, the status of poverty in the world is improving significantly.

Harvard professor and author of Enlightenment Now: The Case for Reason, Science, Humanism, and ProgressSteven Pinker gave a TED talk in which he shared that today fewer than 10% of the world’s population still live in abject poverty.

Which seems like a very good thing.

Since my time as a fintech CEO, I’ve been very bullish on the fintech space and today that seems more sensical than ever. I’m excited for the changes we will see in the coming years as these developments among others alleviate suffering caused by corruption (however unintended).

Author Bio: @chadjardine is the CMO @goreact, an associate professor at @uutah and sometimes blogs about marketing on Medium.

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