Fintech replace government? This seems fanciful, right? Even delusional? But get this: in China recently, a 5-year-old girl who needed brain surgery and had to pay what for her parents was an impossible sum to get, received the surgery courtesy of millions of people who each paid 0.03 yuan per person. They thus met the medical bills of around 300,000 yuan (around $40,000).
Jack Ma’s Ant Financial Services now operates this “mutual-protection” plan for users of Alipay. Right now it has 50 million participants. It’s aiming for 300 million participants in the next two years.
Hmmm, isn’t that almost the population of the United States? Come to think of it, do we have any health insurance plan with 300 million participants? One that is fully private? I guess we Americans just aren’t innovative enough.
That comes under the heading of crowdsourcing right? And lately people have been speculating about the possibility of using crowdsourcing as an aid to government efforts to conduct research and collect intelligence. But that idea is not about the money end. And funding a la Kickstarter is one-off and project-based. What if, instead, medical bills were paid for not by a single project, but by a continuous program. Sort of like opt-in social insurance. Could that work?
It’s a commonplace that most governments are in a state of continuous partly-concealed, semi-paralytic, semi-failure. That’s why we have political parties in democratic countries, to give us an alternative. But if we check out the US it’s clear that approach isn’t working. Nor is it even in China where no-one needs to worry themselves about being democratic. Yet they still have the same failures in their own health system, actually a lot worse.
We’ve tended to think of fintech as being a technical issue. It’s something to allow us to do payments better, have better financial systems, make more profits, trade more quickly, even to do radical things to money like digital currencies.
But these ideas have been incidental to the main act, which is the actual governance of a country, not just to make sure its current governance is improved, even if only a little. Can fintech be a total alternative to modern government? Can it really move the needle in the way that democracy moved it when it was a shiny new toy for grown-ups in the 19th century?
That quasi-medical-insurance project in China was really a cooperative in action. These days coops are seen as a quaint notion, something left over from the medieval era of guilds or kibbutzim in Israel.
But fintech gives a whole new meaning to coops. Now fintech can transform them into powerful social nuclei for concerted action. Fintech can provide them with the financial oomph to do many unheard-of things. One of them might just be to pre-empt the need for traditional-style government with its traditional style of taxing, or even outright confiscation.
Of course, governments aren’t going to give up their prerogative to wield power, and to get the massive personal financial benefits that come from being a political insider (what the economists call collecting rents, and others simply call stealing). That’s not going to happen in a hurry, no matter how revolutionary the fintech in question. But what about new territories where there’s no government. Like on other planets?
First, let’s acknowledge that there was a lot of really useful fintech around even before the term was coined. We might have bitcoin and blockchain now, but things like derivatives, hedging, exotics and CMOs were and still are just as powerful types of fintech as the ones we have dreamed up lately, even though they extend the range of the territory enormously.
We’re starting to see a general picture of humans in space. Colonies on the moon, Mars, even Titan. These are going to be a burden on many terrestrial exchequers. How will governments pay for all they want and need up there in the wild black beyond millions of miles away? Can humans on Earth afford all this when they can’t even afford to pay for the things they need back home now?
There is an opportunity opening up. Many of these colonies are going to be privately run. Think SpaceX or the Israeli private space company SpaceIL which recently launched its moon lander Beresheet, which sadly, crash-landed on the Moon.
These colonies won’t have government backing for all the funds they will need to set up and run these colonies. It’s almost inconceivable to think that governments anywhere will be up to the momentous task of developing and using fintech to run these colonies when they can’t even do it for their Earthly dominions right now.
But being private, these private space companies have the incentive and means to use fintech in its most powerful forms.
Many of these colonies are going to want independence but will lack their own budgets to achieve it. How about fintech coming to the rescue?
So, what would that entail? Maybe terrestrial citizens subscribing to one or many more new planetary colonial governments. Not just by being taxed but by special purpose cooperatives, say for a health system on Mars. How about cooperatives for defense and social security? If you don’t want to subscribe now, how about a Space 401K? Subscribe now, live here later for your retirement?
Could these colonies improve the odds by issuing their own digital currencies? Maybe Earthly governments wouldn’t take the same umbrage about this being done millions of miles away in the way they would if it was done in their own backyards. Could digital currencies really move the market when they are seen as the base for space-based money markets rather than those here on earth?
What about selling options to Earthlings to buy property in a colony? If it’s a “gated” community, there will be many on Earth willing to plump down the money. How about issuing futures contracts on purchase prices? Then you will need hedging strategies to offset the risks. More fintech.
Here’s the issue. We have been thinking that the main problem in forming space colonies on other planets will be technical. But these issues are already being solved. Soon they won’t be an issue. The main problem will be financial.
Even space colonies will have to run at a profit eventually. But with small numbers of people, comparatively speaking, that’s going to be difficult. We can’t trust traditional governments to do that. So private companies with fintech are likely to come to the rescue.
And it might not be Western fintech either. As my example at the beginning of this post shows, it might well be Chinese fintech. Anyone who is familiar with the China scene knows well that China is already way ahead of the West in payments fintech. So maybe it will be the Chinese colonies who will be the go-to colonists to follow if you want to make money.
How about a Belt and Road Initiative on other planets anyone?