How to join the network An odd paradox exists in the way capital moves around the world — or doesn’t — from developed to developing countries. A few specific technology hurdles halt the flow of money, at the personal level, from transferring wealth to and investing in emerging markets. Issues with ledgers of exchange, unique identifiers, transfer costs and points of access all impact capital flows across borders. Innovative firms have made strides developing solutions for each, but a comprehensive technology answer still remains to be found. “A World Awash in Money” On a global scale, western economies are awash in cheap investment capital chasing anemic returns. Capital in the global financial economy is so plentiful that central banks in countries like Sweden, Switzerland and Japan now offer negative interest rates on deposits. This means that investors essentially have to pay to “park” the funds that they can’t invest — and choose to do so en masse because the nominal losses from negative rates outweigh the potential significant losses from investment. Over time, capital pools up, and when attractive investment opportunities do come up, they’re quickly oversubscribed — look at the late-stage Silicon Valley venture capital market in 2015 for evidence. Emerging markets, meanwhile, generally offer more lucratively priced investment prospects. A corporation based in Lagos, Nigeria, for instance, might offer higher interest rates when it issues debt to raise capital than would a similar company in the U.S. But that debt is priced to account for the increased risk of operating in a country without a well-developed “trust architecture,” which slows the flow of assets from advanced to emerging markets. People want to see that the money they send across borders is going where it is supposed to. The lack of trust architecture is the defining stumbling block […]
