Financial and Monetary Systems

The fall and rise of global borders

A US worker inspects a section of the US-Mexico border wall at Sunland Park, U.S. opposite the Mexican border city of Ciudad Juarez, Mexico, November 9, 2016

Dividing line: are we entering a new phase of globalisation? Image: REUTERS/Jose Luis Gonzalez

Taavet Hinrikus
Co-founder, TransferWise
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This article is part of: Annual Meeting of the New Champions

The world is becoming more global. More than ever people are proactively deciding where to live, where to study, where to work. Sometimes it’s out of necessity, sometimes it’s out of choice. But the opening up of the world thanks to technology and other factors like simpler regulation means we don’t need to stay within the borders of the country in which we were born. It’s even possible to be an e-Resident of a country.

Being a ‘global citizen’ is no longer reserved for the global elite. Thanks to the democratising power of technology, it’s not a trend determined by privilege or even age but by attitude. Technology gives us a level of global interconnectedness that we’ve never before experienced. If we couple that physical/virtual interconnectedness with an attitude of openness, then the world becomes both limitless and a lot smaller.

However, this macro-trend seems to be experiencing a few setbacks at the moment. There is increased rhetoric in parts of the world about the need for borders and walls. The voices in favour of borders that are heard at the moment come from a position of fear, perhaps of change or the unknown. In some cases these voices highlight some of the challenges in a society that’s changing at speed; those voices need to be heard, and solutions found.

 Globalisation is increasing - but are countries retreating behind their borders, too?
Globalisation is increasing - but are countries retreating behind their borders, too? Image: KOF Swiss Economic Institute

In other cases, these voices come from a fear that the balance of power will change. Well, maybe it needs to. Because once you start building borders, the world retreats into different cells closed off from each other and competing out of insecurity and limitation. It closes down potential and opportunity.

Look at the financial sector. In theory, it should operate well on a global level - it is after all a global system, for example because of its role in facilitating international trade. And there is no reason for money not to move as easily as sending an email.

In reality, it’s quite the opposite. The financial system functions very much within national borders. Some of those constraints started for the right reasons, such as to avoid criminal use of the system; many did not. More often than not the constraints are there out of self-interest or laziness and now function as a way to protect the status quo.

Banks have always used technology. But they’ve used it in the back-end to cut costs, not to benefit their customers. The driving force has been profit, with the focus on what’s good for the bank rather than what’s good for consumers.

Compare that to the new generation of financial services companies who use technology to make the system fair. At TransferWise we started out as - and continue as - idealists. We start with what we can do to make things better and how we can solve problems, focusing on what people need. It turns out you can focus on building the best service and be successful as a business.

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Sometimes, companies are better placed than politicians and governments to make change happen. That doesn’t mean that they should not be held to account and follow international rules. But with the right motivation, they can be the force for change. That’s what we’re seeing in the financial sector right now. The new generation of financial services companies refuse to accept the limitations of the status quo; they demonstrate that an interconnected, open world leads to a positive impact, and inclusion rather than exclusion.

Hopefully, the walls will continue to be knocked down in the financial world. And the wider talk of borders and separation will turn out to be a short-term obstacle as, longer-term, we continue to progress towards a global and unified world.

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Financial and Monetary SystemsIndustries in DepthGeographies in Depth
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