Posts in Mobile money

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Next Generation Digital Financial Services Will Drive Internet Use in Africa

August 30th, 2016 Posted by Central Banks, Cryptofinance technologies, Mobile money 0 comments on “Next Generation Digital Financial Services Will Drive Internet Use in Africa”

Last week, the Internet for All initiative by World Economic Forum (WEF) presented their objectives in Nairobi, Kenya. Over the next 3 years, they plan to incorporate an additional 25 million internet users in Northern Corridor East African countries (Kenya, Uganda, Rwanda, South Sudan) and bring total internet adoption to 70%.

The group determined to make this ambitious goal a reality by including stakeholders from Information and Communications Technology ministries, mobile network companies, hardware manufacturers, software and content producers, multinational NGOs, entrepreneurs and innovators. Their approach is to target broad sectors that are helping to drive demand for internet access and lobby infrastructure providers to help curtail high barriers to entry.

So, why is the WEF focused on increasing internet usage in countries that are also busy trying to increase food security, gender development, and basic healthcare?

Well, the internet is more than cat memes and a way to follow your favorite celebrity on Instagram. The internet democratises communication, education, and enables even the poorest and most vulnerable to be heard. Not long ago, information was held in libraries and universities. Only those with the privilege and means had the ability to access that information. The internet, however, opens the library doors and allows anyone to benefit from the knowledge humanity has created over thousands of years. Now, a girl in a remote village in Kenya can use her smartphone to stream a lecture at MIT to learn computer science and a mother in rural Uganda can learn about proper nutrition without have to spend money or time traveling to a health center to talk to a nurse.

The projects underway in the Northern Corridor are impressive. Many aim at increasing digital literacy across all segments of the population. To generate demand and gain awareness for those not yet connected, new programs teach students how to access the internet for things as simple as opening a social media account. A Facebook profile piques youth interest and teaches the value of the internet at a young age. The interest gained from gratification on social networks can be leveraged to learn job skills, e.g., software coding via gamification.

In a digital world, national borders dissolve and people become more connected. The global nature of the internet shatters location and geographic glass ceilings. As more citizens of the world learn to utilize digital skills, the ability to access education materials and make income from global sources becomes less of an ambitious goal and more of a reality.

The WEF released a favorable and forward-thinking report 2 weeks ago titled, “The future of financial infrastructure: An ambitious look at how blockchain can reshape financial services”. The key takeaways are very much in-line with the vision ofMonetas:

Distributed Ledger Technology (blockchain) is not a panacea. Instead, it should be viewed as one of many technologies that will form the foundation of next-generation financial services infrastructure.

Cryptofinance consists of many different technologies that utilize and complement different technologies in order to deliver an optimal final product for the end customer. The hammer isn’t the ideal tool for every job, and blockchain technology isn’t ideal for every user story. At the WEF, many people spoke about the use of  cryptofinance and blockchain tech in various cases from digital identity management to better sharing health records. Even though I was the only person in the room from the cryptofinance sector, I sat back and listened to an array of stakeholders speak about what is needed to allow for widespread uptake of digital financial services. The three factors consensually agreed upon were straight forward:

  1. Interoperability is vital. Today, users in most markets can’t send value from one mobile network to users of another. We need to unify financial service providers so users can send money to anyone they want, regardless of what bank or mobile network they use. Sending and receiving money internationally will also further increase usability.
  2. Low value payments must be able to be made at affordable levels. With 50% of payment volume taking place below USD 1 in Kenya, users today face fees in excess of 10%. With the inability to complete day-to-day transactions, all mobile money platforms today require users to immediately withdraw funds and leave the digital medium.
  3. Mobile money today barely qualifies as financial inclusion. Financial inclusion isn’t just payments; it’s financial products, savings, loans, investments, and more. Products like M-Shwari offered by MPesa are a start, but users only receive between 2%-5% in interest in a market with +7% inflation.

The speakers at the WEF who thought they were addressing mobile money needs were actually (perhaps not even to their own knowledge) describing the benefits of cryptofinance. It’s encouraging to know that a product our engineers have been making for the last 3 years fulfils these requirements plus much, much more. Monetas looks forward to further participation in working groups at the World Economic Forum to help drive awareness of the capabilities and benefits of cryptofinance amongst the stakeholders, central banks, and financial service institutions.


An Audience of Innovators. A Stage of Incumbents.

August 4th, 2016 Posted by Cryptofinance technologies, Mobile money 0 comments on “An Audience of Innovators. A Stage of Incumbents.”

The recent GSMA360 event held in Dar es Salaam, Tanzania highlighted the great progress in mobile tech on the African continent. With the world’s first global distribution platform now at the fingertips of hundreds of millions of Africans, companies–small and large–are delivering new tools that help add value and stability to people’s lives digitally. Companies are utilising mobile for a variety of cases: from digital health products, risk profiling and lending, to digital recruitment tools that aid growing enterprises perfectly match with prospective candidates. At the event, it was apparent that one thing was missing, however: a clear look towards the innovations of tomorrow.

Today’s digital revolution is changing the way we see and use technology and it’s changing fast. We have seen the cost of phones drop drastically allowing the long tail of the population to now find value in a device that until recently they didn’t even know they needed. WhatsApp managed to cut the predatory costs of the SMS message and allowed users to communicate globally at nearly no cost. Other tools, such as health applications, have seen their user base grow by millions while distribution costs drop. Now there’s no need to go visit a hospital hours away to ask a basic medical question. Other innovators in the room, such as, have solved a problem that local banks have been failing to do for a century: they can now create accurate risk profiles of unbanked customers. Collecting a wide array of data points across various mediums, including social media and phone usage, Branch uses machine learning to accurately assign a risk profile to be used in lending for someone with only a smartphone. Adoption has been rapid. Branch issued more than 70,000 small loans in their first few months of operation. To solve the age old problem of how to connect the labor market with companies looking to expand, Duma Works has connected over 3,000 candidates to 350 companies in East Africa via an innovative SMS platform that matches talent with employer.

These are examples of real progress. Presentations on innovation at GSMA360, however, were less than inspirational. A panel on the “Next Generation of Mobile Money,” focused on front-end changes and the need for regulatory support to better make things work. In regards to ecosystem development, the presenters believe it’s the responsibility of the operators to work together and increase the usability of mobile money platforms. At a time where we see Orange charging double digit fees to their customers for low-value transfers, it’s hard to imagine them innovating to the extent necessary to create the inclusive digital ecosystem that so far has been unachievable.

When asked about how a Central Bank issued Digital Currencies (CBDC) will impact mobile money, many incumbent presenters were unaware of developments that occurred in the last few years. Sagaciously, the impact investment fund Omidyar Networkexpressed interest in the subject and seemed to be making bold steps in the right direction with their financing of eCurrency, a company that develops software for central banks. The impact of a CBDC will solve the problems faced today in mobile financial services by reducing the transfer cost to a negligible level, allowing for $0.01 transactions, and facilitating global network agnostic transfers (a WhatsApp, for value). Most incumbents still see this as science fiction, but they are unaware that even theBank of England’s report on this exact subject determined–amongst the many benefits–a 3% uptick in GDP. Mark Carney, Governor of the Bank of England, is a strong proponent of this digital future. He recognizes its potential to deliver “a more inclusive financial system, domestically and globally; with people better connected, more informed, and increasingly empowered.” In addition, Adam Ludwin of Chain recentlyspoke on the subject at the Federal Reserve in Washington DC with over 100 interested central bankers; swift developments in this arena are already happening.

These technologies aren’t a dream of the future. Most people can’t imagine how fast things develop and the speed of which creative destruction occurs with the introduction of software. Ten years ago, there was no iPhone. Today, over 127 million Africans have a Facebook page. Watching a panel of established players is certainly compelling, however it is important to understand that their experiential bias can result in an underestimation of the speed and scale at which technologies and societal practices can change. GSMA360 offered attendees an enthralling insight into the current state of the industry, however, we can be certain that the incumbents on the stage will not be the sole drivers of our future digital financial services. Partnerships and collaboration with the innovators in the audience is vital.

Disclaimer: Blog posts reflect the views of the respective authors, and do not necessarily represent the official view of Monetas.

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Four Reasons Why Cryptofinance is Replacing Physical Cash

August 3rd, 2016 Posted by Cryptofinance technologies, Mobile money 0 comments on “Four Reasons Why Cryptofinance is Replacing Physical Cash”

Cryptofinance has a huge number of high-impact killer apps, from censorship resistant value exchange (Bitcoin and its blockchain) to business automation (Monetas and its digital contracting technology). These technologies, and Monetas technology in particular, will have a significant impact on the most fundamental tool of exchange: physical cash and coin. Here are the four big reasons why cash is going the way of the dodo right now:

Cash creation is costly

Today a central bank will order, print/mint and deliver physical cash and coin to the banks in its network. This involves a lot of resources: cotton or polymers, ink, gasoline, trucks/lorries, armed guards, warehouses, manual and office labor, and probably much more. The process takes weeks or longer, and you might be paying $0.40 just to create a $50 note.

Book printing used to be almost as complicated and expensive, until e-books came along. And just like the cost to print an e-book, the cost to mint a digital note drops the production cost to near zero. With Monetas technology, a central bank uses an “issuing device”, a small hardware device, to create digital legal tender and deliver it directly to the banks in the central bank’s network.

Cash is a barrier to financial inclusion

Physical cash and coin just doesn’t fit with the model of complete and instant connectivity that the world has grown to know and love. With Monetas technology, your mobile phone or any web browser lets you send money to a friend, receive your paycheck directly, pay for groceries or lunch, or buy insurance. Any barriers to the global financial system that existed due to geography or social status have disappeared.

Cash is a constraint on monetary policy

If a central bank wants to experiment with negative interest rates or “helicopter money”, physical cash is a problem. Issuing digital notes provides more policy options and greater control. A central bank can react faster in a crisis and ensure the money is delivered to the parts of the economy that need it most.

Cash is corruption

If you want to eliminate or at least reduce corruption, you need a way to make sure that money flows in the way that you expect it to. With physical cash and coin this is impossible, but with digital cash this is simple. With Monetas technology, you can create digital vouchers that can only be spent in certain places or under certain conditions. In a natural disaster, digital vouchers might be distributed and redeemed for food, water, or shelter. Education vouchers can only be spent on school supplies or for tuition.

Disclaimer: Blog posts reflect the views of the respective authors, and do not necessarily represent the official view of Monetas.

A photo by Thom.

Traditional Mobile Money Wallets Aren’t Wallets, They’re Accounts.

June 22nd, 2016 Posted by Cryptofinance technologies, Mobile money 0 comments on “Traditional Mobile Money Wallets Aren’t Wallets, They’re Accounts.”

Wallets and accounts are two very different things. The leather wallet in my pocket is exclusively accessed by myself, and holds bearer instruments (physical cash) directly. My bank account however, is where I have entrusted my money to a third party- my bank.  That trust, is expensive. Not only the insurance of my deposit, but the amount of capital expended to insure the correct state of the ledger raises the costs of financial services, which in turn raise the barriers to entry.

Today’s mobile financial services use antiquated technology providing a simple digital interface with a centrally managed account being held by a bank or mobile network operator. We have seen tremendous success of mobile money in Africa, where users are able to digitize a once risky task; domestic remittance.

Mobile money today is far from financial inclusion. Currently, mobile money allows a user to dip their toes into financial services for the first time through the ability to transact high values digitally within a country, to a friend or family member who is also using the same mobile network.

Mobile money can not yet allow for true financial inclusion because of the antiquated system of central account management it is built on top of. What today is referred to as a ‘Mobile Money Wallet,’ is nothing more than an interface to access a centrally managed account via a mobile phone.

Centrally managed accounts are what we have used exclusively for financial services because, until now, we have always needed a trusted third party to complete transactions not taking place in physical cash. Banks have taken on this role for hundreds of years, and recently mobile networks have entered the scene. These centrally managed accounts are expensive because of the necessary backend support required to insure the correct balance and security of the account. Not everyone today realizes what an account actually is, and they don’t understand the value they see represented in an account represents only a promise.

An account balance is a promise. It’s a promise that the financial institution will return the value that the depositor has lent it.  We have seen this promise broken countless times in history, from sovereign crisis in Cyprus and Greece, to the devastation of 50,000 depositors at Chase Bank of Kenya just a few months ago. Deposit insurance, greater controls, and continual audits help to build trust and insure the safety of consumer deposits, but all add cost for the end customer and further raise the barriers to access financial services.

What if you could hold cash in a digital wallet, just like you hold paper cash in your leather wallet today?

One of the greatest advantages users of bitcoin have found, is the sovereignty of control and ability to be the sole party able to hold and transact value. When somebody holds a bitcoin, they hold a financial instrument that is conceptually similar to physical cash. As a bearer instrument, whoever is in physical possession, is the rightful owner. There are no centrally managed accounts, and holders of the cryptocurrency are the only ones able to access it.

Cryptocurrencies aren’t exclusively bitcoin, and new technologies have made it possible for central banks to issue legal tender exactly how they do today, but in a digital medium. Digital legal tender is extremely advantageous for central banks, and dozens have created working groups to investigate digital issuance to help lower the cost of printing, distributing, and securing money. China, Russia, England, and dozens of other central banks have looked at accelerating financial inclusion with digital national currencies.

This digital legal tender, which is equivalent to physical cash in every way except the medium which it is printed on, is able to take on favourable properties of cash without having to occupy the physical world.

A user is able to hold and transact digital cash directly, without the need for a trusted third party. This ability has the potential to change financial services at its core, and change the role financial institutions play today. The financial services paradigm shift brought forth by bitcoin and the blockchain is still not fully known. The ability to hold any digital bearer instrument directly, however, will change finance. A user’s wallet will hold a variety of financial instruments; cash, equity in a company, commodities, or even non-monetary instruments such as identification documents, school records, and driver’s licenses.

Because institutional risk is removed when a user is responsible for their own bearer instruments (just as it is when a person holds paper cash in their leather wallet), cost drops dramatically and the need for physical infrastructure diminishes as digital services are accessible anywhere a data network exists (which is already over 97% of global population coverage).

Mobile based banking will not be revolutionized by Apple Pay, Google Wallet, or even MPesa. No, those services simply offer an increased convenience to access legacy technologies which at their core are prohibitively expensive, complex, and require reconciliation between financial service providers.

Financial services will be revolutionised by the disintermediation of trusted third parties and the ability for value to flow like information is communicated today – digitally.

Disclaimer: Blog posts reflect the views of the respective authors, and do not necessarily represent the official view of Monetas.


An Invisible Burden on the Poor – The Cost of Cash

May 24th, 2016 Posted by Cryptofinance technologies, Mobile money 0 comments on “An Invisible Burden on the Poor – The Cost of Cash”

Due to the extortionate costs of today’s digital financial services (specifically for low value transactions), cash is widely perceived as free, and thus used as a payment tool by the poorest individuals. This misconception must be addressed, and digital services must provide for those at the bottom of the pyramid who are suffering most from the hidden losses and costs associated with a life reliant on physical notes and coinage.

Cash is still king in the developing world. Despite the success of M-Pesa in Kenya, the average transaction size over this service remains at $27. Carrying high minimum fees, the most frequently occurring merchant transactions (under 1 dollar) would carry a transaction fee of up to 10% when executed digitally across these services.

Why? Costly and complicated legacy financial infrastructure render low cost transactions expensive for the operator thus expensive for the end user. With the exception of occasional larger value remittance transactions, digital financial services remain out of reach for the billions of people across the world living on $1-2 per day.

Looking at the impact of cash on individuals and society we can identify a number of key issues.

The sole reliance on physical cash locks an individual out of the formal and global economy, and the opportunities it presents. Individuals are hard pressed to finance a small business or purchase a vehicle because of the lack of a “digital history” that allows lenders to create a risk profile for lending. Savings are stashed under mattresses, at huge risk from theft. Even small household cash flow spikes can be disastrous because of the inability to safely store value. Informal community savings groups exist, however demand high re-pay rates and leave households vulnerable to loss. Even the most intelligent, entrepreneurial minded individual will be unable to step out of poverty without access to basic financial services.

Transactions in physical cash do not carry an immediately identifiable transaction fee. This has led to the common misperception that cash is free. Despite understanding the security risks of  carrying cash and the lack of access to financial services, the principal and least recognized downfall associated with cash is the actual losses and costs associated with accessing it.

Tufts University has conducted extensive research into the cost of cash across developed and developing economies. The results are clear – those hardest hit by the hidden costs of cash are the poorest.  In Mexico alone, the costs of access to cash represents around MXN 2.3 billion (USD 125 million) and 48 million hours of time every year. And furthermore, this number excludes all other means of loss associated with holding cash;  petty crime, loss, corruption, and the opportunity cost of cash not held in an interest bearing account.

For the poorest individuals the cost of travel and the time lost in reaching the cash access point is highest. An average Mexican loses around USD 1 per month. In the US, people spend 28 minutes per month accessing cash, with the lowest income individuals spending on average 5-10 minutes longer. Specifically those with no bank account or unemployed. This time and money lost travelling to and queuing at a cash access point, as well as paying the access fee results in a huge loss of productivity.

If these costs were to be calculated into a “cost per transaction”, it would become obvious that cash is clearly not the cheap option we all perceive it as. And certainly not for those who rely on it most heavily.

Furthermore, it is important to recognise the costs to the government. On a macroeconomic level, producing, securing, and distributing physical notes and coinage costs around 1–2% of GDP in developed countries, and 5–7% of GDP in developing countries. These costs may seem invisible but are in reality a huge burden on the economy.

Today, cash may be the cheapest option but it certainly isn’t free. Looking to the future of a cash lite society, we can identify three key steps that must be taken: the first is the significant reduction in transaction fees and provision of a service that can process true micro transactions digitally –  even less than $0.01. The second is the creation of a fully interoperable digital ecosystem through the central bank issuance of a national digital currency. Thirdly,  we must consider the use of an extremely efficient and secure technology that is able to power the transactions of entire national economies.

It is unlikely in the near future will see total eradication of physical cash, however the benefits associated with the introduction of a widely used digital payments systems will be huge: lowering the barrier to access financial services, stimulating financial inclusion, and adding huge value to a country’s economy.

Disclaimer: Blog posts reflect the views of the respective authors, and do not necessarily represent the official view of Monetas.

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CeBIT Global Conferences: An Interview with Johann Gevers, Monetas Founder and CEO

April 1st, 2016 Posted by Central Banks, Cryptofinance technologies, Mobile money 0 comments on “CeBIT Global Conferences: An Interview with Johann Gevers, Monetas Founder and CEO”

In this short interview, Johann discusses Monetas’ digital contracting technology and the benefits of creating Crypto Valley as a hub for digital finance.


Startup-Corporation Collaborations: A Discussion with Vitus Ammann, Monetas and Penny Schiffer, Swisscom

April 1st, 2016 Posted by Cryptofinance technologies, Mobile money 0 comments on “Startup-Corporation Collaborations: A Discussion with Vitus Ammann, Monetas and Penny Schiffer, Swisscom”

Vitus Ammann, CMO and Penny Schiffer, Head of Innovation at Swisscom, discuss the impact digitization is having on large corporates. Together, Penny and Vitus highlight the difficulties corporations encounter keeping up with the rapid pace of digitization, and the benefits that come with a startup-corporation collaboration. It is clear that the innovative, agile, and visionary nature inherent to startups cannot be ignored.