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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
Pagos, a startup that provides intelligent payment infrastructure for commerce, is placing its stakes in the payment space today. The newly-minted company landed $10 million in a round led by Underscore VC and Point72 Ventures that also included participation from Amit Jhawar, Bill Ready, Billy Chen, and Rich LaBarca.
Pagos will use the funds to build out its team with more engineers.
Company founders Klas Bäck, Albert Drouart, and Daniel Blomberg launched the company earlier this year to help businesses optimize their payment infrastructure by integrating Pagos’ API micro-services into their payments stack.
Pagos offers a range of four products to help understand and build a better payment infrastructure. Offerings include Parrot, which provides enhanced Issuer Identification Number or bank identification number data; Peacock, which connects to business’ processors to provide payment analysis and optimization tools; Canary, which detects patterns and predicts opportunities from customer data; and Toucan, an API to integrate network tokenization into any payment stack.
“The challenge we saw pretty much for every one of our customers was that they didn’t have enough knowledge, not enough data and not enough tools to be able to execute a strategy around payment processing or know how to optimize it,” Bäck told TechCrunch. “This means they are a lot slower and they have a much harder time doing all the things they need to do and producing the results they want.”
Pagos holds a lot of promise, and not only because of consumers’ recent shift to online shopping and digital payments. As Chris Gardner, partner at Boston-based Underscore VC explained, “…their potential market is every e-commerce merchant in the world — and there are millions of them. Those are two potent ingredients in a winning recipe.” Additionally, company Founders Bäck and Drouart have both held senior leadership roles at PayPal for almost a decade, while Blomberg has launched seven startups, five of which were acquired, over his career.
When it comes to financial inclusion, it’s easy for some people to turn a blind eye. However, when banks and fintechs help to solve gaps in the current environment, there’s more potential to boost everyone’s financial health.
Lloyd Pitchford, CFO at Experian, is working on promoting financial inclusion via Experian’s Environmental Social and Governance (ESG) program, which helps Experian improve its performance across ESG matters, including supporting financial inclusion and financial health.
We spoke to Pitchford about the program and his view of the current financial inclusion environment and how the industry should respond.
How have you seen financial inclusion awareness evolve into what it is today? What has prompted the increased awareness?
Lloyd Pitchford: The United Nations includes access to financial services, such as credit and microfinance, among its Sustainable Development Goals. Access to affordable credit opens the door to opportunities for people to transform their lives – from homes and healthcare to education and entrepreneurship. This has never been more important than it is today, following the global pandemic.
There are times in most of our lives where we can’t get access to the financial system in a way that we want, be it for a mortgage, a car, or a business loan. We’ve all experienced the frustration when you feel you’re on the outside of the system and you can’t do the things you want for yourself or your family. At Experian, it’s our job to change that. We want to make sure everybody is included and has access to fair and affordable financial products. Financial inclusion is fundamental to our business.
When it comes to financial inclusion, what are some of Experian’s offerings you are most proud of?
Pitchford: As the pandemic took hold in 2020, we stepped in with data and analytics to support governments, health services and national emergency response efforts. Our data and analytics helped them plan ahead and direct health care and financial support to the most vulnerable people through major initiatives such as COVID Radar in Brazil and Experian CORE (COVID Outlook & Response Evaluator) in the USA.
It soon became clear that the impact, not just on physical health, but on financial health, would be far-reaching for people around the world. We looked at how we could mobilize our expertise and resources to help communities through the crisis and focused on financial education as the best way to strengthen their resilience and support their road to recovery.
Through the launch of our United for Financial Health programm we rapidly established 11 NGO partnerships across our biggest consumer markets to deliver targeted financial education for some of the communities hit hardest by COVID-19. By the end of the year, we had reached nearly 35 million people, more than double our original goal of 15 million, and we’re not stopping there. We aim to reach 100 million people by 2024.
Part of our efforts include our member relationships around the world. This year, we surpassed the milestone of 100 million direct relationships with consumers globally and delivered further innovations to support people through our business, such as the launch of products like Experian Boost in the UK and Serasa Score Turbo in Brazil. This, of course, is on top of our ground-breaking Experian Boost launch in the United States a few years ago. Our goal is to have a direct relationship with as many people as possible; to truly become the Consumers’ Credit Bureau and power financial opportunities for all.
What advice would you give other incumbents who are trying to drive financial inclusion within their organizations?
Pitchford: I would point to our culture of innovation. It helps us harness opportunities to drive business growth. We are continually investing in product innovation and new sources of data to address emerging market opportunities that can make a real difference to global communities. In 2020, around 1,000 innovators from across Experian joined our annual Future of Information Conference – which was held virtually because of the pandemic – to encourage them to think differently in their work. Topics included fairness in artificial intelligence, transforming agribusiness, and enhancing the consumer healthcare experience. Teams at our DataLabs in Brazil, Singapore, the U.K. and the U.S.A. tap into our culture of innovation to continually create new solutions to global challenges. The result of all this is that our Social Innovation products have now reached 61 million people since 2013. We aim to reach 100 million by 2025.
What challenges exist in serving underbanked communities as an incumbent? Would it be easier as a startup?
Pitchford: Our annual Sustainable Business Report notes that more than a billion people in Asia Pacific lack access to formal financial services, 45 million in the U.S.A. have no credit profile or are unscoreable, 45 million in Brazil are unbanked, and over five million in the U.K. have no credit history. So we know we’ve got more work to do and we remain focused on using our business to make real and sustainable change. With social innovation running so deeply through the core of our culture, and our commitment to improving global financial health front and center of our thinking, we will continue to push to find new solutions to help people, serve communities and protect the environment, helping to create a better future for all.
Arival Bank, which won Best of Show in its FinovateAsia debut in 2018, is now a fully licensed and regulated bank. The company was granted its U.S.-based banking license in Puerto Rico and will leverage its “U.S.-based but internationally friendly” license to work with customers around the world. The license generally allows banks to offer full stack fiat banking services, upon receiving the necessary authorization from the local regulator.
Arival Bank’s primary customers are international technology firms. The bank offers these companies USD-based bank accounts, and supports both domestic and international payments for global technology companies. Arival so far has onboarded more than 100 business customers from more than 25 countries, with the biggest demand coming from firms in the U.S., Canada, the U.K., European Union, and Singapore. Arival has experienced 1.7x month-over-month growth and boasts $13 million in assets under management.
“We’re focused on providing bank accounts to customers who have been labeled as ‘abnormal’ or ‘too risky’ by traditional banks,” Arival Bank COO Jeremy Berger explained in a statement. These firms include everything from international tech startups, digital SMEs, and money service businesses, to crypto exchanges and blockchain startups. “We’ve proudly turned this market of misfits into our niche, and we strongly believe the market demand of the ‘abnormal’ will soon outgrow the demand of the traditional banking clientele,” he said.
Arival’s management team (Director of IT Security Raul Rosado, Head of Finance Vivien Fernandez, CCO Sonia Camacho, Head of Global Compliance Ana Cavallini, Co-Founders Igor Pesin and Jeremy Berger) at the Office of the Commissioner of Financial Institutions in San Juan, Puerto Rico.
In terms of traction, Arival Bank recently was invited to FinCEN’s innovation program to showcase its compliance technology to more than 20 top U.S. regulators. FinCEN is the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury that focuses on defending the financial system against criminal and illicit activity, including money laundering. “We’ve built a compliance-first culture and like to think of ourselves as a cutting-edge compliance firm with a banking license,” Berger said. “That’s really our X factor at the end of the day.”
Additionally, Arival Bank has inked a partnership with Railsbank to launch SGD accounts and local payments as part of its borderless account opening offering. The company noted that it may leverage its relationship with Railsbank to expand its services in regions like Europe and Latin America.
“We’ve achieved significant traction since our launch – in large part thanks to our supportive group of visionary investors from our Seed and Pre-A rounds,” Arival Bank co-founder and CFO Igor Pesin said. “They’ve enabled us to invest heavily into key facets of building a digital bank fit for the 21st century: licensing, technology, infrastructure, compliance, and user experience.”
“We’re starting to gear up for our Series A round as we enter a new phase of growth driven by scaling our footprint internationally,” Pesin added. “Being live operationally is somewhat atypical for a licensed digital bank at their Series A round. In other words, our commitment to infrastructure meets our readiness to scale. And we have the license, product, and team to become the go-to digital bank for a new generation of businesses and entrepreneurs.”
Founded in 2018, Arival has 50 employees and hopes to double its workforce by 2022. The company’s investors to date include SeedInvest, Crowdcube, and Polyvalent Capital. Earlier his year, Arival Bank was nominated by Daily Finance as one of the top Fintech Companies in Singapore.
Just days after relaunching its online store and appointing a new CEO for its European operations, point of sale (POS) technology provider SumUpannounced the acquisition of customer loyalty startup Fivestars for $317 million. The purchase marks SumUp’s sixth overall acquisition but its first in the U.S.
“Our global community of merchants has battled through lockdowns and volatility and we’re confident that this acquisition will further energize the U.S.’s recovering small business economy,” said SumUp Co-founder Marc-Alexander Christ. “Now is the time to make sure our presence is as strong in the U.S. as it is in Europe and, by acquiring Fivestars, SumUp will deliver for U.S.-based merchants as it has in other international markets.”
SumUp launched in 2011 and now helps three million merchants across the globe get paid. The company offers card reader, QR code and POS payment technologies, along with management and reporting tools and invoicing capabilities. Lacking in this product lineup, however, are loyalty and rewards offerings. This is where the integration of Fivestars’ technology comes in. Providing small business clients a way to reward their customers and build loyalty will help SumUp compete with other POS technology providers such as Square, Shopify, PayPal and Zettle.
Founded in 2010, Fivestars helps businesses set up a digital rewards program that gives customers points and gifts for their purchases. The technology automatically sends campaigns to welcome new customers, celebrate their birthdays, and bring back customers who haven’t visited recently. Fivestars also offers enterprise loyalty programs for larger franchises; clients include brands such as Play it Again Sports, Super Cuts, and Orange Leaf.
The acquisition will also help SumUp launch operations in a new geographical market. The U.K.-based company will now have access to Fivestars’ 70 million consumer members and 12,000 small businesses; a network which drives $3 billion in sales and 100 million transactions each year. Fivestars’ San-Francisco-based team, along with its CEO, Victor Ho, will remain in their roles and continue to operate Fivestars.
SumUp raised $869 million (€750 million) earlier this year, bringing its total funding to $1.4 billion. The company supports over three million merchant users in 34 markets.
This is a sponsored post by Cyvatar, Gold Sponsors of FinovateFall 2021. Written by Craig Goodwin & Corey White.
In case you missed it, we’re losing the battle against hacks and breaches. Even though more and more security tools come online every year, personal information and other sensitive data doesn’t get better protected.
We buy more products. We get breached.
We adhere to compliance standards. We get breached.
Why can’t we do better?
Increasingly sophisticated and relentless attacks and high-profile breaches, like the one at Solarwinds, spur the purchase of more and more tools, but companies rarely (if ever) have the right people and processes in place to ensure the tools they purchase are installed–installed and configured correctly–to say nothing of the ongoing assessments, remediation, and maintenance needed to achieve a solid return on their cyber investments.
The industry’s response has long been to build newer, shinier products, knowing that buyers will come; when the technology fails to defend against a breach, managed services providers step in to remediate after the fact and “manage” the customer’s environment against future incursions.
Then a Solarwinds or an Equifax or a Marriott happens.
It’s a vicious cycle–a cycle companies can break by stepping away from traditional notions of ownership (i.e., buying or “owning” a security tool, platform, or solution) and embracing the Membership Economy.
What is the Membership Economy?
The Membership Economy, coined by Robbie Kellman Baxter in 2015, includes any organization whose members — what another company might call customers or clients — have an “ongoing and formal stake” in that organization.[1] The human desire to belong, to be part of a community or affiliated with an exclusive organization, is fulfilled in the Membership Economy, and Netflix is one of its best-known acolytes.
Key components of the Membership Economy include:
Continually focusing on the needs of members
Understanding your members’ frustration as well as their satisfaction
Embracing a willingness to forge new paths to meet member desires or address their concerns–flexibility, innovation, and evolution are all part of this process
Communicating a strong, clear value proposition
Investing in the membership experience
Cybersecurity companies, like many technology organizations, still focus on transactional sales. Customers buy a software or services package for a period of time–typically two to three years–and are largely left to fend for themselves until their contract comes up for renewal. Also like other technology deployments, security installations can be complex, costly, and time consuming, often making it difficult for customers to change or add products in their production environments. Even when a customer is unhappy with a product, swapping it out for something new may be more trouble than the customer thinks it’s worth, which leaves little incentive for transaction-driven security companies to foster meaningful innovation in their offerings.
In other words, ownership in cybersecurity is a liability. The thousands–even millions–of dollars organizations spend on tools and platforms tied to those multiyear licensing agreements effectively hold them hostage regardless of product efficacy. In the event of a breach, they’re still stuck in their contract and may even feel the need to buy more tools to bolster their security posture. Security product companies are hamstrung by the model too: Once they create products to deliver their solutions, they become limited by the scope of their own design, for good or ill, and innovation remains stalled.
Groundbreaking innovation through experimentation, development, and even dumb luck has enabled significant economic growth–and has toppled entire organizations that were upended by the thoughtful and rapid advancement of others,[2] as Blockbuster was by Netflix. As the pace of technological change continues to accelerate with force, so too does the cyber attack surface.
Taking the next step
Membership–the Netflix model–is just such a foundational change. It can be every bit as disruptive and transformational to the cybersecurity industry as Netflix itself was to the movie rental and streaming industries. Here’s how.
Subscriptions alone do not a Membership Economy make.
Subscriptions are a good first step. Subscriptions make it easy for members to select the pricing and options that are best for them, and consistent and predictable revenue streams benefit shareholders and users alike. But subscriptions alone do not a Membership Economy make. It’s important that security companies understand the need behind each package they develop so they can grow members into new offerings and ensure value is continuously delivered.
Additionally, the Membership Economy can’t work without high levels of member engagement, which is why Baxter recommends that a good membership program be beneficial for members as well as the company that serves them. Benefits stemming from loyalty create bonds, even emotional connections, between members and the companies they associate with, which in turn create vibrant communities of influencers and evangelists that become a continual source of innovation for Membership Economy organizations. By staying close to your members and active in the communities you share with them, you’re always a part of the feedback loop, enabling you to continue to evolve your offerings to meet member needs.
Cybersecurity-as-a-service, or CSaaS, brings all of these concepts to life. CSaaS is inherently a member-driven model, allowing providers to focus on access rather than ownership. Instead of selling transactional point solutions or fee-for-services to create what we used to call customer “stickiness,” security companies can use the membership model to level the playing field and democratize cybersecurity, making the best protection accessible and affordable for every size organization, even those with no cybersecurity expertise in house.
The CSaaS membership model offers a new, innovative paradigm for successful protection from today’s advanced cyber-attacks by pairing skilled security advisors with proven processes and best-of-breed technologies to deliver guaranteed business outcomes. Importantly, CSaaS handles the heavy lifting associated with evaluating and recommending solutions from more than 4500 security vendors so that members can focus on scaling their businesses without worrying about securing the sensitive data and information that make those businesses successful.
CSaaS also ensures that recommended solutions are installed and configured completely–and correctly–in addition to providing ongoing remediation of cyber threats and vulnerabilities and regular maintenance of security tools. By selling membership rather than ownership in the CSaaS model, members can achieve faster compliance to standards like NIST CSF, SOC 2, PCI, and HIPAA.
[1] Baxter, Robbie Kellman. “The Membership Economy: Find Your Superusers, Master the Forever Transaction, and Build Recurring Revenue.” McGraw-Hill Education. 2015, p. 26.
Cryptocurrency exchange platform Coinbaseannounced plans this week to launch its own NFT marketplace. Dubbed Coinbase NFT, the new marketplace will help users mint, purchase, showcase, and discover NFTs.
“Just as Coinbase helped millions of people access Bitcoin for the first time in an easy and trusted way — we want to do the same for the NFTs,” said Coinbase VP of Product and Ecosystem Sanchan Saxena.
Coinbase NFT, which the company aims to launch at the end of this year, will offer a user-friendly interface that the company said will be “as simple as tapping a few buttons.” The new platform will be creator-centric, placing art and the artist’s experience at the forefront.
Coinbase is putting creators first by leveraging decentralized contracts and metadata transparency to help artists maintain creative control. Additionally, the platform will cultivate a community for artists and their fans using social features to help users discover and discuss NFTs. Coinbase NFT will curate a personal feed based on users’ interests. User profiles will showcase all of their NFTs and will help them connect with like-minded collectors and artists.
“Our ambition with Coinbase NFT is to allow everyone to benefit from their creative spark; to contribute to a future where the creator economy isn’t a small subset of the real economy, but a central driver,” said Saxena.
Coinbase NFT will compete with NFT exchange platforms such as OpenSea, one of the major players in the space. According to TechCrunch, OpenSea facilitated $3.4 billion in transaction volume in August of this year. Coinbase NFT boasts two differentiating factors that set it apart from OpenSea. The first is that Coinbase is placing a large focus on the social and community aspects of its tool, something that OpenSea lacks. Coinbase’s second differentiation is that it comes with brand recognition and a built-in client base of 68 million users.
Currently, there is no word from Coinbase on the commission percentage it will charge artists, nor on the royalty percentage for perpetual trades. Whatever it decides, it will need to compete with OpenSea’s relatively-low 2.5% fee.
Coinbase went public on the NASDAQ earlier this year, trading under the ticker COIN. The San Francisco-based company’s user numbers increased 44% in the third quarter of this year, up from 56 million users in the previous quarter. Brian Armstrong is CEO.
Accounts receivable automation firm Billtrust made its first acquisition since going public via a SPAC merger a year ago. The New Jersey-based company purchased collections management company iController for $58 million.
Belgium-based iController was founded in 2017 and offers a SaaS product that provides credit and collections professionals visibility into cash flow management. Billtrust will acquire the iController team, along with the company’s 566 Europe-based clients. iController employees will continue working in the company’s offices in Belgium The Netherlands.
“Acquiring a great company like iController is consistent with our growth plan of strategic global expansion in targeted ways to broaden our customer footprint and provide extended value to our current customers,” added Billtrust Founder and CEO Flint Lane.
Billtrust was founded in 2001 and today’s deal marks the company’s eighth acquisition.
Billtrust offers a wide variety of products, including credit, ecommerce, invoicing, payments, managed services, training, and more. The company also offers a collections tool, which will be enhanced with iController’s collections product. Billtrust President Steve Pinado described iController as “a strong strategic fit,” saying that the company will help Billtrust not only expand its physical presence in the European market but also enhance its collections capabilities.
In 2013, Billtrust launched its Business Payments Network, a service that connects suppliers to accounts payable automation platforms buyers are using to pay, as well as to a network of third-party banks and ERPs. Earlier this year, the company updated the platform to now support bi-directional exchange of transactional data and documents. The new release now enables invoice presentment to accounts payable portals.
Data-driven decision-making is something most businesses aspire to. However, for the majority, significant data silos across the enterprise often means that the data they are using is delayed and inconsistent – resulting in decisions that are neither timely nor accurate. Instead, what organizations need is real-time access to their data and a consistent enterprise view. Fortunately, this is where a data fabric with both embedded analytics and self-service business intelligence (BI) can be extremely powerful.
The use of embedded analytics and self-service BI in combination with a data fabric allows organizations to give a wider range of users the ability to visualize and explore data more freely, empowering employees, partners, and customers with accurate information. Yet, while most organizations recognize the value of actionable analytics, currently most struggle to provide critical metrics and access to ad hoc analysis. In fact, our research shows that only 7% of organizations say more than half of their employees have access to a data analytics platform.
With a staggering 93% of organizations revealing that the majority of their employees don’t have access to analytics, let’s look at how they can set themselves up to become a more data-driven organization.
Bridging data silos with embedded analytics tools
To gain the most benefit from their data and analytics platform, businesses should look to start prioritizing and bridging data within their organization. While they are likely to be faced with a large number of silos, prioritizing key metrics and iteratively connecting data sources will allow companies to reduce redundant data and provide a common language across data sources.
Implementing a smart data fabric, a new architectural approach, will also help to remove silos and help organizations to gain a common semantic view of the data, even if that data remains distributed. Businesses that have grown through mergers, acquisitions or organic expansions benefit from both local and organization-wide visibility. A common semantic view will also enable performance comparisons over time – day to day or year over year, and allow for analysis of patterns and trends.
Vitally, this enterprise view will give businesses a firm foundation to introduce analytics capabilities.
Figure out what needs to be measured
Once they have started taking incremental steps to unify their data, organizations should seek to understand where the real business problems lie and the questions they need to answer. As part of this, they should consider what issues or challenges their CEO and business counterparts, such as the CIO and COO, currently face and what will help them characterize and measure improvements.
Using this as a starting point and working back will allow the IT teams who will be undertaking the implementation to understand what data and insights they need to provide to answer the questions those leading the business have. It is also important to leave capacity for additional metrics because once they are being used effectively, there will be a need for future measurements and answers.
This approach will ensure the organization is clear about where to apply analytics to derive the most value and to impact the most change. Following this method, they can then build out the capabilities across different parts of the organization.
Success lies in collaboration
While likely to be driven by IT teams, implementing analytics platforms isn’t just an IT initiative. Instead, it requires collaboration from individuals across the organization.
To guarantee success, different teams should work together iteratively and constantly assess the contributions being made by the introduction of analytics platforms and continue to refine the use cases and required metrics to understand whether they are providing value and what changes might be needed to measure progress.
Taking this approach will help to iron out any issues as they occur and ensure that all users are extracting real value from the platform.
Simplifying the complex
For most businesses, obtaining a single source of truth from which they can gain insights can be extremely complex. Not only do organizations tend to have a large number of data silos, but they already have a range of different technology in place, from data warehouses, data lakes and data marts, to integration platforms and BI tools. As such, the majority are ideally looking to simplify their technology infrastructure, but without having to rip and replace.
Smart data fabrics make this possible, helping businesses to unlock the true potential of their data by speeding up and simplifying access to data assets across the entire business. This is all while allowing existing legacy applications and data to remain in place, to enable organizations to maximize the value from their previous technology investments.
Realizing the value of embedded analytics
The benefits of embedded analytics capabilities span across all industries, allowing businesses to make more informed decisions and enabling a variety of business users to have access to actionable insights. A data platform like InterSystems IRIS which includes embedded analytics and ad hoc analysis tools, also forms an integral part of a smart data fabric architecture. InterSystems IRIS can provide organizations with access to live data on-demand, integrated from multiple applications such as trades, equity and fixed income positions, or treasury.
This technology ensures that businesses are able to make decisions on current data, including live transactional data, and eliminates latency from source systems. Additionally, it supports business user self-service analytics, enabling drill down and ad hoc capabilities and can also help to automate time consuming tasks such as ongoing integration and interoperability – freeing up the IT team to focus on more value-adding tasks.
With access to more comprehensive, accurate, and timely information, employees across businesses will be better placed to make informed decisions and measure the success of new initiatives needed to drive their organization forward.
Grab the popcorn. It’s time to watch some FinovateFall demos and chill. All 74 of this year’s live demos from FinovateFall 2021 are ready for your viewing pleasure.
Simply check out the demo tab on the Finovate website to browse, find, and watch any of the seven-minute demos from last month’s event for free. Already seen them all? Send a link to a colleague who wasn’t able to make it!
The best way to dive in is to check out the demos that the audience voted as Best of Show. Here’s a list to get you started:
Three payments powerhouses have partnered this week in a movement toward fast and seamless cross-border payments. France’s EBA Clearing, Belgium’s SWIFT, and the U.S.’s The Clearing House (TCH) are working together to launch Immediate Cross-Border Payments (IXB).
IXB is a new initiative that can synchronize settlements in two different, instant payment systems and convert real-time messages between both systems. A total of 11 banks contributed to IXB’s design. Seven banks, including Bank of America, BBVA Group, Citi, HSBC, Intesa Sanpaolo Bank, J.P. Morgan, and PNC Bank, participated in the proof of concept alongside EBA Clearing, SWIFT, and TCH, three private-sector, member-owned companies.
“IXB demonstrates how the current ecosystem of cross-border payments may be enhanced and made suitable for new high-volume 24/7 business,” said EBA Head of Service Development and Management Erwin Kulk. “In combination with an international request to pay, its potential applications would be limitless.”
The impetus of IXB is the fact that consumers and businesses have come to expect domestic payments to be sent and received in real time. In their minds, cross-border transactions should be no different.
IXP leverages regional payments infrastructure, such as the RTP network in the U.S. and RT1 in Europe, to help banks of all sizes offer instant, cross-border payments more easily. That’s because, by relying on existing infrastructure, banks don’t need to build or connect to a separate network.
“By utilizing existing faster payments systems, financial institutions can leverage existing processes, protocols, and technology to make the user experience seamless across payment types, whether domestic or cross border,” said TCH’s EVP for Product Development Russ Waterhouse.
One of the biggest experiments in bringing cryptocurrencies to the mainstream is taking place in the small Central American nation of El Salvador. Earlier this summer, the country’s legislative assembly authorized granting Bitcoin status as legal tender inside El Salvador beginning September 7th. One month after Bitcoin joined the U.S. dollar as the second official currency in the country, what can be said of the project so far?
This morning, Reuters took up the question of Bitcoin adoption in the country and discovered that the initiative has boosted use of the cryptocurrency, but that increase in use has come with more than a few “headaches” for many Salvadorans who have attempted to withdraw cash from Bitcoin wallets or make other transactions with the digital asset.
On the adoption front, Forbes reported late this week that the Bitcoin project has resulted in more Salvadorans having digital, Bitcoin wallets than traditional bank accounts. According to the article, approximately three million Salvadorans have downloaded Chivo, the new, government-sponsored digital wallet to facilitate Bitcoin transactions. This adds up to 46% of the country’s 6.8 million population. “By contrast,” Forbes noted, “as of 2017, only 29% of Salvadorans had bank accounts.” The Forbes account also observed that Chivo is not the only option available to those seeking to transact in the cryptocurrency; the availability of other digital wallets suggests that the estimates on early Bitcoin adoption by El Salvador’s citizens could be significantly higher.
El Salvador president and long-time Bitcoin backer Nayib Bukele boasted recently of negotiations with the country’s largest gas stations to offer reduced prices for those paying for gasoline using the Chivo app. But widespread adoption by the country’s retailers will still be one of the initiative’s biggest hurdles. Part of this issue is likely timing- a Reuters story reported that, according to the Salvadoran Foundation for Economic and Social Development, 12% of consumers have used Bitcoin in the month since the Bitcoin Law was implemented, and that 93% of the 233 companies it surveyed were reporting no payments in Bitcoin over the same time period. But another part of the issue may be easily explained by Chivo itself, which provides instant conversion from Bitcoin to dollars – meaning Salvadorans who own Bitcoin can still readily pay for transactions in dollars if they choose to.
Nevertheless, early indications are that the project may accomplish its most important role of promoting financial inclusion – especially among the country’s poorer, rural-based citizenry. While some in the business community remain skeptical – and more aggressive opponents of the measure have resorted to vandalizing and defacing Chivo ATMs – others point to the possible use of Chivo as a way for expat Salvadorans living in places like the U.S. to send money to family still in El Salvador as a use case that could help drive Bitcoin adoption in the country. Potential cost savings of using Chivo instead of traditional money transfer services – as well as the Salvadoran government’s willingness to incentivize Chivo use with Bitcoin bonuses of up to $30 – could help Bukele’s Bitcoin brainchild sustain the momentum it already has achieved in its first 30 days.
Here is our look at fintech innovation around the world.
Areeba, a Lebanon-based, issuing and acquiring service provider to financial services companies in the Middle East, teamed up with Netcetera to implement the latest 3-D Secure protocol 2.2.
MoneyGram, a pre-digital P2P payments player, announced a collaboration this week that will send funds faster and offer consumers more options.
The Texas-based money transfer company is partnering with Stellar Development Foundation, a non-profit that supports the development and growth of the Stellar blockchain network, and Circle, an online platform that enables users to send money. The partnerships will enable consumers using Circle’s USDC stablecoin to receive cash funding and payout in local currency, and will facilitate near-instant backend settlement.
As Stellar Development Foundation CEO Denelle Dixon explained, the partnership combines the reach of MoneyGram’s services with the speed and low cost of transactions on Stellar. As a result, “a new segment of cash users will be able to convert their cash into and out of USDC, giving them access to fast and affordable digital asset services that may have previously been out of reach,” Dixon said.
Once the partnership goes live, end consumers will be able to use MoneyGram to convert USDC to cash, or cash to USDC. United Texas Bank will serve as a settlement bank between Circle and MoneyGram. Thanks to Circle’s USDC, consumers will also see their funds settle in near-real-time, resulting in accelerated money movement, improved efficiency, and reduced risk.
“At MoneyGram, one of our top strategic priorities is to pioneer cross-border payment innovation and blockchain-enabled settlement, and we’re thrilled to now work with the Stellar Development Foundation to further our efforts,” said MoneyGram Chairman and CEO Alex Holmes. “As crypto and digital currencies rise in prominence, we’re especially optimistic about the potential of stablecoins as a method to streamline cross-border payments. Given our expertise in global payments, blockchain, and compliance, we are extremely well-positioned to continue to be the leader in building bridges to connect digital currencies with local fiat currencies.”
This isn’t the first time we’ve seen MoneyGram using blockchain technology. The money transfer giant partnered with Ripple in 2019 to leverage XRP for cross-border payment and foreign exchange settlement. That partnership has since ended, but MoneyGram has gone on to initiate other partnerships that provide broad consumer access to digital currencies.
