What on earth am I doing?

As a startup founder you have to refine your vision a bit and a million articles purport to tell you how to guide your thought processes. They generally take the form of lists like this one I totally stole from any one of a million Medium posts which purport to tell you how to be a startup CEO.

What is the problem we’re solving?
What is the market size?
Why now?
What traction can we show?
Who are our key competitors in the market?
How will we make money?
What is our unique advantage?
And finally…why us?

These are fairly useful questions, and I think it’s maybe time I put down somewhere some answers for these questions for Mautinoa Technologies. It certainly will save me some time when trying to explain what we’re doing, why we’re doing it, and some of the choices we’ve made. There are also links in the texts to other articles that explain some of the ideas and stats that underpin some of the key issues we are trying to solve.


What is the problem we’re solving?

Access to and delivery of physical cash is often a limiting factor that holds back economic activity in the developing world. Existing technologies either require reliable infrastructure, expensive smartphones, or are very heavily siloed. We can do away with almost all of that because we think we have built something better:

A cryptographically secure digital wallet service on an NFC (contactless) card and a cryptographically assured backend ledger which works for peer to peer, merchant, government to people and business to persons, payments remotely and locally on-line, and locally offline when the network is down

Our technology platform makes digital liquidity easily and always available as if it was cash and works online and offline. Access to financial services like savings and loans is a key plank of poverty reduction, allowing people to trade and save their way out of poverty and letting the micro and small businesses at community level grow and employ more people

So far so elevator pitch. While this is fine for a silicon valley VC with the attention span of a goldfish on the finest Bolivian marching powder, you’re probably wondering why this is a problem anyone would want to solve, after all in the developed world, ATMs are everywhere, and the last time you went on vacation to somewhere that was a little bit adventurous, your Visa card still worked, even if you couldn’t find anyone who would take your black Amex card. To figure this out, let’s talk about the 3 billion poorest people on earth, and which leads to the next question.

What is the market size?

According to the World Bank only 53% of adults on earth have an active bank account. That leaves roughly 4.3 billion adults on earth who either don’t have a bank account (estimated 1.2 billion) and 3.1 billion who have an account but don’t regularly use it. To those of us in the developed world, the latter might seem a bit strange, but let’s take the example of an pensioner in East Timor: he uses his bank account twice a year when he is paid his pension; he walks to town to take out all the money in his bank account in one go. Technically he has an account, but in reality this fellow is what is commonly called underbanked. He has no access to savings services, and he keeps his money in a box under the bed where it doesn’t do anything other than maybe get a bit mouldy. For the bank, this chap isn’t much use as a customer, because he takes all of his money out in one go, they don’t have any money to lend to local businesses. Without loans, the local businesses can’t invest, and the whole economy stays depressed. Which is terrible for everyone, except foreign businesses with access to cheap capital, they can buy everything (people, resources, land, rebel armies etc…) for a song, and give you the developed world consumer cheap goods while netting a massive profit margin.

In some parts of the world, the trend is even worse, with fewer people saving and getting ever closer to absolute destitution. This is a good short article about the underbanked by Dan Kopf.

Why now?

To answer this question, it’s probably worth exploring how I first ended up thinking about the problems of finance in the infrastructure poor developing world and disaster ready finance.

Disaster

For the last 14 years I’ve been a member of MapAction, a small UK volunteer based NGO that provides mapping and geospatial information services for the coordination of humanitarian aid in major emergencies. That volunteer role has taken me to some of the biggest and most dramatic scenes of devastation that the world has ever seen. The first hand experience of working in the immediate aftermath of these events, is searing to say the least. From this vantage point it is clear that weather disasters are becoming much more frequent and are happening in places whether they historically haven’t as the climate warms up thanks to our pollution.

Ideally people have money before a disaster hits, this allows them to either get out of the way, or prepare to weather the event. The earlier funds are invested in resilience, greater savings can be achieved. The Pew foundation estimates that every dollar spent in preparedness saves 6 dollars in relief. How to get money to people to invest in preparedness?

Once a disaster hits, the transition from rescue to recovery is usually characterised by lots of well meaning people giving lots of money which is turned into goods which are then delivered for free by well meaning NGOs. This is great in the short term, but often compounds disaster in the long term in poor countries, as this tsunami of free things totally submerges the local private sector who in addition to the destruction of the disaster, now find themselves competing with free goods. The locals go out of business as local people don’t have money to spend, and a state of aid dependency develops. Several excellent books and documentaries cover this: Dead Aid by Dambisa Moyo is probably the best known of the books and Poverty Inc does a good job of outlining the problem in documentary form.

To their credit, many NGOs realise this is a problem now, and are moving to cash based aid, but this is riven with problems. Accountability to donors is often painful and the logistics of the delivery of cash is often fraught with difficulty; from finding enough banknotes and coins, to getting it distributed in a timely fashion and concerns around fraud and misappropriation. Digital finance is held out as a way to get round most of these problems but low and patchy uptake means that physical cash is still king (for now).

In the developed world, people are affected by hurricanes, floods, cyclones and fire and until the infrastructure is repaired they are functionally in the same place as the people in the least developed countries, who never had reliable infrastructure to begin with. With more of these events happening more frequently than ever before, it makes sense that these people need access to the same resiliency features as the poorest people. After all mother nature doesn’t discriminate between rich and poor, developed and under-developed.

To ensure our technology platform is more helpful than others when it comes to our new weather disaster prone world, we’ve built some disaster assistance features into the development road map, like the ability to draw a fence around an area and push money to all the cards in that area with money to help people prepare for the flood, storm or drought, in combination with civil defence messages sent via SMS and the App. This should help reduce casualties (people can flee knowing they can rebuild and that their money is safe and accessible) and help economies bounce back faster as people can be paid directly by everyone from NGOs to Government to concerned relatives. Money flows in, people rebuild and hopefully come back stronger.

Financial System Development

I first got exposed and then interested in the practical problems of finance in the Least Developed Countries back in 2014 during the Ebola virus epidemic in Sierra Leone. I ended up as the Regional Coordinator for NetHope and I’d been given an extremely broad remit to help the NGOs involved in the effort to contain the outbreak. You’re likely thinking, this is a disaster again, what does an epidemic have to do with financial system development? It turns out epidemics and their containment, aren’t like other disasters, unlike in the aftermath of a hurricane or earthquake the majority of the population still have to get on with living, even while things are disrupted by fear of disease.

A keystone problem in the response to the epidemic was paying people, specifically the tens of thousands of healthcare and support workers hired in a matter of months by dozens of organisations to run the response. In the developed world, this isn’t really a problem, even if there is a deadly epidemic raging, payroll services and bank accounts make this sort of scale up relatively easy. In an environment which is chronically underbanked, trying to accurately pay tens of thousands of people on time across a huge area is very hard indeed. How then, in the teeth of a terrifying epidemic do you compress decades of financial system development so you can run something we take for granted like digital payroll into less than 2 months?

Instead of me trying to write down how we managed to pay everyone and reduce corruption during the response to the epidemic, watch this talk I gave at the 2015 Chaos Communications Congress in Hamburg. It’s possibly the only time that a room full of hardcore hackers has burst into tears and danced at the same time. A small warning, the talk has some bad language, especially when describing some meetings, where the overall theme was “If we can’t come up with a way to pay everyone this country is f**ked”

In that emergency, we ended up making mobile phone credit fungible back into cash at face value, unblocking the liquidity (cash is the most liquid asset for those not in the financial services business) problem and enabling people to paid on time and without having their money stolen.

In Sierra Leone, to get mobile money to work at national scale, the government and international community had to subsidise the ecosystem and the networks themselves. This obviously isn’t ideal, and wasn’t sustainable, the ecosystem collapsed after the emergency and subsidies stopped. The system also never had to contend with a rainy season, which often disabled bits of the network for days on end. Workers would withdraw all of their money from the system at once, even though the amounts were relatively huge compared to local incomes. When asked why, one reason given was that people weren’t confident their money would always be available, so they took it all out into a form they knew they could use, even if it meant stashing huge amounts of cash in a box under the bed.

What this experience taught me is that electronic money is only useful if you can use it all the time even in the middle of a howling gale or tropical downpour, and mobile money fails completely when the network vanishes which happens when networks are poorly maintained and it rains a lot. App based systems like AliPay have the same problem. If the network is down, they don’t work. If it’s not available, money is useless. Therefore I came up with a key design goal:

When all other technologies fail, our platform must keep working.

What traction can we show?

We do have an up and running deployment and it is set to get quite big. National state scale big.

Our first “At Scale Demo” deployment is “Kartaun Bele” (KB) in East Timor. This project sees us partnering with a consortium comprising World Vision, one of the largest INGOs in East Timor, and local investors to bring digital finance to the poorest country in SE Asia.

KB’s secure digital currency deployment is a radical departure from traditional development programmes which historically overlooked finance as a key enabler of poverty alleviation. Aiding people to safely trade and save their way out of poverty. Australia’s Dept of Foreign Affairs and Trade estimates that for every dollar spent in Aid to enable Trade is equivalent to twenty dollars in conventional development aid.

Not having to rely on constant internet and data connectivity KB overcomes the limitations of the telecommunications and physical infrastructure in the country and enables the pooling and efficient allocation of funds. This will ease payments of everything from pensions to utility bills to payroll. Seeing the practical benefits of a fast, secure payment system first hand, the local Timorese people have enthusiastically embraced our technology. Villages are now actively petitioning for the system to be rolled out to them as soon as possible.

After one demo and training session, a group of elderly village leaders trekked overnight over mountains in freezing fog to ask the World Vision team when their villages would get the platform. The last time I was in one of the villages where the platform is being tested, a local shopkeeper asked me when could he deposit his own meagre funds into the system for safekeeping.

When the elderly cross mountains and the poorest trust your technology with their means of sustenance, that’s customer demand.

Who are our key competitors in the market?

The problems I encountered as I worked through the field, got me thinking about how do existing digital payment technologies work. These in effect are our competitors.

Mobile Money

Systems like MPESA and AirTel money, use the billing systems of Pay As You Go mobile phones as wallets, and were developed from the observation back in 2002 that Kenyan merchants were accepting airtime minutes like currency for payments. Mobile Money simply formalises this and adds some management features. This is a gross oversimplification, but it helps explain the limitations of these systems, they obviously don’t work when the mobile phone network is unavailable (hence the stories of people walking for hours to get to somewhere with signal so they can transfer some money), and worse they have a problem where it is very expensive or impossible to move money between phone networks. After all if there is no agreement between the mobile phone carriers to cooperate to allow cross network funds transfers, then your money is trapped, and it’s not in the phone company’s interests to allow really easy movement, they would rather try to grow their subscriber base at the expense of the other phone companies.

This results in Mobile Money being mostly used for transfers, rather than for savings or loans. People don’t deposit money to keep it safe; rather they use the system to send value to other people who withdraw it as soon as they can to so the value is always available in a form that everyone accepts, even if they are on another network.

People always point to Kenya as the shining example of how Mobile Money can revolutionise an economy, but it’s not a good example for a few different reasons; one is that Kenya has forced it’s mobile operators to co-operate and interoperate between its two dominant platforms M’Pesa and AirTel money. This is combined with brutal competition which has forced the networks to become reliable, as well as a benign environment which doesn’t suffer environmental events that bring down parts of the network barring the odd lightning strike. Kenya is unusual in that while central government is often politically weak, it has strong institutions and regulators which drive integration, if only the rest of the developing world were anywhere near as organised.

EMV2 based Credit and Debit Cards

You’ll immediately recognise these as the credit and debit cards in your wallet. The system that underpins them is pretty complex, and I won’t go into all the detail, other than to say that they rely on complex communications networks to allow the receiving bank that holds the merchant account to check you have enough money or credit available to pay. They have floors and ceilings built into the cards which allows you to simply wave the card or present it to with no authentication for small value payments, but need to contact your bank to do anything above that built in ceiling. Anyone who has ever travelled to a country where the telecoms and banking infrastructure isn’t great has probably experienced this first hand; you try to make a purchase, put in your PIN number and it’s declined (this goes double for ATMs, I remember many a time going from ATM to ATM of different banks trying to find one that worked to withdraw cash). You call the bank and they say you have plenty of money and they have no record of the transaction being attempted, would you mind trying that again. What you just experienced was a failure of that complex bank end infrastructure. Needless to say when the infrastructure fails you can’t use your card for very much unless it’s to buy a bus ticket or a coffee while you wait for the network to come back.

We’ve built our platform so that this should never happen, as long as you have enough money on the card, so one can enjoy that foot massage at the airport spa rather than endlessly searching for an ATM that works (true story from several occasions stuck in airports around south east asia where looking for an working ATM totally wrecked my quest for a foot massage; you come up with solutions to problems you’ve personally experienced, foot massage is important).

App based payments

These are the big new kids on the block, and in China, they have supplanted everything from Mobile Money to Credit Cards to Debit Cards. They rely on everyone having a smartphone with a camera and having really good telecommunications networks. They come in 2 sorts of flavour: Paypal/Venmo and WeChat/Alipay.

Paypal and Venmo technically aren’t technically very interesting. You link your existing credit or debit account to the app, and then use the app to pay for stuff identifying the payee with an email address or phone number. They are more like payment processors than anything else, you can hold a balance on them, but it doesn’t offer you much other than convenience for online shopping.

WeChat Pay and AliPay are totally different animals, which use very different technology to achieve the same ends. They both use the ubiquitous smartphone camera and QR codes with embedded single use passwords (Time based One Time Passwords for those of a technical bent) to identify either the seller to the payment app (alipay) or the payment app to the seller (wechat pay). They have staggering user bases, 871 million people in China use AliPay and WeChat Pay claims over 600 million users.

Obviously none of these work when the telecoms are down, and require everyone to have a smartphone, which is actually a very expensive item for the bottom 3.1 billion people.

Bitcoin and other crypto currencies.

Despite the recent hype, these things aren’t actually very useful. They behave more like a effort to recreate assets like gold, and suffer many of the same disadvantages as gold as money (which is different from money, cash and assets). As well as being inherently deflationary, they can’t be recovered if stolen, the apps don’t work when the network is down, they are hard to turn into real goods like food due to poor acceptance, vulnerable to theft by hacking and tough to turn into widely accepted currency because of rules around money laundering and tax evasion. An excerpt from a hilarious and very erudite book about the strange world of cryptocurrencies called Attack of the 50 foot Block Chain by David Gerard which explains some of Bitcoins deficiencies can be found here

How will we make money?

In a word licencing. We want a tiny cut of every transaction that crosses the boundary from the physical cash and default banking system into the card ecosystem. We don’t want to be a bank, or have to set up payment processing subsidiaries in every country. That’s a regulatory nightmare, and we aren’t bankers. There is also a strong argument to be made that finance must be accountable to the needs of the people it serves, and in practice that means financial institutions should be locally owned and run. Even in the globalised developed world, this more or less holds true as we have strong government, central banks and regulators (in theory at least).

So the game plan is to try to get our technology into every payment card worldwide and get cards into the hands of everyone, ideally from a local financial institution that can use the deposits the technology enables to invest into the local economy. Often times those financial institutions that make up these national payment associations won’t be able to or want to run the backend ledger systems needed to support the card ecosystem, and we plan to make money hosting and running these backends for them.

Integration with everything from trade finance platforms for small producers to government to people and business financial platforms provide additional income streams, as finally does data. Central banks, government and regulators finally have a way to directly see the health of their economies in near real time, while segregation of KYC data and ledger data ensures that privacy of users is protected. These are all services we can make money from.

It’s ambitious, but if one thinks about the world that we are heading towards, where the bottom 3.1 billion make up the last markets that will experience double digit growth rates, and increasing numbers of weather related (un)natural disasters test the resilience of everyone, it makes sense to move to technology platforms that are inherently robust, and that make real the promise of the much vaunted, but rarely seen, technological leapfrog.

What is our unique advantage?

To the best of our knowledge our technology is unique. It is the only one that works well when the network is down, it’s pouring with rain and the mains power is out.

A common idea is that once a technology is adopted, it opens a moat which makes it hard for competitors to cross. In our case, by getting to these markets first with a product that is trusted because it’s always available in the same way as cash, empowers countries, local economies and which provides resilience we can open a moat that is very hard for others to cross, simply by virtue of being the only digital wallet that keeps working seamlessly even when everyone else has failed because a flood, cyclone or fire has drowned, blown away or burnt their supporting infrastructure to a crisp. Or indeed when just some tropical rain makes it impossible to buy your vegetables because the local cell has gone down for an hour.


And finally…why us?

Hopefully, if you’ve made it this far you’ll have some confidence that we have thought deeply about the problems of building a robust digital financial platform for the environment of the 21st century.

I’ve built a team made up of people with world class skills in cryptography, software engineering and computer security scooped up from my previous 22 year career in computer security to deliver on my (probably slightly ambitious) vision of trying to build something that can help people both work, trade and save their way out extreme poverty and at the same time provide the rails needed for help and safety nets to be delivered when things go wrong without destroying local economies.


Emerson Tan

CEO Mautinoa Technologies LLC.