Moving from outdated “industrial” business to “postindustrial” social funding system
By Vasily Sumanov, researcher in Lomonosov Moscow State University, blockchain analyst, MicroMoney project advisor
Today many businesses highlight not only their profit but also the social value that they bring to society. Blockchain as technology accelerates the process of work for the benefit of society because of the technological opportunity to create trusted social systems, based on reputation and providing mutually profitable p2p and b2p interactions (e.g., payments or financial interactions, data exchange and other). Upcoming tokenization trend already changes business vision in some industries, for example, browsing (Brave browser uses the model of “attention economy” where people can exchange their attention and time for tokens), data storage (decentralized storage systems), decentralized social networks where creators directly receive money for their content, and other. These fast changes indicate that we are in the breaking point: or we’ll make our business more social or will stay in “old economy”, because a community around our business becomes one of basic component, providing value. In this article, I have a pleasure to discuss business transformation in microfinance industry with the MicroMoney project as the example.
Further, I will show my own vision for MicroMoney evolution in a new social paradigm. A part of this model has been included final Whitepaper documentation of the company; the other part was declined due to legal and technical reasons. However, it is important to note that even that implemented part became essential for a business model development, especially for the period before MicroMoney started its token distribution campaign.
In general, the business process in MicroMoney until its token distribution campaign that will start on 18th of October 2017 based on a classical microfinance organization model. The company started in Southeast Asia (Cambodia) as a lending services provider and a fintech project simultaneously. Differences occurred only when the company started to design its own scoring platform. The main reason that forced the company to create it was a market situation. In Asia, the average microfinance business is not able to assess customers without at least 5 documents and certificates. A collateral and a person to vouch are strict requirements as well. At the same time, the majority of the population are unbanked and have no credit history or any credit ratings. Finally, there is not enough lending automation in the region: all the business processes including the customers’ assessment are held in Excel or even in paper ledgers.
The smart scoring application allowed MicroMoney to build a new niche for a lending market in the country with very fast procedures of applying for a loan, customer’s assessment, loan application approval, and sending the money to a borrower. The fact that almost every process is transferred to online gives the company critical advantages in comparison with what banks and lenders using classical scoring procedures have.
However, the company is now moving towards tokenomics business model (digital economy, based on cryptocurrencies and tokens circulation) where the “direct” business processes are hardly ever could be literally implemented. Therefore, preparing for its token distribution campaign, MicroMoney had to create the system, where it’s own token circulation would be native. This can be made only in the ecosystem, which connects MicroMoney with the other financial organization, customers and other businesses using AMM tokens, and provides social interactions between all these groups.
Credit organization 2.0: social funding system
The basic MicroMoney’s advantages are its database and network of customers with the full and detailed information about each of them. Using the funding risen through a token distribution campaign and blockchain technology, we will be able to organize one of the largest customers’ networks in emerging markets. Moreover, it doesn’t mean the competition with the other social networks like Facebook because we have totally different aims and a type of business here:
· Facebook: social interactions between people (just messages/content/sharing). Without money. Without lend service on demand.
· MicroMoney: the network of customers, based on financial interactions.
What is the “social funding network” in my definition? It is a network, where each person is able to borrow money for a short period of time when he or she needs it, and interest rate depends on a borrower’s reputation. Also, participants may spend their money and make safe and easy financial interactions with other participants even monetizing their time, reputation or personal information in case of b2p interaction. The time, to be more precise, can be monetized with the help of an advertising network in the MicroMoney application. Since we know a lot about the users, it is possible to build very customized and targeted adverts for all these people, so the price of advertising will be low, and the accuracy of “hit” will be high. Any advertiser can pay for it by tokens, in this case part of the token goes to the person who views it. (A similar principle, by the way, implemented in the Brave browser with the use of the Basic Attention Token.).
In this case, MicroMoney’s business divides into two business fields: commercial money lending and social system organization (as the marketplace for customers and businesses). Here is a new business model scheme.
Social model and token economy description
MicroMoney in this ecosystem is the “hosting social system”. MicroMoney becomes the organizer of a social system in which all the financial and other interactions are maintaining. First, it collects rich data from existing and potential customers and then organizes financial and other interactions between the core business, customers, and the other involved businesses.
Step 1. MicroMoney collects rich data allowing it to assess a customer and to take a decision about loan application approval automatically and then to lend money. This database also become a valuable source of information for other business in the ecosystem. During this stage grows a number of users, who installed the app and shared their data, and the number of customers repaid the loan. Based on the accumulated data we achieve more accurate customers’ scoring processes. All significant information (personal data, repayments, the unpaid amount, defaults, etc.) is stored with the help of blockchain (technically it will be stored outside, of course, we will keep only hashes or other short significant information with blockchain).
It is important to understand that an interest rate of each social loan will be decreased in case if a customer has a very good reputation (=high credit score).
Step 2. MicroMoney opens the access to the data under a license agreement via APIs. Companies, interested in reaching new emerging market audience or analytics for the compilation of segmented advertising offers, can pay for this access in AMM tokens. However, short and general information without any details will be available for businesses for free.
Here are some examples of cooperation scenarios between MicroMoney rich data platform and businesses.
Enabling Know Your Customer (KYC) policy as a service — all applications and businesses can use our KYC for their purposes. In fact, here MicroMoney becomes an identification agent, as we already know all the details about a customer. When a client contacts any business where identification is required, for example, any bank, he or she does not need to provide a bunch of documents because all the information can be downloaded from the MicroMoney database.
In addition, business, for example, can recruit people using the database because it has all the information about a person (reputation, jobs, and other personal data).
Step 3. Building a smart advertising network. All users, who installed our mobile app, have the option within it to agree to share their private data. Therefore, this creates the perfect environment for the advert network with very precise targeting. More users in it mean more value contains within this system. Businesses can place their adverts for demonstration in the app and pay for them by AMM tokens. The part of the tokens received as payments goes to MicroMoney and another part — to the user, who saw or clicked the advert.
Step 4. On this step, we add the interactions between users. Network users can share their general personal information with each other, which can be useful in the situation like recruiting, when company can check the reputational characteristics of the candidate, or in the apartment renting the landlord can see the reputational level of his potential tenant. In addition, network users can make instant P2P payments inside the mobile app as it also has the e-wallet and token storage and exchange features. Therefore, people can drive bargains with each other and send e-money simply and instantly. This payment method seems to be easier for the majority of users than to buy bitcoins or other cryptocurrencies somewhere because AMM token is native and can be obtained without payment in some cases (advert viewing, cash-backs, and bonuses).
Step 5. MicroMoney adds offline stores and services to its network, as well as digital applications based on MicroMoney marketplace. These offline stores and services are able to create their own landing pages in the app and run their advertisements, for example, about new goods or discounts for the other users who are in the same location. These businesses can pay by AMM tokens for their promotion, can make discounts for AMM app users and can receive payments in AMM (any user’s case may be implemented). This is a win-win strategy for all, MicroMoney, network users, and companies.
Some mobile application (usually, these are Android and iOS apps) can charge for their services (games, calendars, other features) by AMM tokens and this way they get discounts for promotion in MicroMoney network and other benefits. Moreover, in some cases, apps can get the access to a users’ information (paying for this access by AMM tokens or by giving any value for users and the company inside their apps).
Step 6. MicroMoney’s financial service partners such as Karma project, integrate with MicroMoney to use our scoring system algorithms for their scoring purposes. This is just first step of integration. In future some other p2p lending services can use MicroMoney scoring system, so there will be collected more rich data. Such approach provide “win-win” interactions between MicroMoney and other lending services: they have accurate scoring, MicroMoney collects more data.
Step 7. Our company enables P2P credit system for users in fiat money or AMM tokens, based on a certain customer’s reputation and scoring points from MicroMoney. Users can lend money to each other using the available accurate scoring information and basic features from the MicroMoney’s platform to organize a proper process of debt repayment. In addition, a user with a good reputation and token deposit can serve as a person to vouch for the other user.
Step 8. MicroMoney adds blockchain-based social services, like proof-of-existence and some others that can provide additional opportunities for MicroMoney application users.
Finally, MicroMoney’s goal is to build a social funding system, where users will be able to borrow or send money and to receive any available funds for their activities. In this network, businesses will be able to use rich data for their own purposes and profit, as an illustration, online stores, apps, and services will be able to attract new users and customers and to increase the loyalty of the existing ones. Partnership with other lending services like Karma can expand both our and the partners’ dataset and ecosystems, and new bonuses options and social services will attract more attention from our users.
In our further articles, we will give more details about this concept and transformations in business vision. We will take a more detailed look at the process of social system building based on MicroMoney example and will discuss how blockchain and social constructions change the vision of many business processes. Stay tuned!