It’s sort of exciting… breaking the rules?
You might guess that charity is not the easiest job: it requires a certain calling and passion. But most likely, you never knew that it is just as hard when it comes to charity sector relationships with banks and payment services.
We at the Elbi charity mobile app (and “Naked Hearts” foundation before that) have faced these problems multiple times. We’ve been spending a lot of time and effort to explain to these institutions who we are, what we do, whom we help.
A little less than a year ago, in January 2018, Apple agreed to meet us halfway and provided Elbi with Apple Pay to give our users the opportunity to donate to over 60 charity organizations in 80 countries around the world with a single touch of the Love Button. It was a real breakthrough, but we still have a lot of work ahead of us.
One of the challenges being “how do we reduce costs and increase the speed of charity transactions?”
Let’s say a U.S. citizen has decided to donate $100 to educational programs for girls in India via Elbi. Here comes the first round of commissions fees — for conversion and transfer. Neither Elbi, nor Apple charge fees for donation via the app, but both the user’s bank and the ‘Stripe’ company that accepts the money transfer from the charity fund’s side take their fees, and we just have to deal with it. Then, Stripe transfers money to our partner fund, chosen by the benefactor. It brings with it yet another set of commission fees. Only then does the ultimate recipient gets their money from this fund — for instance, a school in the state of Rajasthan — and it’s a good thing if they don’t then also charge the school for withdrawing cash.
The donation makes a long journey, and middlemen take a ‘bite’ of it in commission fees on each step — and it hurts even more that it’s not charity organizations who do this, but banks and payment systems.
Throughout the years, I and my co-founder — Timon Afinsky have been attentively following and communicating with entrepreneurs from the blockchain industry. We have heard many interesting ideas in this space, but each had its own obstacles.
For example, we have been offered to either tokenize money to move tokens inside the chain, or do the final settlement (a direct money transfer from the benefactor to the one in need) only upon fund withdrawal from the system. There is an alternative to use existing cryptocurrencies as a universal means of payment. But after exploring this topic further, we couldn’t help noticing a fundamental problem with this: banks and payment services don’t like to serve crypto-related companies even more than charity funds (and blockchain-related companies as well — they don’t see any difference), and keep closing their bank accounts around the world en masse.
The issue stays the same: it is hard to track the source of funds with too many participants from all over the world at the same time. It’s no wonder that it causes idiosyncrasy in banks’ compliance departments :)).
When someone wants to donate money to a charity fund in cryptocurrency, the best option for the fund is not to mess with it and decline the donation, to avoid nightmare inspections from the bank’s control service.
The next scenario for the use of blockchain in charity we are thinking about is tokenization of tangible (but non-monetary) and intangible assets. We often get requests from people who are not ready to donate money, but are willing to help others providing goods and services they work with. Technically, it is not that easy — goods need to be taken off the donor’s bank balance sheet, registered on the organization’s balance sheet, distributed among benefactors. Then, we need to transparently track the distribution chain and ultimate usage. In this regard, we are taking part in a great experiment with fashion brands and our internal loyalty points for good deeds — LoveCoins. But we are still far from reaching the goal we have set, it requires troops of super hero blockchain, logistics and accounting professionals to create the best mechanism.
The third scenario is reporting and transparency improvement for charity organizations. When giving away money to a fund, donors want to know exactly who and how they helped — reading an annual report about all the people the fund supported is not engaging and doesn’t give a sense of involvement.
Meanwhile, a year ago I read a book called ‘The First Fintech Bank’s Arrival’ by a fintech investor I know, Slava Solodkiy. Even though we constantly follow new technologies and have started to get the hang of financial services, I found a lot of new information in this book. Turns out, several fintech startups in different countries have significantly succeeded in making their service more convenient, cheaper and faster than traditional banks, each in their own vertical. I was especially interested in the chapter about fintech for unbanked clients — I couldn’t imagine there there are so many technologies and teams that provide financial services in places with no drinking water, let alone banks! At the same time, fragmented startups in various countries can’t join forces to rival old market players and replace them. This is what the book is about: the next step in fintech, when separate mono players start to assemble fully-fledged new structures to create a new generation of fintech banks.
Right after the book was released, I was sitting with Slava at The Lowell, an old New York hotel that opened its doors several years before the Great Depression in the 1930s. We discussed his vision on how existing fintech and blockchain startups can change the world, and help charity organizations along the way. We found interesting ideas on how to raise efficiency here and there, but saw barriers in their implementation and utilization at the same time.
Sometime later, Slava and his team decided to ‘change shoes’ from fintech investors to fintech entrepreneurs — and to launch the bank he has described in his book. In the bank’s first phase he is going to focus on the first niche of “rejected” clients — crypto and blockchain businesses. From the beginning, Slava asked me — how to get this bank’s DNA right from the start: socially responsible, diverse and empathic (or humane, if you prefer this word).
In the end, we decided to join forces and to create a joint product between Arival and Elbi, specially for charity organizations. With a friendly and simple onboarding process created with our understanding of how this industry works, and high-tech compliance from the bank’s side. With lower fees — the bank wants to help, using its infrastructure and employees’ time, instead of making money from clients from the charity field.
The Elbi team has been working with a large number of charity organizations around the world, choosing the most efficient ones, verifying their activities, understanding the specifics of their work and the lives of people they help, analyzing approaches and sharing experience and best practices of funds from different countries.
It is very important for me that Arival Bank is created by like-minded people — just like the Elbi team: they care. Together, we want Arival Bank to become not only the first crypto-friendly bank, but also the first charity-friendly bank!
Several days ago, the bank’s team showed their product’s first public demo at Finovate Hong Kong — and immediately won best of show (a “Fintech Oscar”)! I couldn’t be happier that industry specialists and experts supported this project with their votes and confirmed that it is needed by those who it is created for.
I’m glad to announce that I have joined Arival Bank’s team as an Advisory Board Member — I’m planning to help the project to build their internal culture, based on corporate social responsibility values, and create the banking product that will make charity organizations’ and donors’ lives easier. From the business point of view, Arival Bank claims — and Slava and I both agree: focusing on bringing more diversity and inclusivity to the fintech sector can only be a really good thing… And as Hermione Granger says in Harry Potter and the Order of the Phoenix: “I mean, it’s sort of exciting, isn’t it, breaking the rules?”.
