Blockchain technology has been said to have the potential to disrupt many industries with low-cost transactions, immutability, and enhanced security. Indeed, many blockchain implementations have been developed, each exhibiting unique features tailored to specific use-cases. One of the most exciting of these use cases is serving so-called emerging markets. In this article, I discuss some of the central challenges of emerging markets and how one African-based crypto startup plans to overcome them.
Emerging markets — also known as emerging economies — are newly industrialized countries whose economies have not yet reached developed status but have, in a macroeconomic sense, outpaced their developing counterparts. Emerging market are chracterized by high investments in productive capacity. These countries are also moving away from their traditional economies, which have relied on agriculture and the export of raw materials. For these reasons, emerging markets offer high potential returns to investors, though with higher risks than developed market countries.
However, the transformation of emerging markets is far from complete. Currently, 90% of the economic activity still happens through traditional outlets. There is also an inherent lack of trust in banks and the use of bank cards in many emerging markets. As result, emerging economies are almost exclusively cash-based. Individuals would rather do transactions at a local merchant or agent than use a bank. Consequently, approximately 40% of the population in emerging markets do not even have bank cards or bank accounts. This population is known as the “underbank” or “unbanked.”
The Challenges of Emerging Markets
There are several challenges that the nature of emerging markets presents for investment. One of the challenges facing emerging markets is a lack of reliable and verifiable market data. The bulk of the economic activities that go on in these regions are subsistence level and done offline through traditional outlets. Moreover, 94% of transactions in most emerging markets are done using physical cash. This creates problems for companies trying to understand consumer behaviour and the dynamics of the market.
Emerging markets must develop economic structures to overcome these challenges. However, the ensure uptake these structures must be compatible with local cultures and daily life. For instance, the local nature of emerging markets means large costly financial infrastructures will not work to bring them into the digital economy. More appropriate are smaller collections of humans and devices building trust and working together in a collaborative manner.
Crowdforce’s Plan to Overcome these Challenges
CrowdForce Solution is an African-based startup that plans to use blockchain technology to address the unique needs of emerging market economies . As the whitepaper states, bringing the billion consumers in emerging markets to the digital economy requires a human touch. Therefore, the key is incentivizing local and trusted retail agents in each community to offer financial services. An agent in this instance is a local entrepreneur or retail outlet owner who already sells goods and services in his or her area. S/he is likely well known in the area and already handles cash in his/her outlet. By enlisting local agents, CrowdForce believes it can bring emerging markets into the digital age.
First, Crowdsource plans to use blockchain to provide an alternative to the banking system in emerging markets. Through the PayForceMobileApp, however, CrowdForce gives local merchants the capacity to be agent banks in their area. These agent banks are incentivized through commissions and can sign up and get started in less than a day by simply funding their wallet with cash that becomes their startup capital.
Second, Local agents will also be able to offer microservices through the app, including utility bill payments, cash in/out accounts, buying and sell cryptocurrency, and crypto-fiat exchanges. The crypto services are especially exciting. The present process of buying cryptocurrency requires an international bank card, which cuts out 70% of the population in emerging markets. The ability to buy cryptocurrencies for local merchants with cash will open up the possibility for massive uptake.
Third, since the CrowdForce platform will also perform important microtasks for local agents. Specific microtasks the app will offer include, market research, retail audits, data verification (businesses, KYC, addresses), image and GPS capture.
Finally, CrowdForce will offer users a crowdfunding service. Conventional crowdfunding platforms charge high transaction fees. For instance, a Kickstarter campaign, would pay up to 9% of the amount raised after including the transfer fees (3–5%) and listing fees (5%). On the CrowdForce platform, there are no listing fees and transfer fees are only 1%.
The PayForceMobileApp will work on android devices with the flexibility to interface with Mobile POS devices in scenarios where POS devices are an added advantage. The PayForceMobileApp works with the CrowdForce platform, which will initially be built on the Ethereum platform and over time moved to the CrowdForce blockchain platform.
In phase two of the project, CrowdForce will record verified agent data hashed function results to the Ethereum blockchain in batches but store actual user data in a blockchain-based storage network like Storj or Filecoin. Verified users will be able to prove their identity within the CrowdForce Platform by signing a message from privately controlled Ethereum address and smart contract integrated to the ecosystem.
CrowdForce has a plan well-suited to emerging economies. Through enlisting local business and retailers, it could build an extensive network of outlets offering banking services and access to cryptocurrencies. The crowdfunding service will charge the lowest fees in the crowdfunding industry, which will give the platform a competitive edge. At the same time, the use of blockchain technology to power transactions on the PayForce app means there is no need to have banking structures in place (something lacking in many emerging economies). Moreover, by operating outside of the of the regulated banking sector, the economic activity CrowdForce facilitates is protected from the effects of rapid political change that often threaten investment in emerging markets.
Full disclosure: I do not own Crowdforce tokens and have not participated in the ICO. This article is not investment advice. It is just my personal opinion. Please do your own research! frauswif.