ARYZE: Remittances 2.0

This week we are welcoming Carl Jenster from ARYZE, a company based in Denmark, on a mission to “make cross-border payments cheaper, faster and smarter”.

Carl will show us how cross-border payments can become more efficient and cheaper by walking us through an example — a transfer made with Western Union compared with one using the ARYZE model. He will also explain to us, why ARYZE is doing an STO and what role their Security Token “RYZE“ is playing within the ecosystem.

Enjoy the Interview

Please describe briefly, what problem ARYZE is trying to solve?

The way that money is moved today is a complex, expensive and unnecessarily “heavy” process. Intermediaries that have to verify transactions are numerous, and all require a small fee and time to process a payment. It all comes down to the fundamental problem that money, in its current form, is still quite analog. Traditional banking relies on fractional reserve in order to work, in the sense that a bank issues digital IOUs, whereupon they can lend out a large portion of consumer deposits in order to fund their business models.

Furthermore, the innovations that we see in cryptocurrency are largely incompatible with the traditional financial system. Volatility in cryptocurrencies is an element of risk that regular businesses will never accept, and the credit risk of cryptos is something that corporations have decidedly distanced themselves from. However, programmable money is a benefit of crypto that businesses really need — so how do we find the middle-ground? ARYZE creates Digital Cash, which is a digital representation of fiat currencies that is stable, pegged 1-to-1, programmable and redeemable through a full-reserve banking model. We utilize central bank issued bonds as the majority of our collateralization, and in that way achieve a high credit-rating for our digital cash, which in turn mimics the value and behavior of actual cash.

Furthermore, this programmable money that we issue is transactable in our system at zero transaction cost to the business or consumer that chooses to use it.

On top of this engine room, we build several products. The flagship product is called MAMA, which stands for Multi-Asset Modular Application. This is the payment app that will not only function as the digital wallet, but will also allow businesses and developers to build “modules” on top of the Digital Cash ecosystem. Besides that, we also address the needs of businesses and corporations seeking to optimize their own supply-chain and cash management, by providing a Business version of the product, which essentially is an overview dashboard with additional analytical tool for managing treasury and other recurring transactions.

How does a typical “traditional” journey of a person who wants to transfer money from the United States to South Africa looks like today? What are the major obstacles people are facing?

Today, someone seeking to transfer $200 from the United States to South Africa has a few options to transfer money. The most obvious (and perhaps the cheapest way) is to use Western Union to transfer. The process has the cost of approximately 5%, as South Africa is still heavily reliant upon cash, and bank transfers will be even more expensive. Western Union has a monopoly on these kinds of remittance corridors, as they have a network of physical kiosks in many different countries. However, South Africa is also a country where crime, robbery and armored cash-transport heists are rampant, and cash appears to be at the root of this issue.

The major obstacle is how to onboard users of a cash-reliant economy into a digital payments ecosystem, which we feel starts with the employers. By providing a payments ecosystem and Digital Cash, where transaction fees are reduced to zero, businesses are incentivized to encourage employees and customers to use ARYZE. The true barrier though lies in a gradual adaptation to a new way of transacting currencies. By enabling businesses to build solutions on top of an improved currency vehicle, Digital Cash, we provide the fundamental platform on which the next age of innovation can flourish.

How can blockchain technology improve the process?

Blockchain and Distributed Ledger Technology can significantly reduce the cost in the transfer of monetary value in the global market. We intend to bring such technologies to market by delivering a custodial service that is secure, from a technological standpoint, and has a sound and transparent value proposition behind it — namely, digital fiat currency.

By providing our custodial service of the underlying funds and continuously verifying and auditing the deployed ledger against current holdings, we ensure that our platform can be a trusted building block that enables the technological pivot in today’s financial operations.

We use blockchains and distributed ledgers for a multitude of services and microservices, including the transaction ledger, identity and security and risk management/business intelligence. Using DLT as a mitigator of transparency, there is a total oversight of internal holdings that can give signals to our internal trading floor. The internal trading floor ensures that current holdings are always 1 to 1 with issued digital cash, and are readable with users with the appropriate access.

Furthermore, it’s our ambition that we integrate with existing exchanges and decentralized exchanges as long as they fulfill our requirements for AML compliance. At this time, we cannot comment on which blockchain services we are using.

4. Please walk us through an example that illustrates the cost saving and other specific advantages by comparing a “traditional” and “new” process of a remittance transfer done by a worker in Denmark sending money to his family in Africa. What happens behind the scenes?

Western Union

1. John, in Denmark, has money in a bank account and wishes to send 100 Danish kroner (DKK) to Bill, in South Africa. Bill wishes to receive South African rand (ZAR).
2. John goes to a Western Union kiosk, located at the local train station. He specifies the recipient’s name, phone number, email, and informs the teller that his friend Bill wishes to receive rand.
3. The teller informs John of the currency exchange rate that he will be given, as well as the service charge that Western Union places on the exchange. (for a 100 DKK to ZAR transfer, the fee is roughly 50% of the transaction!)
4. Western Union does not utilize SWIFT network for validating and instead uses an internal network of operators with their own supply of cash-on-hand to facilitate withdrawals.
5. When John informs of the desired destination for the money to be sent, Bill can pick it up as long as he has the proper identification to verify. In reality, Bill could pick it up from any Western Union agent in any location in the world.
6. Despite the process being relatively quick, the fees are high and the identification that is needed for the transaction can be counterfeited.
7. Bill receives his transaction in local currency upon providing his ID, and has essentially received half of what John originally sent.

ARYZE

1. John, in Denmark, has money in a bank account and wishes to send 100 Danish kroner (DKK) to Bill, in South Africa. Bill wishes to receive South African rand (ZAR).
2. John and Bill both sign up for an ARYZE account, and complete the necessary KYC/AML validations.
3. John deposits money into the ARYZE ecosystem at no charge.
4. John specifies which account he wishes to send money from, and types in Bill’s username/email address, as well as the currency format output desired.
5. Through ARYZE, John transfers 100 DKK to Bill, on the other end, instantly.
6. ARYZE handles the foreign exchange to ZAR at no additional charge.
7. Bill, on the receiving end, can receive the desired currency in their ARYZE account in Digital Cash format, or choose to withdraw to their bank in a traditional currency format, without having lost more than 1–2% of the currency’s value on the exchange spread.

What role does your Security Token play within the ecosystem you are building?

The RYZE token is the asset sold during the STO and will be used to pay fees in the ecosystem and to pay dividends to shareholders. The backing of Digital Cash comes from actual deposits of fiat money. The government bonds will be held by an intermediary capital markets bank, off balance sheet.

So, the RYZE token is the fuel of the ecosystem. This is a hybrid utility/security token that is used to pay any fee or subscription in the platform. This could be a business subscription for the platform, or a developer account, for example. The RYZE token is part of a burn mechanism, where 50% of the gross profits of ARYZE are used to buy-back the token from the open market and are subsequently destroyed, on a regular basis. Holding RYZE gives holders right to dividend payments through token burn. No dilution of supporting business, and no additional RYZE will be created. There are no voting rights associated with holding RYZE.

Which are the biggest upcoming challenges for ARYZE to become a successful business long-term?

Finding the right strategic partnerships and first initial clients, in order for us to swiftly gain traction with our product will be the primary goal. Right now, we are in dialog with some key players that will allow our road to market to be very efficient, as we are not focused on serving a retail customer market, but rather a business-to-business-to-consumer strategic model that incentivizes businesses to onboard their own customers/employees.

That being said, raising funds through an STO from Denmark presents a challenge in and of itself in the sense that regulations surrounding the method are still fresh. We have a strong understanding of what is required, through cooperation with our valued partnerships and advisors, yet also realizing that such regulations are subject to constant scrutiny, review and change is something that we are aware of and ready to adapt.

Thank you for the Interview!

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