Spitballing with Mojaloop
3 ideas for fintech enabled by Mojaloop
I first read about Mojaloop and the Level 1 project about a year ago. The tech world was knee deep in cryptocurrency hype, and I was looking for some concrete examples of crypto use to improve financial inclusion in low-income countries.
Mojaloop is one such implementation, which uses the Interledger protocol to settle funds between banks. I won’t go into all the details here (you can read about them here and here if you’d like.
Lately (and spurred on by DFS Lab’s upcoming Mojaloop bootcamp, I’ve been exploring ideas around Mojaloop and the opportunities it presents to fintech companies working in emerging markets.
I’m going to share three early stage ideas I’ve had for building on top of Mojaloop. My goal here is to really get these ideas out of my head and into a place they can be discussed. While I’m passionate about all things financial inclusion — especially where they intersect with tech — I’m much more experienced on the tech side than the financial side of things. Any thoughts, corrections and feedback would be greatly appreciated!
A few things to note:
Mojaloop is attempting to be the Linux of banking infrastructure: freely adopted, used, and improved as different players contribute back to the codebase. It also aims to spur on some valuable network effects: once enough banks are integrated using Mojaloop, other banks will want to be on Mojaloop in order to capture more value, which will continue on in a virtuous cycle.
Now as core banking infrastructure, Mojaloop isn’t a open access API for developers like myself to build applications upon.
I really liked Dan Kleinbaum’s (@danbabbles) illustration in this primer on Mojaloop. He outlines three areas for innovation that Mojaloop can enable:
- On mojaloop itself, and will derive value from the wealth of centralized data on the platform
- Between DFSP (digital financial service providers) and Mojaloop, in ways that make the integration easier, and
- External to the Mojaloop/DFSP ecosystem, but enabled by Mojaloop nonetheless.
So while I’m still getting my head around everything to do with Mojaloop myself, here’s three ideas that might inspire you, enrage you (after all, we are on the internet), or baffle you with their stupidity.
1. A Mojaloop Powered Chatbot Platform
Mojaloop aims to bring down some of the costs associated with banking, in hopes that this will increase the ability for banks and other financial service providers to serve low-income people.
For me, my bank in Australia doesn’t charge me an account fee on my savings account. This is because they hope that one day, I will purchase other products from them, such as a home loan or investment portfolio. My account fee is $0 because they cross-subsidise the cost of maintaining an account with the lifetime value that I will provide them as a customer.
(The joke is on them, because I’m a millennial who is more interested in buying avocado toast then a home).
In situations where banks provide services to low-income people, over the lifetime of a customer, there is much less potential value from a low-income customer, so banks typically need to charge fees.
In order to reduce banking fees, there are at least two potential solutions to this problem: (1) lower the cost of servicing an account, or (2) improve the lifetime value of a customer, by offering other products and services.
Chatbots have the potential to address #1 above, by automating common tasks and improving service delivery for low-income people without increasing the cost of servicing accounts. One such example is automating pin mobile money resets. Pin numbers are often forgotten by customers who rarely use their accounts, or juggle multiple accounts. By offering a pin reset service over a chatbot, we can automate the task and reduce the need for call centre operators.
For the last 18 months, I’ve been working on a variety of projects that use chatbots and other associated “conversational tech” to look at how service delivery can be improved for low income people. Each of these integrations and projects have been bespoke, but if Mojaloop somehow enabled a common interface for chatbots to interact with, then there is a great potential to offer a turnkey chatbot service that would work with any DFSP using Mojaloop.
I’m not really sure how such a Mojaloop/Chatbot integration would work (in fact, it might not even be possible), or if there would really be a way that a common API could be used and shared among banks, but there it is; idea number one.
2. Credit scoring based on your Mojaloop transactions
As more customers use Mojaloop, the data contained in it’s transaction logs become more and more valuable. Mojaloop has the potential to provide a common interface for companies wishing to credit score their customers.
If there was a way (somehow) of gaining access to the Mojaloop transaction data, we could envision a service which produces credit scores on customers based on their transactions in Mojaloop.
One of the challenges with this approach is identity fragmentation: customers typically have more than one mobile phone and more than one mobile money account.
The true benefit of this approach is that it’s rapidly scalable to other Mojaloop implementations around the world.
3. Open Fee Comparison Service
I’m currently staying in the Philippines for a while, and getting my Aussie dollars over here isn’t always straightforward. Transferwise for me has been a real lifesaver in being able to see transparently how much it costs for me to send $100 AUD to PHP.
With Mojaloop, there is the potential that fees for sending and receiving money become more transparent. This could also be integrated with a 3rd party service that calculates other associated fees (such as a cash-out fee) to give senders and receivers a better idea of the true cost of sending money. This would depend on different fees being available publicly in real time from Mojaloop (which I think is the case, but I’m not 100% sure).
This is probably the least-baked of my ideas, but I was greatly inspired by Transferwise, and truly wondered if this level of transparency is possible in other markets.
If you enjoyed this post, or have any suggestions or questions, let me know in the comments. If you liked this post, give it a ❤️ or a 👏, or whatever the cool kids are doing nowadays.
