Is it just nerd talk, or are we at the cusp of making the world a better place using evolving blockchain technologies?
A version of this article was previously published on AméricaEconomia in Portuguese. We’re sharing it here for our English-speaking audience.
Brazilian banks are a consumer nightmare, and withdrawing cash is like playing the lottery. Customers hover in bank foyers, moving with frustration from one ATM to the next, hopeful that the next machine will actually work (presuming the bank is not closed for the weekend). When account holders need to go into the bank and speak to a teller, they must take a half-day off work (or bring along an elderly neighbor) to get to the front of a maddeningly snail-paced queue.
Surely with all of the technology that surrounds us, there should be no need for these time consuming, endlessly frustrating, and downright expensive situations. We were told years ago that plastic would replace cash, and maybe it has — but can’t we just get rid of the wallet altogether? Do we really need money and banks in this modern age?
Blockchain technology is key to changing the status quo in Brazil, a mission we feel passionately about. We have recently launched a “mobile wallet” service in our CEO and co-founder Victor Santo’s home country, Brazil, where more than half of the nations’ young people do not have bank accounts, due to exorbitant fees, interest rates, and overly bureaucratic systems.
With Airfox (free to download on Google Play), the smartphone becomes the only wallet needed. Users can send and receive money from friends, pay for goods and services, pay utility bills, and even apply for personal loans. Soon, Brazilian customers will also be able to top-up commuter travel cards using the same technology. But, how?
The answer lies in blockchain technology. Basically, rather than depending on intermediaries (banks, companies, online marketplace sites), transactions are performed on a peer-to-peer basis, across the globe. Without the middleman, there is no need to pay for services, so consumer prices can drop. If money is transferred between friends (or online contacts), and no banking system is used, then no bank fees need to be paid. Everyone does a little better out of the transaction (except maybe the bankers, but they will survive).
It sounds great in theory, but a little odd. If no-one is paying fees, then how is this sustainable?
Airfox works on the presumption that while many Brazilian don’t have bank accounts, most people have a mobile phone. And, more than half of all phones owned in Brazil are smartphones. (We are hoping to expand wireless access, improving online penetration in parts of Brazil, specifically in low-income communities).
The idea is pretty simple. Using the app, small business and entrepreneurs can have access to finances and to customers, skipping the banks altogether, and without having to compete with massive generic brands. Those at the bottom of the social pyramid can gain a stronger foothold in local micro-economies. This stability, and reduction of overheads, will enable small businesses to expand, and enable owners to study innovative solutions for their growing client base. Their clients, with greater access to affordable solutions, can climb out of the “survival mode” that is the reality of so many Brazilian families, and focus on other priorities. A winning situation for all concerned.
Blockchain technology works through peer networks, and for this reason is extremely difficult for would-be fraudsters to infiltrate. Imagine a virtual accounting system or ledger, with one hundred users. Every time a user makes a transaction, this is noted on the ledger, and everyone’s record is updated. If there is any discrepancy in a record (if it is not the same as all of the others), it will not be confirmed. So, the fraudster is stopped. If (s)he tries to dishonestly change any part of the system, it will not proceed, as the transaction will not be verified by all other peer users.
Obviously a system that is free to use, and that prevents banks and other massive corporations from getting their piece of the fiscal pie will cause consternation in several markets. But, this just might be the start of a great leveling of Brazilian society. It won’t happen overnight but developing peer-based marketplaces, without the corporate overlords, seems a good place to start.