Open-Source Mobile Money Payment System for Energy Access

Can Open-Source Mobile Money payment system built on blockchain technology address the high transaction cost (from 1% to 6% +) associated with mobile money transfer?
We recently received another Open Innovation proposal leveraging blockchain technology to minimise the transaction cost in mobile money payment system. However, the success of any new technology is defined by its adoption. Tell us:
What are the key elements or must haves to ensure traction and adoption of a new Fintech solution by consumers in rural and peri-urban areas in sub-saharan Africa.
Details of Innovation:
Innovation is creating another use case of digital crypto currencies, such as Binance USD (BUSD), which is 1:1 backed by real US Dollars and thus as stable as the actual US Dollar. Given Binance backing by USD, is considered to be a “stable coin” in the blockchain world and therefore not as volatile as other popularly known crypto currencies like Bitcoin. The market liquidity of Binance USD is around 14 billion USD, so no local banks are required to implement our open-source payment system. Anyone can exchange local currencies with BUSD and use the digital US Dollar. Local regulations are managed and fulfilled for each country by Binance.

The goal of this project is to adapt the existing technology to deliver energy access and other basic services using open source, cheap and interoperable payment alternative. Developer plan to enable mobile money users to use BUSD currency on Android mobile devices, feature phones (USSD) etc.
Following Open Source technical deliverables will be released:
• Banking SDK and App: Android app and SDK to exchange, send and receive BUSD. The app is an out of the box working app for customers and businesses, while the SDK can be used to integrate the payment service in third party apps.
• USSD service API: Implementation of all banking functionalities via the USSD API service of Africa’s Talking, so that end users can send and receive money via their feature phone.
• Financial blockchain services: Implementation of exchange and peer-to-peer payment services into server backend (please see attachment).
• Backend: The backend interacts with the exchange API, the Binance Pay API, the USSD API and the Android client. Everything can be installed on a server easily via docker

3 Likes

Hello Aarti

This is a great intiative. However, I do have concerns regarding the likely energy emissions and transaction costs associated with mining on the Eethereum blockchain.

Three questions arise:

  1. What assessment has been undertaken to understand the typical micro-payment energy footprint for a typical Etheuem blockchain transaction?
  2. Are the energy emissions created from these Ethereum blockchain transactions being off-set by purchasing carbon credits?
  3. If not, why not?

Regards
Ed

1 Like

Hi Ed.
thanks for shedding light on high energy emissions related with solutions based on blockchain technology. I am not sure developer has looked into the climate impact of this solution @dan would you like to comment?

Hello Aarti,

thank you for sharing this with the community.
We are looking forward to fruitful discussions.

Please find below a visual concept overview.

Best,
Dan

3 Likes

Hello Ed,

thank you very much for your feedback and addressing this issue.

I agree with you that the energy consumption of the Ethereum blockchain is too high at the moment, since it still uses a Proof-Of-Work (PoW) consensus mechanism.

The Binance USD does not sit on the Ethereum blockchain, but on the Binance blockchain, which is a second-generation blockchain. It uses a Proof-of-Staked-Authority (PoSA) consensus mechanism, so a combination of Proof-of-Stake (PoS) and Proof-of-Authority (PoA).

This makes the Binance blockchain much more energy-efficient than first-generation blockchains relying on Proof-of-Work, such as Bitcoin or Ethereum.

In numbers: A Proof-Of-Stake consensus mechanism uses 99,95% less energy than Proof-Of-Work. Please find the source for this number in this paper: https://content.ftserussell.com/sites/default fileseducation_proof_of_stake_paper_v6_0.pdf

Although the energy consumption is very low compared to Proof-of-Work, I think it is a good idea to consider carbon offsetting in the financial model.

By the way, Ethereum is planning to move from Proof-of-Work to Proof-of-Stake this summer. The graphic below depicts the estimated power consumption :slight_smile:

Best,
Dan

3 Likes

This is big news, and it’s been a long time coming. Open-Source Mobile Money payment system is great for financial inclusion in energy access and I’d really be excited to see it’s ripple effects in the sector.

Transaction costs and facilitating conditions need to be factored in when deploying and evaluating adoption of mobile money products. You realise that the cost of paying a transaction has a direct effect on consumer adoption of mobile money services. So according to me, an open-source mobile money payment platform built on blockchain technology would help address the high transaction costs.

But then again, it would be very important for the open-source mobile money payment “providers” to provide reliable technology, and adequate agent network coverage (if need be). Actually apart from cost, reliable technology is one of the issues mobile money services providers are yet to properly invest in to enhance adoption of the mobile money services in Africa.

Some FinTech startups now have to up their game. But let’s also hope it doesn’t affect the fintech bubble… because a lot of them are overvalued and not really doing much for financial inclusion especially on the grassroots level.

3 Likes

Hello Oluoch,

thank you very much for your feedback and addressing the issue of implementing an adequate agent network. This question also came up recently in other discussions (especially how the exchange works in detail), so please find a more detailed approach below:

The open payment transfer system can be implemented locally on project level so we will not need to introduce a new currency to all African countries.
For a better understanding, let’s go through this by the example of a mini-grid in Kenya.

  • The mini grid does have a local operator, equipped with an Android smartphone.
  • Registration: An end customer registers a new Binance account with the local operator. The end customer can use her / his new open mobile money account directly on her / his feature phone or smartphone.
  • Exchange: The end customer can exchange cash for BUSD with the local operator. No bank is required and liquidity is always ensured.
  • P2P exchange incentivization: We believe the key to success of a sustainable agent network is the right incentivization model. Please find attached a graphic, which describes the exchange model and incentives in more detail:
    • Company: The mini grid provider in this example can get BUSD via bank / credit card payment, using for instance the transak exchange service.
    • Agent: A local agent / operator can exchange cash for BUSD from the mini grid provider. The company might charge some exchange fees, but in this example the mini grid provider could also decide not to charge additional fees.
    • Customer: A customer can exchange cash for BUSD from the agent. The agent will earn a small transaction fee of x% for each exchange. So everyone with a smartphone or feature phone can become a local entrepreneur providing P2P exchange services. At the same time an agent could sell air time or data bundles and earn some extra money, providing additional services. We propose to provide these functionalities for the open banking app as well as any feature phone.
  • Driver to establish the agent network: Since the open mobile money transfer system can be implemented on project level, the initial driver is always the project owner.
    In this example, the driver would be the mini grid provider. We believe end customers will be happy to use the new system due the tremendous cost savings at no additional effort (except for the initial account setup / registration).

I would be happy to hear your comments on this.

Thank you and have a good day,
Dan

1 Like

Thank you for your initiative, this sounds promising. I do have a question:

How will this work with local currencies, will this be handled in USD only? How will you handle forex currency transactions and handle its related risk?

But congrats, this is the direction we need to go in Energy Access if we want to scale

Claudio P

2 Likes

Hi Claudio,
thank you for your contribution.

Our plan is to implement a multi-currency account, where BUSD serves as basis.

As an example:
In Kenya, 10 BUSD would be shown as 1140 KES on the mobile money account.
Thus, users don’t have to get used to a new currency, but BUSD is merely used as underlying technology “in the back”.

Regarding foreign exchanges, the exchange rate will be calculated at the point of sale.
A customer can select whether he or she wants to pay by the local currency or BUSD.
The business owner (e.g. a mini grid operator) will receive all money via BUSD.

Does that clarify your questions? Please feel free to add your comments and thoughts on this.

2 Likes

Hi Dan,
This really sounds interesting, and more of a game changer, especially to the end user.
I’d like to see how it works.
Great idea there!

2 Likes