Dear bank, where did my 100 bucks go?

Vansa begins her presentation by outlining a major pain-point that exists within the online banking industry: coordination and interoperability. Specifically, the financial and time costs that are incurred as a result of the current antiquated infrastructure. At present, it is a greatly labored process, when wanting to transact funds between two different banking services. Sending funds across boarders and jurisdictions is difficult because:

  • There is limited visibility of in-flight transactions. The banks that are sending and receiving payments have no visibility of pending transactions and therefore they cannot be easily tracked.

  • Payments can incur financial and time costs, depending on the bank’s chosen payment rails.

  • A user’s balance is not updated in real-time as it can take days or even weeks to receive confirmation of payment.

Throughout Asia, financial inclusion continues to be a challenging feat, with Asia representing around 50% of the world’s under-served population, in countries such as China, India, Pakistan, and Indonesia; the majority of online transactions of physical goods rely heavily on cash-on-delivery for payment. Within this population, however, at least 66% of people have access to mobile services, providing a potential avenue for future development that could help to alleviate these issues, and open the possibility for greater levels of international trade and e-commerce.

eWallets

In an attempt to overcome the poor banking infrastructure in Asia, eWallets are now being offered by banking institutions or non-financial institutions such as telecommunication companies, e-commerce platforms, and messaging apps. The eWallet industry has experienced explosive growth throughout Asia, especially in China, whereby Alipay and WeChat have captured around 50% market share each. These eWallets are not simply used for financial transactions, they are also used as all-encompassing utility apps, whereby a user can pay utility bills, book appointments, and interact with various social services, further highlighting the need for greater levels of accessibility, leading to proliferation of social services within the developing populations.

eWallet challenges

Despite the advantages of eWallets and their rapid adoption throughout the Asian population, there remains friction points in the communication- and flow of money- between the different providers. The current infrastructure sees eWallets and their users confined to their respective silos, erecting unnecessary jurisdictional barriers and preventing much needed coordination between the poorest population of society. The global remittance market is one area of society that is greatly affected by this lack of interoperability, in 2017 the global aggregate remittance flow to developed nations reached $466b. Along side the coordination issues, time, and financial costs, exists the issue of currency exchange when sending money across boarders; there currently exists no easy-to-use and cheap infrastructure for exchanging small amounts of currencies.

Potential Solutions

Any solution to these problems must avoid transferring the financial power dynamic of old, onto the new technological landscape, and ensure to mitigate any long term risks of monopoly. A potential framework for doing so, would embrace interoperability through an open-source public infrastructure, and would enable the transaction of any asset, anytime, anywhere. A shared-ownership model of a public infrastructure would have perfect incentive alignment with the goal of inclusion, as there would be no ‘gatekeepers’ elected into positions of power. Blockchain technology as a base-layer for such a solution, would allow for transparency and tracking of payments, without the reliance on a third party legacy system. In order to maintain these features, while facilitating the seamless transition between currencies and different tokenized values, this payment rail would take the form of a permissionless decentralized exchange. The result of building an eWallet on this infrastructure for the end user, would be the ability to transact using any currency, with no uncertainty in exchange rate.

In an attempt to solve these problems, while maintaining all necessary elements of a public permissionless decentralized exchange, OmiseGo are building two open source products: a white-label eWallet SDK, and the OMG network (a massively scalable decentralized exchange.)