By Kagondu Njagi
NAIROBI (Thomson Reuters Foundation) – Sitting on a low bench at her shop in a Nairobi slum, Grace Wangari sifted through a handful of grains that a waiting customer had just ordered.
As she poured them into a shopping bag, the customer scrolled through her phone to pay for the purchase.
Normally, Wangari would have been paid in shilling notes, Kenya’s hard currency, but in some ways she preferred the digital payment that was instantly transferred to her phone.
“I am happy with this transaction because there is no risk of losing my stock to conmen or people who have come to take goods on credit,” said Wangari, a middle-aged trader in Mukuru Kayiaba, one of the city’s poorest slums.
The transaction happened through Sarafu, a blockchain-based community currency that is helping thousands of Kenyan slum dwellers pay for food, water and sanitary items as they battle through the COVID-19 economic downturn.
Each week, families are issued with virtual vouchers worth 400 Kenyan shillings ($4), which they can use to buy essential goods, said Roy Odhiambo, an innovation officer at Kenya Red Cross Society (KRCS), one of the groups behind the project.
Vendors can then send the vouchers to Grassroots Economics, the Nairobi-based social enterprise that co-developed Sarafu (“coins” in English) with U.S.-based engineering firm BlockScience, and redeem them for cash.
Odhiambo said more than a third of the vendors in Mukuru are already signed up to the project, which launched in 2019 with the aim of helping struggling families get hold of everyday basics without worrying about having cash on hand.
Now the project is providing a lifeline for families trying to cope with the financial pain of the pandemic, he noted.
Antony Ngoka, a field coordinator with Grassroots Economics, said thousands of slum residents, who are mostly casual workers, have lost their jobs during the pandemic.
Unable to get loans from traditional banks, many become easy prey for loan sharks, he added.
But, blockchain can help poor Kenyans avoid economic exploitation, said Nelson Ochieng’, a rights activist and social worker in Kibera, Nairobi’s largest slum.
“Blockchain can foster local trade by tapping resources that are ignored by mainstream businesses. It also increases levels of trust among struggling communities,” he said.
SECURE AND TRANSPARENT
In Mukuru Kayiaba slum, about 5.5 miles (9 kilometres) away from Nairobi city centre, some 4,000 residents have registered with Sarafu, according to Odhiambo of KRCS.
Developed with funding from global government donors, the platform can make an average of up to 1 million Kenyan shillings ($9,0000) in daily transactions, Odhiambo said.
Unlike cash aid, which can be spent on anything, Sarafu can only be used to pay for essentials such as food, health supplies and educational resources, he explained.
And, he added, because the platform runs on blockchain, meaning all transactions are tracked and transparent, that ensures people are spending the money only on necessities.
Odhiambo said KRCS is currently working with the Danish Red Cross and Innovation Norway, the government’s business development agency, to roll out Sarafu across Kenya.
But, seeing the platform as a threat, loan sharks are using political and financial manipulation to lure Kenyans away from it, said Ochieng’, the rights activist.
Informal lenders recruit people to spread rumours that blockchain is a Ponzi scheme with no backing from local leaders, a tactic that has successfully stifled the uptake of other blockchain-based projects in the past, he explained.
“The aim of loan sharks is to divert people from innovations that are helping them access basic services in the slums without having to pay interest,” Ochieng’ said.
They also pull in customers by offering much higher sums than they can get through Sarafu, with exorbitant interest rates, he added.
Violet Muraya, who sells water in Mukuru slum, said informal lenders can offer loans up to 10 times larger than anything available through the community currency.
“When people have emergencies and need huge amounts of money, they cannot use Sarafu. So, they go to loan sharks for help and end up being trapped in financial slavery,” said Muraya.
Odhiambo said the Kenya Red Cross Society is running education and awareness-raising campaigns in areas where the project has been rolled out, to reassure users that the platform is safe and fair.
“At first there was resistance … because of the propaganda. But the community has accepted this cashless transaction because they know it is not some type of betting or loan facility,” he said.
‘NO ONE IS GOING TO SLEEP HUNGRY’
At Isaac Makavu’s food kiosk in Mukuru, customers lined up to order his steaming rolls of baked flat bread, chatting about an upcoming Premier League football game and sharing funny stories about their day.
Makavu said Sarafu has helped people in his community avoid eviction during the pandemic by allowing them to save their cash.
Some come together to pay each other’s rent through table banking, a form of savings scheme where a group contributes a set amount of money every month and then uses that money to help members who need it.
Charities say evictions have been rife in parts of East Africa during the pandemic. In one instance in May 2020, Human Rights Watch reported more than 8,000 people living in two Nairobi slums were evicted from their homes.
“But there have been no evictions in areas where Sarafu is being used by slum communities because they were able to pay their rent on time,” Makavu said.
“No one is going to sleep hungry here because they have community currency.”
($1 = 109.9000 Kenyan shillings)
(Reporting by Kagondu Njagi, Editing by Jumana Farouky and Zoe Tabary. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)
How the Brexit Agreement Failed the Financial Services Sector
By Steve Taklalsingh, MD UK Business, Amaiz
Over the Valentine’s weekend, it was announced that during January, the first month that the new Brexit-related changes came into force, Amsterdam overtook London as the largest financial trading centre in Europe. Approximately €9.2bn (£8.1bn) worth of shares were traded on Amsterdam’s exchanges each day in January, against €8.6bn in London. How did that happen and why is Brexit to blame?
The Brexit deal for the Financial Sector
The Christmas Eve Brexit agreement delivered an unfair market for UK companies in the Financial Services Sector. The deal meant we were left in a situation where EU-based banks wanting to buy European shares cannot trade via London. EU shares that were previously traded in the UK have moved to the EU on advice of the European regulator. In addition, EU FinTech companies can operate in the UK but, as ‘equivalence’ (agreeing to recognise each other’s regulations) has not been agreed, our FinTech companies cannot now operate in the EU. You can already see evidence of EU companies, particularly those based in Amsterdam and Germany, eyeing up the UK market.
As a sector we’ve never been shy of boasting about our 12% contribution to the UK’s GDP. FinTech, in particular, has been a UK success story. This vibrant scene is looked on with some envy and I’m very proud to be part of it. Internationally, having a foothold in this market, and a London address, was the aspiration of financial services companies who wanted to be taken seriously, but not anymore.
Action to solve the market distortion
The Bank of England chief Andrew Bailey has warned that there are signs that the EU plans to cut off the UK from its financial markets and has urged them not to do so. The indications are that the Government is aware of the ‘problem’ but doesn’t appear to see the clear urgency in resolving it. It has been reported that there are ongoing talks to harmonise rules over financial regulations (equivalence) and that they’re working towards a March deadline.
Number 10 has said they are open to discussions on the equivalence issue and claims that the Government has ‘supplied the necessary paperwork’ and boasts of the UK’s strong regulatory system. It lays the fault of delay firmly at the doorstep of the EU: “Fragmentation of share trading across financial centres is in no one’s interest.” I’m disappointed that they’re not, in public, recognising the seriousness of the situation.
Research on the impact of Brexit
At Amaiz we have worked hard to understand the implications of Brexit. At the beginning of December we carried out research which focussed on the impact on financial services. The report, Brexit Brink: Are British SMEs about to fall off the edge of Europe – or building new bridges? is based on a survey of SMEs across the UK and you can download it free from www.https://journal.amaiz.com/amaiz-guide/. Our findings gave us valuable insight into the deal that was needed for Financial Services.
Most companies had been preparing for Brexit for some years. Whilst there were some that hoped and campaigned for the referendum result to be overturned, that seemed unlikely. The results of our research in December showed that people were as ready as they could be:
- Nearly half (49.2%) of company decision makers had reviewed new regulations set to take force on 1 January 2021 (if there was a no deal Brexit) and made changes to ensure their companies would meet them.
- Only 17% of companies said they had failed to prepare.
The changes that company leaders believed would have the most impact were those to regulations (37.4% of respondents said this was a concern), increased costs of doing business (37.2%), and reduced access to suppliers (35.5%). Overall, 57% of companies believed that Brexit would have a negative impact on their business, and some (6.6%) believed it would destroy their business.
The research found that larger companies were more prepared for Brexit than smaller ones. That’s likely to due to their ability to devote resources to solving the challenges Brexit presents. Those employing between 1 and 10 people were most concerned about increased costs (45.7%) and those with between 11 and 50 employees about taxes and VAT (41.3%).
Larger companies in Financial Services prepared for Brexit by registering companies and offices within the EU so that they could continue trading there. This acted as a fail-safe solution that avoided issues, whether a deal was struck or not, and whatever the nature of that deal. Smaller companies don’t have the resources to do this; they could not open another office on the off chance that they would need it, so Brexit put them in a more vulnerable position.
Impact on the economy
Of course, Brexit came at a time when we were all trying to manage the devastating impact of the pandemic. The FCA (Financial Conduct Authority) and FSB (Federation of Small Business) both published figures in January that show the terrible impact of the pandemic on SMEs in the UK. The FCA found that 59% of smaller financial firms expected that their profits would take a hit this year. The FSB found that nearly 5% of smaller companies expect to be forced to close within 12 months, the largest proportion in the history of the Small Business Index and would mean that 295,000 companies will close this year.
A plea to the Government
The Government has worked hard to find ways to help small businesses survive the pandemic in order to save jobs. The economy is experiencing an unprecedented recession, with all hopes laid on a swift bounce back as soon as lock down ends. Until then we are in ‘war’ mode. However, helping businesses survive is not just about handing out cash. What the Financial Services Sector urgently needs is a fair regulatory framework and marketplace in which UK business can operate. Instead, the Government has allowed distortions that continue to damage one of the country’s key sectors – one that can drive us out of recession – and appear laid back about resolving the situation!
Bitcoin tumbles 17% as doubts grow over valuations
By Tom Wilson and Tom Westbrook
LONDON/SINGAPORE (Reuters) – Bitcoin tumbled 17% on Tuesday, sparking a sell-off across cryptocurrency markets as investors grew nervous at sky-high valuations and leveraged players took profit.
The world’s biggest cryptocurrency suffered its biggest daily drop in a month, falling as low $45,000. Bitcoin was last down 11.3% at 0939 GMT.
The drop extended a slump of nearly a fifth from a record high of $58,354 hit on Sunday – though bitcoin remains up around 60% for the year.
“The kinds of rallies we’ve been seeing aren’t sustainable and just invite pullbacks like this,” said Craig Erlam, senior market analyst at OANDA.
Ether, the world’s second largest cryptocurrency by market capitalisation that often moves in tandem with bitcoin, also dropped more than 17% and last bought $1,461, down almost 30% from last week’s record peak.
Cryptocurrency markets have been running hot this year as big money managers and companies begin to take the emerging asset class seriously, piling money into the sector and driving confidence among small-time speculators.
A $1.5 billion investment in the crytocurrency by electric carmaker Tesla this month has helped vault bitcoin above $50,000 but may now lead to pressure on the company’s stock price as it has become sensitive to movements in bitcoin.
Rising government bond yields over recent days have hit riskier assets, spilling over into leveraged bitcoin markets, said Richard Galvin of crypto fund Digital Asset Capital Management.
“Markets were quite hit from a leverage perspective so that didn’t help,” he added.
U.S. Treasury Secretary Janet Yellen, who has flagged the need to regulate cryptocurrencies more closely, also said on Monday that bitcoin is extremely inefficient at conducting transactions and is a highly speculative asset.
Critics say the cryptocurrency’s high volatility is among reasons that it has so far failed to gain widespread traction as a means of payment.
Analysts said key price levels have played a large part in determining the direction of crypto markets.
“Because we’re so lacking in fundamentals, it’s the big figures that have proved to be support and resistance points,” said Michael McCarthy, chief strategist at brokerage CMC Markets in Sydney.
“$50,000, $40,000 and $30,000 are the key chart levels at the moment. If we see it heading through $50,000, selling could accelerate.”
(Reporting by Tom Westbrook; Editing by Jacqueline Wong and Nick Macfie)
The future of cryptocurrency in the eCommerce industry
By Josh Brooks, Head of Marketing at OnBuy.co
With some of the biggest names in the business turning to cryptocurrencies, it’s becoming harder to ignore just how influential and impactful these could be on the eCommerce industry – and likely sooner than you’d think.
Although relatively immature, cryptocurrency is making huge shakes in the retail sector, and certainly looks like it’s here to stay. Some of the largest multinational enterprises have already dipped into this new digital playing field and many others are following suit. Just last week, Tesla announced that it had bought $1.5 billion worth of Bitcoin to hold on its balance sheet, and is planning to allow its customers to use this coin to pay for cars. But it doesn’t end there. In the same week, Mastercard disclosed its plans to let merchants accept some forms of cryptocurrencies through its network later on this year, which will convert traditional money to digital currency before entering the companies’ systems. Other leading enterprises making the move to embrace cryptocurrency include Square, who already give users of its Cash App access to buy Bitcoin, and Fuse.io, who recently partnered with Monerium to create a platform for entrepreneurs to turn “communities into economies” via a blockchain.
In the aftermath of last week’s announcements, the price of Bitcoin surged to a record of $48,297, highlighting the problematic volatility of cryptocurrencies. While it’s undeniable that its erratic fluctuation in value holds substantial implications on its profitability, there’s still an ever-increasing buzz around cryptocurrency in the eCommerce world. Before delving into that, it’s first worth noting exactly what cryptocurrency is.
What is cryptocurrency?
In short, cryptocurrency is a form of digital currency that’s independent from banks and governments. Instead of being regulated by a central control, cryptocurrency uses encryption techniques to control its use and administer its release. Transactions are verified by a decentralized system and then distributed on a blockchain (a digital public ledger) as a public account of records. This prevents the user from spending the coin multiple times, acting as a check and balance to regulate use.
Cryptocurrency can be bought through a broker, traded online, transferred between peers using ‘cryptocurrency wallets’ or mined, all of which is typically recorded on a blockchain. Although Bitcoin (BTC) is the most well-known cryptocurrency, there are many other types of digital currencies available under the name of ‘Altcoins’, a blanket term used for all Bitcoin alternatives. These include Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Neo (NEO) and thousands of others that have emerged since 2018. Some Altcoins use a peer-to-peer exchange system like Bitcoin, while others use unique mechanics that can offer different levels of protection and privacy. For example, some coins don’t use a blockchain at all, offering fully private transactions, while some offer pseudo-anonymous transactions in the form of encrypted data.
The term ‘cryptocurrency’ was coined as a neologism made up of the root word ‘crypto’, meaning ‘secret’, and ‘currency’, the system of money for a specific region or country. This stands as both its name and definition in one, representing a hidden – or secret – system of money.
The benefits of using cryptocurrency in eCommerce
Both centred around tech, it would be fair to assume that cryptocurrency and eCommerce have the potential to complement each other quite nicely – and, in a few cases, they already are. Cryptocurrencies, particularly Bitcoin, are already infiltrating the eCommerce industry, offering an innovative, viable and streamlined digital solution for many existing blockers. With the ability to appease consumer demand for immediacy and security, while expanding market share for retailers, cryptocurrencies could prove extremely beneficial for the eCommerce industry if adopted efficiently. More and more companies have grown to understand these benefits, leading to a surge in consumer attention, and it may not be long before we start to see the commercial use of cryptocurrency as standard.
One of the biggest problems eCommerce companies face during globalisation is having to adjust prices and currencies to accommodate the individual fiats of each country. Fiat money is the government-issued currency used as standard in any given country, like British pounds or US dollars. While OnBuy is circumventing this concern for its retailers by providing auto-currency conversion and using PayPal to process global payments, cryptocurrencies also negate this concern entirely as they can be used in every country of the world without having to adapt prices or currencies, making global expansion far more streamlined for businesses. Further to that, there’s a vast, ever-growing community of people using cryptocurrencies across the world, offering an entirely new market share to target. Through accepting this method of payment, via a digital wallet or credit card platform, eCommerce companies could delve into this new market and appeal to a greater volume of consumers.
Due to the blockchain, it’s difficult to reuse or counterfeit cryptocurrencies and cancel a transaction once it’s complete (without the consent of the retailer). This not only gives retailers more control, but also offers them greater protection against fraud, as there’s no central control that could withdraw the funds from their account without consent. In addition to this, the encryption technology used by cryptocurrencies also offers a greater level of security for buyers’ data, preventing the likelihood of cyber-attacks.
Cryptocurrency is processed immediately, unlike bank transactions which can take a few days to process, giving the retailer instant access to funds. This allows companies to streamline their cash flow, which is particularly beneficial for those with aggressive expansion plans. What’s more, this allows for instantaneous shipping of products once the required payments have been made, allowing for a fast-tracked delivery service which is particularly appealing to buyers.
Blockchains not only affect transactions but the exchange of useful information to the buyer, too. Retailers can use the blockchain to make associations, track inventory and create personalised, targeted offers and discounts to buyers. Not only that, they can issue redeemable reward points to returning customers whenever they hit a particular spending threshold. These special offers and loyalty programs can attract more customers and further expand their market reach.
Is the eCommerce market ready for cryptocurrency?
Although the commercial use of cryptocurrency has many advantages, which are becoming increasingly apparent as it infiltrates the eCommerce sector, there are some substantial risks associated with it that are currently hindering its mainstream adoption. More commonly used by the major tech giants and technologically-advanced buyers (the minority), rather than large-scale brands or smaller, independent retailers, cryptocurrency may not be suitable for the current commercial scene as it stands today.
Due to the nature of cryptocurrency exchange and additional coin generation, the market value of cryptocurrencies fluctuate erratically. This makes cryptocurrency far less reliable than fiat currency. This poses many potential issues for both buyers and sellers alike, particularly with the valuation of goods and services, and it gets even more complicated in the case of returns. If a customer buys a product for X-amount of coin and wants to return this item a few weeks later, but the value of the cryptocurrency fluctuates in this time, how much coin would the seller return to them? In these cases, the seller could make a loss or they could lose custom through their buyers making a loss and, with a lack of a consensus in the community, there’s no right or wrong way to go about this situation, making it all the more difficult.
Lack of trust
One of the biggest blockers preventing the mainstream adoption of cryptocurrency is the lack of trust surrounding it. This is not just down to the lack of an established central control, but also media scepticism and the use of technological lexis which is largely misunderstood by the average consumer. There’s a general air of uncertainty around cryptocurrencies, bolstered by fears of illegalities, which provides retailers no guarantee that consumers will use these provisions if adopted, leaving questions as to whether it’s even worth the risk.
How financial industries are responding to cryptocurrency
Gone are the days where traditional banks could brush off cryptocurrency as a passing craze. The market for cryptocurrencies has grown at a tremendous rate in recent years, and is now worth over £1 billion. As such, banks and other traditional financial institutions are having to face the reality that cryptocurrency is likely here to stay, and have already begun exploring adaptations to keep up with competition.
In 2019, JPMorgan Chase launched their own cryptocurrency, JPM Coin, which harnesses cryptocurrency’s instantaneous nature, offering faster transaction settlements and funds transfers between clients – and they’re not the only ones. In fact, more than 100 banks across the world have tested instant payments via Ripple (XRP), and activity shows no sign of slowing down soon.
It’s unsurprising that cryptocurrency is gaining international interest, particularly as it allows for hassle-free, cheaper foreign exchange. Currently, the foreign exchange system is time-consuming, expensive and requires a nostro account, a corresponding foreign bank account which holds the domestic currency of the country where the funds are held. With cryptocurrency, funds are automatically converted to coin and changed to the destination currency in seconds, omitting costly holding fees while significantly shortening the exchange process. Bitbond, a German online bank, are already harnessing this technology, using Bitcoin as a bridge asset to transfer loan amounts into the destination country.
As understanding around cryptocurrency grows, the benefits of its technologies are becoming clearer. From faster payment processing to the facilitation of international cash transfers, enhanced data protection and reduced overhead and operating costs, it would be remiss of financial institutions to not explore the dynamic technologies and systems that cryptocurrencies provide.
How stablecoin is shaping the future of cryptocurrency in eCommerce
The volatile nature of cryptocurrency is one of the more substantial blockers that has prevented its adoption in the eCommerce world, but that may all be about to change at the hands of stablecoin. Stablecoins attempt to tackle unreliable price fluctuations by pegging the value of cryptocurrencies to a more stable asset, typically fiat money. These are more commonly known as ‘fiat-collateralised stablecoins’, where a reserve is created to securely store the asset backing the cryptocurrency, essentially serving as collateral. As such, stablecoins offer the best of both worlds, providing the instant process and privacy of transactions made with cryptocurrencies, while offering the volatility-free stable valuations of fiat currencies
There are four key variants that are necessary for the mainstream adoption of cryptocurrencies in eCommerce: development and accessibility of the appropriate technology, consumer demand, corporate champions and an accountable regulatory central control. All aside from the latter are currently available, courtesy of stablecoin. If the final variant emerges over the course of the next few years, cryptocurrency certainly has the potential to successfully breach the eCommerce industry.
Interestingly, the aforementioned partnership between Fuse.io and Monerium may well be the start of this necessary transition to standardise cryptocurrency. This partnership aims to bring regulated fiat money to Fuse.io’s “low-fee” and “high throughput” blockchain, supporting micro-economies with a scalable, cost-effective payment solution. However, unlike stablecoins, the digital money will be “unconditionally” redeemable at any time, with funds capable of transferring directly into bank accounts without the need for counter-parties. This announcement has certainly excited the tech world, and it has the potential to act as a catalyst for the mainstream adoption of cryptocurrency if proven successful.
This market is still very much untapped, but the future is certainly looking bright. As such, eCommerce managers and those in the industry should closely monitor news about blockchains and cryptocurrencies, and create a contingency plan for the easy implementation of such in the event that they do become more widely adopted and standardised.
Josh Brooks, Head of Marketing at OnBuy.com – the fastest-growing marketplace in the world and one of the fastest-growing tech startups in South West England, bringing innovation to the eCommerce industry. Developing future solutions involving cryptocurrency and fintech is one of the areas of expertise for OnBuy.
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