The Bill and Melinda Gates Foundation has unveiled its ambitious new financial inclusion framework, the Level One Project, which leverages blockchain technology to bring financial services to the poor.
The Level One website is intended to be a foundational resource for rolling out modern digital financial services to the unbanked. It’s a well-meaning, if somewhat well-trodden, path. Nearly every young Bitcoin startup has at one point claimed to focus on the unbanked and underbanked, tugging on the heartstrings of first-world investors who have limited understanding of the situation on the ground.
Financial Inclusion Problem Has Many Faces
The Gates Foundation presumably has spent the time to understand the local context, and their decade-long presence in markets like Ethiopia and Nigeria certainly indicates that they have deeper familiarity than most.
The foundation is probably aware that mobile wallet and payments technology layers are often the easiest part of the financial inclusion problem. Indeed, the larger challenge lies in user education and adoption, as well as the fact that infrastructure (internet and telecommunications, bank and ATM networks) is inconsistently implemented throughout a given country.
The Level One Project is their attempt to shorten the time for governments and central banks to get started, by providing a free “recipe” for rolling out a nationwide mobile money platform. The “recipe” is not particularly detailed, and reads more like a brochure than a consultative guide, but discusses basic principles such as push payments, tiered KYC, and enhanced regulatory support.
Importantly, it advocates for building open-loop networks, which allows for interoperability even amongst competitors in a given market. It’s an approach that most bank-financed blockchain efforts have rejected in an effort to preserve their security protocols and, conceivably, market dominance.
The website further lists important network components such as operating rules and business requirements, which must be filled in by the country implementors with content pertaining to their own jurisdictions. It also demonstrates a rudimentary payments API that could be copied and re-implemented for free.
Blockchain May Not Be the Technology For This
Although the guide advocates for the use of blockchain technology, Level One Project leader Kosta Peric says he believes current public blockchains “will struggle to process transactions in real time and have trouble scaling up.” Additionally, the decentralized, global nature of most active blockchains are notoriously difficult for national governments to regulate.
The Level One team is reportedly collaborating with companies in Africa and South Asia to produce a blockchain-derived technology that would satisfy their criteria.
The unfolding narrative potentially echoes that of R3, a bank-financed initiative which notably set out to create a regulatory-friendly blockchain in 2015, and recently wrote that their new platform Corda would not involve a blockchain. Whether Level One will come to a similar conclusion in their own development efforts remains to be seen.
What do you think? Is the Gates Foundation offering anything truly groundbreaking? Let us know.
Images via Bill and Melinda Gates Foundation