April 08, 2021

If we want full financial inclusion, we’ll have to create an interoperable financial system. That’s not the only thing we need to do of course, but it’s essential, not optional.

A theme that runs through our Barefoot Innovation conversations is the need to make both the financial system, and the regulatory system around it, interoperable. The information in these systems needs to be converted to digital form that can be digitally linked, so that data can be readily shared -- within appropriate limits, obviously. When that is done, everything will get easier and less expensive for financial customers and providers alike. Payments will move quickly, with little cost and friction. Sound loans will be made to people who are excluded today. Consumers and small businesses will more easily understand and manage their financial lives, by using better information and tools. Risks and compliance errors will be caught right away before they hurt people and grow into liabilities. Everywhere, and especially for emerging markets, the nodes of activities and flows of data need to be connected, so they can operate as one system.

The Swahili word for “one” is mojaloop, and it inspired the name of the organization that is led by today’s guests. They are Paula Hunter and Lesley-Ann Vaughan of the Mojaloop Foundation.

The open-source Mojaloop software was first developed in 2017 to support the financial inclusion work of the Bill & Melinda Gates Foundation, premised on the realization that reaching financially underserved people with digital financial services will require the financial system to use open and interoperable solutions. Just four years later, more than 400 developers are collaborating to create Mojaloop software that is helping service providers open markets and accelerate progress in emerging markets. Mojaloop was designed by a team of leading tech and fintech companies including Ripple, Coil, Crosslake Technologies, Dwolla, ModusBox, and Software Group, and is available to be used under the open-source Apache 2.0 license. The initial sponsors are the Gates Foundation, the Omidyar Network, Google, Rockefeller Foundation, ModusBox, and Coil. It is part of the broader financial inclusion initiative of the LevelOneProject.org.

In our conversation, Paula and Lesley-Ann tell us about the problem they are solving:  if you live in a developing country and do not have a bank account, how do you go about your daily business? Your life is cash-based. It takes a significant transportation effort to get yourself somewhere to make a payment. That process carries significant costs. Holding cash, and traveling with it, carry risks too. Mojaloop is building a system to help fix all that.

To do so, you need to build connectivity across a number of different providers -- a clearing system that connects phone providers, financial institutions, fintech firms, merchants, etc., and that automates as much as possible by leveraging non-repudiation mechanisms. To overcome a cash-is-king arrangement, that new system has to be really simple and easy to use.

So Mojaloop went out and found partners that operate at scale in each market, to capture economies of scale drive that drive down the cost of interoperability to end customers. These players all have their own products to deliver, of course, but they don’t differentiate themselves on infrastructure. On infrastructure, they can work as a community.

And Mojaloop creates the tools to do this in open source. That means that, unlike most of the software in financial services, it can be adopted and used by anyone, free of charge. This reduces costs of deployment. It provides perspective from a broad range of participants on how it should evolve. It also helps to prevent vendor lock-in, so that the system is not beholden to one company for the software stack and can be nimble in finding the resources needed to run. Equally important, it releases energy and creativity -- people are eager to help. That, in turn, speeds up R&D. This move to open design is a core tool in building a better financial system and for that matter, better financial regulation too. We at AIR are now hosting an open-source SIG (Special Interest Group) for regulatory code, with FINOS.

In today’s show, Paula and Lesley-Ann explain all this and also share insights on how progress has been impacted by COVID; how interoperable digital payments especially helps women; how that fact in turn links with the global work underway on digital identity; the necessity to build systems that the public trusts; and the respective roles of the private sector and governments, especially central banks.

Speaking of women, I hope many of you were able to join in the global Techsprint on Women’s Empowerment that AIR co-hosted last month with the UK Financial Conduct Authority. It was an incredible experience -- and there is more to come!

More on Paula

Mojaloop Foundation Executive Director Paula Hunter is responsible for the organization’s strategic planning and direction, membership development, and evangelism. With over two decades of open source and association management expertise, she has the in-depth industry knowledge needed to enable the Foundation to advance its financial inclusion mission.

More on Lesley-Ann

Lesley-Ann Vaughan recently joined Mojaloop Foundation as Director of Product Strategy. She has been working in emerging markets for digital financial service innovation since 2005, including as part of the founding team behind M-PESA. In recent years she has worked for the Bill and Melinda Gates Foundation, CGAP, IFC, Microsoft, Mastercard, Accion Centre for Financial Inclusion, EFInA, FSD Kenya, GSMA, FSD Tanzania, DFiD & UNCDF as a freelance consultant. She is passionate about the potential for APIs to unlock the next generation of partnerships and co-opetition in payments, and what it takes to deliver that well.

More for our Listeners

Today AIR, alongside Energy Web, and the Rocky Mountain Institute (RMI), launched the Crypto Climate Accord—a private sector-led initiative committed to making the cryptocurrency industry 100% renewable. Inspired by the Paris Climate Agreement, the Accord brings together the crypto and broader fintech industry to build a sustainable future for global finance, with support from the United Nations Framework Convention on Climate Change (UNFCCC) and its Climate Champions. You can find more information on the Crypto Climate Accord here.

We have so many great guests coming up on the Barefoot Innovation Podcast. You will hear me talk with Rob Nichols of the American Bankers Association, Douglas Arner of Hong Kong University, John Ryan of the CSBS, and Sultan Meghji of the FDIC to name a few.

There are also great virtual spring conferences coming soon. Join me on Tuesday, April 13th at the ACAMS International Conference on financial crime; at LendIt on April 27th; and at Fintech South in June! You can also still watch the replay of my SXSW panel session with Cleve Mesidor of the National Policy Network of Women of Color in Blockchain.

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