Listening to Joyce Kim’s enthusiasm when she discusses the future of financial technology (better known as fintech in industry parlance), it’s hard not to conjure the image of a global utopian future where all the difficulties of money: fraud, credit, different currencies, multiple institutions and platforms that don’t play well together, all dissolve like mist.
Kim’s not just dreaming about a day when anyone in any country, regardless of their banking status, can send money to friends, family, or businesses. As a second generation Korean-American growing up in New York City, attending the High School for Humanities, she saw first hand the challenges of many students who came from undocumented families who came to the States to work and send money to their relatives back home.
“I first saw this as a way to help the underserved send money to family who are just trying to get by,” she says. This is particularly important for women in emerging economies who are often impoverished because of the lack of financial services or the high cost of existing ones. Research from the World Bank indicates that only 37% of women in the developing world have bank accounts despite the fact that women often save up to 15% of their earnings.
So Kim, a serial entrepreneur/lawyer/VC firm alum, cofounded an organization called Stellar with Jed McCaleb, a veteran of the open-source payment protocol Ripple. “This was a way for me to make a net positive effect in the world and that impact is really scaleable,” she tells Fast Company. In building Stellar, Kim says, “I found my true north,” and continues to be inspired by the nascent organization’s effect. “I’m hearing stories around the world about people figuring out how to use Stellar to make lives better. This is their first time they have access to protocol to build what they want to build.”
Kim says Stellar’s open-source software aims to make moving money across the street or across the world as easy as emailing. That is because in addition to being a virtual currency, Stellar is a network.
“Think of it as infrastructure for our financial services that behaves a lot like the Internet in terms of accessibility and scale,” Kim says. The way our current financial structure operates is pre-Internet, she contends. Separate systems and channels do not allow currencies to travel easily–the same limitations email used to have before all the email networks connected around an open standard, also known as a protocol, that unified their structure. No one thinks about who owns or is in charge of the email system, she says, we just send our missives and expect that the recipient will get them in readable form, instantly.
Stellar is making the same effort. “We are trying to connect everything,” she explains, “Because our lives are global and how we live requires reach. The technology needs to keep up with how we live.”
Within Stellar’s network, users can move money directly between people, companies, and financial institutions as easily as sending them an email. Before you ask, “Hasn’t PayPal already simplified the exchange of funds through email?” Kim points out that users must have PayPal accounts linked to their banks before those transactions can happen. On Stellar, pesos from Mexico instantly convert into yen in Japan or euros in Spain. You could send bitcoins and have them arrive as U.S. dollars. All with no transaction fees.
With open-source software–arguably the reason Facebook, Google, Amazon, and other modern tech companies exist–developers can build local apps that cater to the specific needs of the communities they serve.
For example, Kim says, someone could make a health savings system that allows farmers to save micro amounts to pay for medicine if that is a big need just as easily as someone could make a single app that lets you pay for parking meters in any city in the U.S.
The concept is catching on. Since launching in July 2014, over 3 million users have created accounts in the network, almost 35% of whom are female. This is in sharp contrast to other demographics in the crypto-currency space such as bitcoin’s which is just 6% female.
One reason for this may be how Stellar has embraced the female user. Kim says women are already underrepresented in both tech and financial services. Combine the two and there’s a huge lack of diversity in the space. At Stellar, Kim says, the UX team focused on creating an interface that explained the value of the network in non-technical terms for a user base that was really spread out geographically relative to other digital currency communities.
They are also educating developers in emerging economies where the need is the highest. Other developers are creating ways to grow the network through gamification, where users earn points that convert into virtual currency. One such social network created to work with Stellar is Reveal which rewards followers with Reveal Coin (RVL) generated by referrals and other interactions. The RVLs are tradeable on the Stellar network and can be converted to dollars or other currency. Kim likens it to Facebook. “We would all feel differently about Facebook if we were rewarded for the interaction and being good community members,” she argues.
But in the developing world, there are more immediate and pressing needs. “How do you send money and not get robbed?” Kim suggests describing a discussion with a group in Nigeria in which she learned that money transfers to the north were facilitated by putting cash on a bus and transporting it for 12 hours to its ultimate destination.
Here in the U.S. she says, we don’t realize how difficult financial transactions are for the rest of the developing world. Kim points out that 2.5 billion people worldwide lack a formal deposit account. Financial access is a prerequisite to being able to pay for housing, education, or health care. It is also an important step towards improving an individual’s economic status.
Stellar’s goal is to unlock the economic potential in local communities worldwide by leveraging financial education, she says.
That’s part of the reason Stellar has applied for 510(c)3 nonprofit status, so that the network can function like the public infrastructure of the Internet. “Can you imagine if the Internet was owned by one company?” she posits. This also builds in a layer of transparency on the network’s governance, the number of Stellar’s distributed, grants, progress, and schedules–just like it does for any nonprofit.
Kim also says that Stellar will be used by the Praekelt Foundation in South Africa to improve the economic security of girls in the country and eventually expand into Kenya and Nigeria. The foundation will use Stellar’s open-source protocol to create a financial infrastructure for one of the Praekelt’s key products, Vumi, a Whatsapp-like scalable open-source messaging platform.
This project will enable users to have a personal savings account, a first for many. Savings can either be cash or mobile phone airtime. Account holders can withdraw airtime from their savings as cash. For aspiring entrepreneurs–whether they are selling milk or crafts–establishing these accounts can be really helpful to create a history of their transactions on ledger, which can show their credit worthiness.
“Financial services are so critical to health of the world, fighting poverty, and mitigating health care crises,” says Kim. It is so much a financial issue because families typically don’t have the ability to buffer against crises because they lack financial services that can plunge them into poverty, she explains. Creating services takes a mindset shift. “Most people don’t think about building [services] because they think it is too hard,” she observes, “we need a better solution.”