In today’s world, financial exclusion forms a structural problem within the modern banking industry and impacts the lives of many. The World Bank states that around 1.7 billion adults are formally excluded from financial services, which makes up for forty percent of the global adult population. In some of the world’s poorest countries, this percentage lies even higher. ARYZE plans to onboard the unbanked and bring an end to globally existent financial exclusion.
Financial exclusion exists world-wide, both in emerging and developed countries. Globally, around 1.7 billion adults do not have access to financial services and mostly live off cash. When some form of electronic payments system is needed, individuals seek expensive alternative services to carry out financial activities, which makes the costs of financial exclusion extremely high. These additional costs can have a drastic impact, especially when it comes to low- and middle-income households.
One of the important reasons for financial exclusion to exist is the business models that fractional-reserve banks operate from. As these commercial banks primarily generate revenue from deposits and lending activities (net interest margin), they tend to aim at acquiring customers who are able to deposit considerable amounts of money with the bank, which can be converted into loans. This causes people with little financial means to be left out of the system and denied ownership of a bank account. ARYZE’s CEO, Jack Nikogosian argues:
With banks, if you have thousands of dollars, they will open a bank account for you, no matter what. But if you have 57 dollars to your name, you don’t get access to these kinds of services.
Currently, many existing digital payment solutions try to solve the needs of the financially excluded, yet fail to do so. The unsuccessful onboarding happens as many digital payment companies partner up with existing traditional banks to provide services. This means that these companies still ask people to sign up with an existing bank account. Unfortunately, because of insufficient ID documents often combined with high levels of financial illiteracy, many of these unbanked individuals do not succeed at opening a bank account in the first place. This results in many people being unable to access digital payment solutions.
Accessible financial services
ARYZE chooses a different approach by building a financial services platform that is accessible to anyone with a smartphone. Instead of partnering with an external bank, ARYZE will acquire one, allowing it to set more flexible identification requirements while still meeting the KYC (Know Your Customer) requirements of national authorities. Depending on the client’s available identification, required financial services and currency choice, users will be requested to verify themselves to a specific KYC tier.
This tiered approach will enable us to provide basic financial services to the largest number of people and organisations possible, with opportunities to expand their access by meeting further KYC requirements. ARYZE’s digital financial services are universally accessible through ARYZE’s MAMA (Multi-Asset Modular App) mobile app, through which users can get multi-currency bank accounts and internationally transfer money directly. Says Nikogosian:
Instead of having to go into the city and going to a bank and being very limited, and having to put up front payments etc., in this system you can get an IBAN in Euros, an IBAN in Dollars, an IBAN in Danish Crowns.
Having this social impact is fundamental to what ARYZE stands for. Undoubtedly, providing financial access will allow for the improvement of many lives worldwide. Together with the removal of remittances costs, ARYZE aims to solve the financial inequality and engage the currently excluded. Not only can people now make use of different provided services, but they can also create value in return. By adding these individuals to financial infrastructures, they will be able to monetize their skills and talents. Ultimately, if more people have means to professionalize themselves and their skill sets, this could stimulate global innovation and growth.
In order to realize this mission, it is important to take a strategic approach due to the complexity of financial exclusion. ARYZE has developed a business model that engages different parties in the ecosystem, with large organizations being a crucial part of onboarding the unbanked and local businesses. Through collaborating with global corporations and NGOs who often work with these people and know them best, ARYZE can ensure an inclusive banking platform.
To learn more about ARYZE’s B2B2C business model that will include organizations, end-users and developers, please see the next article in this series. For other information about our company, check out the other articles of these series on our blog, or visit our website.