Leaf enables users to digitally store savings, receive money from abroad, and manage from a mobile device using blockchain technology. They are the first to make such an application that can be accessed from a USSD platform, as well as a smartphone. We spoke with co-founder and CTO of Leaf, Tori Samples, today who has fifteen personal years of experience working with refugees, which is where the inspiration comes from.
Over 68 million people are forcibly displaced, according to the UN, with another 100 million being at risk becoming forcibly displaced. Usually, people resort to carrying cash, which is dangerous, inconvenient, and expensive to exchange. In the short-term, loss of these accumulated assets make refugees and migrants target, and in the long-term, exclude people from the financial system. Leaf spoke with over 350 people in such situations and learned the issue did come from having to hold cash, which is how the platform was born. Leaf is on a mission to help address the 66% of people in Africa without a bank account.
Tori who also has a wealth of experience on the technology side building datasets for some of the largest datasets in the world discusses why blockchain is particularly suited to address the problem.
Olivia Chow: You’ve compared using Leaf to mobile money. That is a very similar user experience. What is the advantage of using a blockchain as your backbone rather than a telecom network?
Tori Samples: Blockchain helps reduce backend and settlement costs while providing a tamper-proof ledger that is not easily hacked. The network is inherently global instead of limited by country borders and specific telecom networks. Anyone can access the blockchain, no matter what telecom provider they use. With blockchain, the system becomes both the record of truth and the store of value. Assets held on the blockchain are instantly portable anywhere in the world for almost zero fees. The reserve money held to back the funds on the blockchain does not necessarily need to move in order to support this model. That means that Leaf can avoid many of the costs of the traditional financial system when facilitating money storage and transfer for customers. Additionally, the blockchain is completely transparent and secure. This means that customers, partners, and investors do not need to trust Leaf as the intermediary. All activity is validated by the blockchain and posted in a way that cannot be manipulated, reducing the opportunity for fraud by anyone in the system. That said, the blockchain system cannot exist on its own. Leaf uses the telecom network infrastructure as a way of getting money into and out of Leaf’s system. The goal is not to replace the telecom networks but to open up global corridors for customers and drastically reduce costs once in the Leaf system.
OC: Will Leaf be interoperable with any other provider that built on the open-source Stellar blockchain?
TS: Yes. Leaf helps create individual Stellar accounts/wallets for each customer. These wallets are inherently accessible on any Stellar-based system or platform. Users can connect their Leaf wallet to any other Stellar wallet or service if they so choose. We provide some of the technical information to customers but most have not shown interest in how the wallet works at this point. Many may not even know that there is a blockchain behind Leaf.
OC: How important is digitization to reducing remittance costs in Africa?
TS: There is no way around digitization if we want to reduce remittance costs. Either the remittance providers must digitize/revamp substantial portions of their processes behind the scenes, or customers must move their activities to be digital instead of cash-based (ideally both!). Digitizing customer onboarding and compliance through e-KYC would significantly reduce one of the highest cost drivers without necessarily increasing risk. Further helping customers to build an economic identity through digital transaction history will lower customers’ individual risk profiles.
It is important to note that just “going digital” will not necessarily reduce costs to Africa. Like any system, the specific technologies, integrations, and processes will determine the value-add of upgrading to digital. More technical complexity can easily lead to more costs if remittance providers are not careful. Leaf strongly believes in using a combination of high-tech and low-tech systems to create a cutting-edge, hyper-efficient backend with an extremely accessible frontend for those in low-tech environments. By allowing access to digital financial services through USSD, Leaf enables the 2.4B people using feature phones to meaningfully participate in the global economy.
OC: What are the biggest barriers to digitization of remittances in Africa?
TS: Digitizing remittances in Africa still has many obstacles (and those obstacles are often different in each country). First, economies are still cash-dominated due to low levels of financial inclusion. The lack of trust goes both ways–banks and financial institutions make it difficult for customers to easily and affordably open accounts, and customers don’t necessarily trust the banks and financial institutions because of a history of fraud and going under. There are definitely people who prefer the discrete nature of cash for take-home pay, taxes, visibility, etc.
We still see network issues being a huge obstacle even for those who have access to digital services through banks, telcos, or fintechs. Especially in rural areas, network consistency can be a deterrent to entering the digital world. The all-in price of smartphone-based services (device, data, charging, etc.) without a guarantee of connectivity raises the barrier to entry as well.
The lack of coordination between players in the space and regulators makes abiding by regulatory requirements time-consuming and costly, especially in terms of monitoring and reporting. Leaf’s use of the Stellar blockchain eases the burden of such activity by utilizing a transparent, immutable ledger. However, we still must abide by country regulations. Until there is a coherent regulatory framework for digital financial services in each country, remittance companies will struggle to get going and justify the setup costs/efforts.
There is a huge opportunity to use existing telco agent networks where possible to bridge the digital/human divide. Tech versus touch will continue to be a relevant conversation in Africa for many years. Finding the appropriate mix to build trust, educate users on new methods of accessing services, and retain customers will be extremely important.
OC: How is COVID-19 affecting Leaf and the refugees you serve?
TS: In light of COVID-19 and increased urgency around digital financial services, Leaf is moving forward as fast as possible to expand our services. These are times of global uncertainty, especially for the individuals and communities that Leaf serves. Our goal at Leaf is to help families isolated by the virus to send money across borders securely and cheaply directly to a mobile phone. We also hope to soon develop the capabilities to allow governments and aid agencies to make direct payments to individuals suffering from the virus or the economic consequences of the isolation.
We are in the process of opening up self-registration (previously we were on a peer-to-peer model) and then will be able to operate on a fully remote model. Our wallet is still operational in Kenya, Rwanda, Uganda, Tanzania, and Nigeria but we are working to expand to new countries and corridors. We are using this time to establish a new partnership in DR Congo that will allow us to add DR Congo as a pay-in and pay-out country through mobile money.
The refugees Leaf serves have been mostly unable to leave the camps in which they reside. Borders are closed, resulting in loss of income for the cross-border traders Leaf serves. Leaf is partnering with a non-profit organization to accept and disburse donations to Leaf wallets as a means of providing extra support to the most vulnerable and engaging new customers during a tenuous time.