Refugees are among the most unique groups of people for whom to enable mobile payments and other financial services. Clearly an acute need is there, but modern banking is built upon knowing one’s customers; and when all refugees have are the clothes on their back, cash in their pocket and a mobile phone in their hand, knowing one’s customer becomes an extremely high bar to jump.
This is often because many of those refugees go to great lengths to hide their real name from the world.
“When a lot of these people apply for asylum, it is common that they use a different name, because using their real name creates a risk of prosecution in their home country. In a very real sense, their name is the reason they are fleeing,” Balázs Némethi, CEO at Taqanu, told Karen Webster in a recent conversation.
Némethi is not a professional humanitarian or someone who thought much about the refugee crisis until he found himself — a Hungarian national living abroad in Norway — disturbed by his country’s reaction to the flood of refugees fleeing Syria’s civil war.
“I am Hungarian, and things just haven’t been the same over the last six years. I was surprised that they made the rules against refugees, and I couldn’t defend my home country; it was an outrage against human rights.”
That feeling motivated him to become part of the solution. So while others might have created a Kickstarter campaign or a charity, Némethi’s mind turned in a slightly different direction — banking and financial services.
Némethi had never been a migrant, but he had been an immigrant — and he knew that something as simple as securing a bank account is not so simple for a stranger in a strange land.
“It was fairly simple but still problematic, even though I am a white male, an EU citizen with a job contract and [a] signed contract for a lease. It was still three months before I could get a proper Norwegian bank account because I was temporary tax member. It was extremely frustrating, and I ended up paying a lot for not being Norwegian.”
Paying a lot — and arousing the suspicion of those around him inadvertently — because Norway is largely a cash-free society, and in his underbanked days, he was carrying a lot more cash than merchants were used to seeing.
“Homeless people [in Norway] sit with QR codes to send money to because people do not have cash to give to them. I remember shopkeepers questioning me about why I had so much cash on me all the time — which was only something like 50 euros,” Némethi said.
The problem for refugees, he continued, is being a newcomer without any “street knowledge” about the culture of money and payments — so it also makes it hard to get support from the locals.
The Identity Challenge
The basic problem, Némethi noted, comes down to identity. Some refugees come with all their papers in order, but many come with little more than a mobile phone and their name — which, as noted earlier, is often a fake. Being unable to prove who you are is a big problem for anyone, anywhere on Earth looking to secure any kind of bank account, since global regulators all more or less agree that one has to know their customer.
But Taqanu and its founder have a novel idea on that identify issue — which is simply to point out that these refugees have smartphones, regular access to the internet and leave a long list of digital clues in markets that make it quite broadly possible to create an identity profile for them.
“The idea is, if they have a smartphone, they generate all kinds of data. That data can be combined often to understand who this person is.”
It’s not a perfect system — and can be proven wrong. But, Némethi said, it is actually harder than one might think to fake a digital identity even if one wants to — carrying two phones with two completely different search patterns, contact lists and social media profiles is actually a lot of effort. But more importantly, the more the system is used and the larger the network of trust becomes, the better the system runs, because there are more touch points to create an identity.
And, he noted, the system can also be customized to the level of user verification of identity — with basic access for the lowest level of verifiable data and increasingly robust services the more layers of authenticated identity are built on top. But even a basic ability to store and move money via a paycard — the dominant payments system by a long shot in most of Europe — is a strong first step for refugees who find themselves locked out of services.
The Power of the Blockchain
Given its colorful history and connection with bitcoin, blockchain may seem like an out-of-the-box choice on which for Taqanu to build its service.
But the blockchain provides the firm some advantages, Némethi noted — even though the system in large part could carry on without it.
“The system could be built not using blockchain, because we use the blockchain as proof of existence not for storing data. The items and transactions will be recorded on the blockchain, and that is very valuable.”
Plus, he noted, the blockchain put them in the orbit of Kim Cameron, the head of identity at Microsoft, who was looking at ways to create an interoperable blockchain interface for all blockchain users that could be leveraged for humanitarian reasons.
“The Microsoft connection opens a lot of doors — and so their support is very helpful.”
Right now, the identity verification platform part of Taqanu is still a work in progress, as they need to find an open-minded regulator who is willing to consider an identity verification scheme that does not involve a government-issued photo I.D.
That, given the current structure of KYC rules, is not going to be small feat.
But before it takes on that very robust challenge, Taqanu is first launching in Germany with a product custom-tailored for the recently reformed marketplace for refugee financial services.
“Germany actually changed its laws recently and gives a right [to] anyone living in Germany to have a basic account. That change has happened, but banks are not doing it. So we think there is a big opportunity there, and we have designed for the German market,” Némethi explained.
That market will both serve the refugee community in Germany and provide additional valuable data as they continue to build out that digital authentication system.
Before that German pilot can get underway, Taqanu has some fundraising to do. Némethi’s says they are looking to raise about half a million euros to fund their expansion into Germany.
If that round goes as planned, they could be up, running and on their way to proof of concept in Germany as soon as August of this year.