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Bill & Melinda Gates Foundation

An Open-Source Approach to Anti-Poverty

October 16, 2017

 
We launched the Level One Project to help level the economic playing field—to create the conditions for all people, rich and poor, to access financial services. Central to our mission are eight core principles, which outline how to build an inclusive, secure digital payments platform on a large scale—and which echo and stand alongside principles drafted by the World Bank, G20, and other international organizations committed to digital financial inclusion.

We are proud to announce our part in turning these principles into action.

With our support, a partnership of fintech leaders has developed open-source software that can be used to create the kind of platform outlined in the Level One Project Principles. The code is available now on GitHub, the world’s largest software development platform.

The software is named Mojaloop, after the Swahili word for “one.” It’s designed to help loop digital financial providers and customers together in one inclusive system.

WHERE IT CAME FROM

Two billion people today live without basic financial services, which all but traps them in cycles of poverty. Since its inception, the Level One Project has studied the challenges facing companies that deliver digital financial services to poor and unbanked people, as well as how markets have developed as a result of those barriers. Two things became clear.

First, growth is being slowed by a lack of interoperability—the ability for customers to transact with any other customer, whether they use the same service provider or not. Second, the reason services aren’t interoperable is because every provider is more or less going it alone. They have no shared platform or technology to help them get off the ground, leaving them no choice but to build their own systems, independent of and mostly incompatible with everyone else’s.

An interoperable platform—something like the internet, but for digital payments—would benefit all providers. But building one is a complex equation for members of the private sector. Even a successful platform would operate on a “not for loss” model, and wouldn’t be a big moneymaker.

For an organization like ours, however, the equation is very different. The only return on investment we want is fewer people living in poverty.

So we convened leaders in fintech and mobile network infrastructure to create a set of shared technology assets, for the public good. The first of these, developed by Ericsson, Huawei, Telepin, and Mahindra Comviva, was released in July. It’s a set of APIs allowing mobile money providers to establish interoperability with one another.

The second is Mojaloop. Whereas the APIs help individual providers build bridges between each other, the software can be used to help create an “ultra-bridge,” connecting mobile money accounts, bank accounts, and merchant accounts, and spanning all payments throughout a country.

To build the software, we gathered a diverse team of innovators and specialists from across the field of financial technology: Ripple, creators of the Interledger Protocol, a distributed ledger technology solution for transferring funds between multiple providers and across their individual systems; Dwolla, an API and payment transaction platform provider; ModusBox, a cloud and security specialist; and Software Group, a digital financial services integrator that focuses on financial inclusion and developing markets.

We also worked closely with Crosslake Technologies in readying the software for its home on GitHub, where developers from around the world can now access it.

HOW IT WORKS

On the surface, digital payments are as easy as pressing a few buttons. That’s what makes them so powerful—especially for someone who is unbanked, and who spends an inordinate amount of time performing financial transactions in person. But a lot is going on underneath the buttons to provide that ease and immediacy.

In fact, processing digital payments involves all the same steps as processing paper checks: An intention to pay is recorded and received, the recipient acknowledges and accepts the payment, the recipient’s and payer’s balances are adjusted to reflect the change in funds. When this is done digitally, though, every step happens in seconds, without human input.

Every digital financial services provider active today has had to develop systems that pull that off. What our development partners had to figure out was how to pull it off across the multiple systems and providers already deployed in any given market.

The result is a set of central software services, including:

  • An interoperability layer, which connects bank accounts, mobile money wallets, and merchants in an open loop.
  • A directory service layer, which navigates the different methods that providers use to identify accounts on each side of a transaction.
  • A transactions settlement layer, which makes payments instant and irrevocable.
  • And components which protect against fraud.

The code for each layer is accessible individually on GitHub. Developers can explore and use parts of the software if they wish, or they can work with the whole thing.

Given the many different types of companies that are providing pro-poor digital financial services around the world, the software has lots of potential applications:

  • A central bank may commission the use of the software by their commercial partners to speed up the deployment of a national payment gateway.
  • A major payment processor can use the software to modernize their current offering, to achieve lower transactions costs without major R&D investments.
  • A fintech startup can use the code to understand practically how to comply with interoperable payment APIs.
  • A bank can use the code to modify their internal systems so that they easily interoperate with other payment providers.

WHAT MIGHT HAPPEN?

This is uncharted territory. When the internet was hatched, no one could have predicted what it become and how it would change our lives. We’re in much the same place now with digital financial services. Because Mojaloop makes possible an internet of payments, where digital money is as fast, unfettered, and ubiquitous as digital information.

Our hope—and it is an educated one, because both the software and the Level One Project are rooted in what we’ve learned about the need of emerging financial markets—is that this software opens up new possibilities for innovation and inclusion.

The financial services industry has traditionally catered to the wealthy and middle class. But there is no good reason anymore for that to continue. A study by the McKinsey Global Institute projects that digital financial services can end the financial exclusion of 1.6 billion people—plus add 95 million jobs and $3.7 trillion to the economies of developing markets—in under 10 years. That depends on companies recognizing the opportunity they have in developing markets and going after it. Tools like this software help simplify and accelerate the work required of them.

We believe an inclusive digital economy is not only possible but imminent. We offer this software as a way of building that economy, and we look forward to sharing it with partners and leaders interested in developing inclusive financial systems and tools.

For more information on the software and the philosophy behind it, visit the Level One Project website. For the code itself, we encourage leaders and developers across the spectrum of financial providers to find the software on GitHub. Download and explore it. Adapt it to the use cases you’re solving for. Help us make it better.

Join us in building an economy that includes and benefits everyone.

 
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