The aim of Airfox is to provide an opportunity for people without a bank account, credit card, or credit history to gain access financial services to help lift themselves out of poverty. Digital Journal caught up with Victor Santos to learn more.
Digital Journal: What are the complications for someone who is ‘unbanked’?
Victor Santos: Roughly two billion people in the world are unbanked and another two billion are underbanked. This means that four billion people have no financial history and must conduct transactions with cash. The unbanked either can’t receive loans because they are deemed too risky for traditional institutions or are forced to pay interest rates as high as 400% in emerging economies like Brazil.
Consider the importance of credit scores in the developed world, what if you did not have one? It impacts people’s ability to buy a home, contract with utilities and services, create a business, pay for education, and purchase everyday necessities.
Being unbanked is also expensive. Without a bank account, there’s no way to receive direct deposits from an employer and employees must rely on cash-checking. In 2008, the Brookings Institution estimated that fees associated with cash-checking can accumulate to $40,000 over the career of a full-time worker.
DJ: How can this problem be addressed?
Santos: Technology can help. Blockchain service models have the potential to address issues of financial mobility for society at all levels.
Mobile devices have become a game-changer in emerging countries, with the World Bank’s Global Financial Inclusion Database finding that close to 70 percent of the world has access to a mobile phone — and that’s the key to bringing financial services to the unbanked. Companies like Airfox are developing inexpensive financial solutions using mobile devices to provide users with blockchain-based applications for peer-to-peer transfers, bill pay features, and mechanisms for loans.
The decentralized nature of blockchain allows people in rural areas access to the global economy. Whether you’re a farmer in Nairobi or an immigrant in California sending remittances back to the Philippines, blockchain is poised to expand financial inclusion to the most remote corners of the world.
DJ: What was your motivation for introducing blockchain for the unbanked in Brazil?
Santos: My experience growing up in Brazil, a country where the disparity between wealthy and poor is highly visible, inspired me to create a solution that would empower those who lacked access to financial institutions and capital. My team is deeply passionate about promoting global financial inclusion and social good for the world, instead of just making profits. Our vision was to create a solution that would help close the wealth gap between rich and poor.
Because blockchain is distributed with no centralized authority, there are no transactions fees for users, which is ideal for the underserved emerging markets Airfox is targeting. Today’s emerging economies still struggle with volatile financial markets, unreliable infrastructure, and institutional corruption. With blockchain, the unbanked gain cyber wallets for financial access and digital documentation that can’t be lost or stolen.
DJ: How was the Airfox technology developed?
Santos: Airfox moved from the Silicon Valley to Boston, where we launched in the Harvard Innovation Lab and graduated from the Techstars accelerator program. Our mission-based conviction drives the philosophy behind our product and decision making, which is to accelerate financial inclusion for the world’s underbanked population. Airfox builds alternative, smartphone-based credit risk models that leverage state-of-the-art machine learning capabilities. Utilizing our own blockchain technology, we continue to focus on developing software, as well as the proprietary Airfox consumer mobile application.
Airfox has also developed its very own cryptocurrency, AirToken (AIR), as a way to drastically reduce transaction costs and settlement times, while enhancing security, transparency, and decentralization (i.e. bypassing costly intermediaries). The AirToken is already integrated into a variety of Airfox products and features, with the plan for more to come. We have a defined roadmap for scaling the utilization of the AirToken as the company scales its user base.
DJ: How does your blockchain work?
Santos: Airfox’s financial products are built to incur little to no cost for users. AirToken, an Ethereum-based ERC-20 utility token, harnesses the decentralized power of the Ethereum blockchain to create digital ledgers of user behavioral and transactional data, funding a new financial asset class. With the AirToken blockchain, we hope to disintermediate and decentralize the global and vertical silos of financial institutions. We aim to build upon AirToken’s blockchain platform, and our success in Brazil, to enable global interoperability.
DJ: How have you ensured that the technology is secure?
Santos: An architecture board defines policies and enforces standards related to reliability, scalability, maintainability and last but not least the security of our systems. A dedicated devops team makes sure that security patches are applied in a timely manner and performs security scans and penetration tests on a regular basis. On top of that we’re auditing our processes and systems against fraud and security breaches.
DJ: Are you working on any other projects?
Santos: In September, we were excited to announce a major partnership with Brazilian retail giant Via Varejo. This will massively extend the reach of our affordable financial services to nearly 1,000 stores nationally. Millions of Brazilians will have an easy, fast, and cost-free way to complete daily financial tasks such as buying goods, paying bills, transferring money, and recharging public transit cards using their mobile phones. Additionally, we are developing the Airfox app for iOS to allow all users with smartphones to transact across the two major smartphone ecosystems.
In a follow-up interview Victor Santos discusses the overall impact of blockchain on the financial sector and industry in general, including future developments for the technology. See: “Q&A: Blockchain to cause further disruption of financial services.”