On Wednesday (17 October 2018), Miller Abel, a deputy director at the Bill & Melinda Gates Foundation announced via Tweeter that the Gates Foundation is partnering with Ripple and Coil to develop and deploy Mojaloop, the open-source software for creating payment platforms it released last October.
The Gates Foundation's Financial Services for the Poor Strategy
The Gates Foundation's "Financial Services for the Poor" strategy "aims to expand the availability of affordable and reliable financial services that serve the needs of all, including the poorest." This means supporting what it believes are the most catalytic approaches to financial inclusion, i.e. "helping to drive the development of digital payment systems that can help spread use of digital financial services quickly, advancing gender equality to ensure women share in the benefits of financial inclusion, and supporting the development of national and regional strategies that accelerate progress for the poor and provide exemplar models."
One of the most important priorities for the Foundation is "the development of pro-poor, digital payment systems – the mechanisms by which individuals and businesses actually buy and sell." It says that to be effective, such systems need to be
- Accessible: "They need to reach into the poorest neighborhoods and smallest villages, and they need to be easy to acquire and understand."
- Reliable: "Users’ money and information need to be readily available and highly secure, protected against cybertheft, money laundering, and other breaches."
- Valuable: "There must be a clear advantage for people to use digital payments instead of cash."
- Affordable: "To deliver on their potential, digital payment systems must be free of cost for all or most people."
- Profitable: "The emergence of global digital financial services will depend on the full involvement of the private sector which must be able to develop sustainable business models to support their service offerings."
To develop these pro-poor payment systems, we need interoperability ("the ability of customers to transact with any other customer, whether they use the same service provider or not"), because this "substantially lowers the costs and complexity of digital financial services and payment platforms". If we "open up payment infrastructure to new kinds of companies outside of traditional banking organizations", we can help to "accelerate the development of these systems."
On 16 October 2017, the Gates Foundation announced the release of Mojaloop, "open-source software for creating payment platforms that will help unbanked people around the world access digital financial services." This software was "designed to provide a reference model for payment interoperability between banks and other providers across a country’s economy." It was made available "for software developers to adapt and banks, financial service providers and companies to implement."
Mojaloop was built in collaboration Ripple and four other FinTech partners (Dwolla, Software Group, ModusBox and Crosslake Technologies).
Here is how Mojaloop's FAQ page explains what this software is for:
"Mojaloop is open-source software for building interoperable digital payments platforms on a national scale. It makes it easy for different kinds of providers to link up their services and deploy low-cost financial services in new markets."
Mojaloop use Interledger Protocol (ILP), which is "an open protocol suite for sending payments across different ledgers" that was invented by Ripple. According to Mojaloop's documentation, ILP is "a suite of protocol definitions and reference implementations that define a standard way to connect any number of disparate payment systems together into one interconnected network", and Mojaloop uses ILP "as its settlement layer so that individual instances or deployments of Mojaloop software can eventually become interconnected not just with one another, but with all other payment systems worldwide."
The Foundation's Partnership with Ripple and Coil
This is how Miller Abel, the Foundation's Principal Technologist, announced the news on Twitter:
Coil is the FinTech startup founded by former Ripple CTO Stefan Thomas (who is also a co-creator of IPL) and announced back in May:
On October 18th (the day after Abel's tweet), Coil confirmed the partnership with the Gates Foundation:
Proud to confirm that we are working on https://t.co/tbV0COdx3T with the @gatesfoundation - Technologies like @Interledger and #micropayments aren't just for media. They also increase #financialaccess and we want to do our part. https://t.co/LUjJo57OgY— Coil (@Coil) October 18, 2018
Both of these tweets were short on details. Thankfully, Ethan MacBrough, a former researcher at Ripple and currently the Lead Scientist at Coil, took to Twitter to clarify the nature of this partnership:
Coil is working together with the Gates Foundation to develop and deploy Mojaloop, separately from our primary work on web monetization.— Ethan MacBrough (@emacbrough) October 17, 2018
Mojaloop does not use Coil the product. Coil the company is helping to develop it independently of our work on our main products.— Ethan MacBrough (@emacbrough) October 18, 2018
And here is MacBrough explaining Mojaloop further:
To throw water on the hype a bit, I'll clarify: the point of Mojaloop is make mobile money networks interoperable, and likely will not use XRP. However, it will open up corridors that were formerly closed off, possibly allowing RippleNet/xRapid to access new regions.— Ethan MacBrough (@emacbrough) October 17, 2018
It's its own system based on the Interledger codebase. Aside from low level details it works just like ILP: I give some mobile money to a connector who gives an equivalent amount of another mobile money to the destination.— Ethan MacBrough (@emacbrough) October 17, 2018
To my understanding, mpesa is a single mobile money provider. The issue is that you can't send money to people using a different provider. Many countries in e.g. Africa have several competing large mm providers and trading between them is costly. Mojaloop fixes that friction.— Ethan MacBrough (@emacbrough) October 17, 2018
Featured Image Courtesy of the Gates Foundation