Cross Border Banking to Drive Digital ID

ChangeInEx empowers financial inclusion by introducing a new standard of automated compliance using digital identity with biometrics and a trusted ledger.

Banks and financial institutions can only serve those who most need help if we can achieve a sustainable scalable solution for Know Your Customer/Anti-Money Laundering and other regulatory reporting requirements.

Our business model is built to scale globally, to extend property rights for everyone. In a ChangeInEx world, everyone with a smartphone would be able to work online, selling their labor into richer countries. This would cause companies to use online training methods to make use of this larger, lower cost labor pool. Then everyone with access to the Internet could know the dignity of earning her daily bread.

The UN’s Sustainable Development Goal (SDG) 10.C calls for reducing the transaction costs of migrant remittances to less than 3% and eliminating remittance corridors with costs higher than 5 per cent by 2030. 

Remittances remain expensive to send: on average 7%. 

However, this figure assumes that $200 USD is sent. The unseen and untold story is the much smaller sums that are not even feasible to consider. High remittance costs for SMALL transactions essentially prevent the use of the Internet for online work in poor countries. 

Remittances must become affordable to send in small amounts, sized for daily salaries for the unbanked or underbanked. 

Once people can receive $7 USD per day (newly increased minimum wage for Mexico) or say $1-3 (for entry level work in Rwanda) then their households and countries can grow in wealth and opportunities.

This is the very problem ChangeInEx is designed to solve. By automating and digitizing the entire process, no minimum fee is required, only a 1% per volume fee shared with the banks (Please see more in response to the Business Model question below).

ChangeInEx was born in a refugee camp in Northern Iraq, when our CEO was on a humanitarian fact finding mission to learn how to help the families who were chased out of their homes by the ISIS genocide. 

Refugees and the internally displaced include some highly skilled, trained, and educated people, as well as generations growing up in camps with limited access to education. All of them are highly motivated to learn and earn online, to enjoy the right to make their own way in the world again.

ChangeInEx creates an accessible and sustainable ecosystem to scale hygienic and robust digital identification by making it profitable for the private sector to provide financial services, thus increasing the business value of new mobile subscribers (once they are able to earn money online). This will also help NGOs and governments be more effective in their work with these underserved populations.

Reducing remittances from 5-7% to 1% will make it possible for entrepreneurs to flourish online, transforming mobile phones and computers into earning devices, and driving demand for connectivity. Digital ID allows automated compliance to lower the cost of money transfer.

Dozens of startups in the ICO craze (peaking circa 2017-2018) attempted to replace fiat money with decentralized crypto-coins, and solve for digital ID and/or financial inclusion in the process. Few survive today. Their replacement approach is destined to run into the reality of regulatory reporting requirements. 

Instead of trying to rebuild banking and money from scratch, we just help to create an ecosystem of cooperation and competition among existing local, already-licensed institutions, lowering barriers to entry for innovative ideas to reach around the world.

Like SWIFT, ChangeInEx sends messages between banks. Unlike SWIFT, it creates a provably faithful ledger of operations between communicating banks, along with a digital identity record that allows individuals to claim their due credit worthiness.

Only ChangeInEx is built on consent and transparency, directly to solve the de-risking crisis of post-911 regulatory policy. Because we exist to empower Financial Institutions big and small, ChangeInEx does not really have direct competitors--only complementary service providers and customers.

ChangeInEx introduces no new technologies, but combines several proven technologies whose cost has fallen to the point that they are affordable even in the poorest countries. This way we can create a unique platform for an ecosystem of inclusion. 

ChangeInEx is built on proven technologies from our developer’s many years experience of financial services and regulatory reporting, hosted in the worldwide scalable Amazon Cloud, using QLDB for a central repository of truth, and partnering with Integrated Biometrics for fingerprint scanners to capture universal unique identifier for our consent based compliance. 

Our model is to solve for the one key piece that keeps financial institutions from communicating to serve the marginalized and vulnerable: digital identity and consented transparency for automated compliance.

ChangeInEx Theory of Change: How to Unwind the De-risking Crisis

Context. By increasing compliance liability for banks, the massive rise in AML and CTF enforcement since 9/11 has had the unintended consequence of pushing many legitimate businesses, and non profits, out of the international banking system. (This makes it harder, not easier, to catch the bad guys.) It has also led many international banks to pull back from developing markets. This is the de-risking crisis.

Derisking has reduced the banking industry’s customer base, made it harder for enforcement agencies to do their jobs, and pulled back financial services from developing nations. Countries cannot grow fast without access to capital.

Activities: ChangeInEx cooperates with regulators to create an end user consent based digital identity system, in order to give regulated entities confidence to use automated compliance with permissioned transparency. 

Output:  An ecosystem for inclusion. We are not trying to reinvent the wheel, but rather make it possible for everyone to get an on-ramp to interstate commerce, via digital identity and account access provided by market forces.

Outcomes: 

ChangeInEx will 

• Make it possible for persons and small businesses who currently lack access to financial institutions (checking, loans, savings, etc.) access to the global financial services market.

• Revitalize the international banking system and help create a local banking system necessary for capital accumulation and investment, and so long term economic development.

• Streamline regulatory reporting data to lower bank compliance cost (an estimated $181 billion per year problem) and create a powerful real time big data analysis of financial intelligence that can be used to disrupt the funding of terror and organized crime.

• Create an indelible money trail transparent to investigators, to allow governments to cut corruption in their dispersal of funds to employees and contractors. 

• Enable rapid vendor vetting and the monitoring of international aid dollars from vendor to end use. 

By streamlining onboarding and KYC processes for mobile banking, ChangeInEx makes outreach for inclusion mutually beneficial. 

Instead of requiring ongoing government subsidy to pay for digital enrollment, our ecosystem empowers entrepreneurs in the private sector to build apps and innovate at Financial Institutions to find the best ways to onboard new customers in a scalable solution for cross border payments.

ChangeInEx provides an upgrade to existing successful mobile banking applications, (somewhat similar to the function of Zelle for interbank money transfer in the United States). Thanks to our partner Integrated Biometrics, we can do fingerprint scanning in low power, low connectivity environments, developing a digital identity based on consent that can interface with any governmental identification databases.

The ChangeInEx ecosystem is entirely based on API integrations with banks/Financial Institutions, to allow them to compete to serve people best. 

Our solution lowers the barrier to entry for new startups and for new ideas from established institutions.

Better connectivity will come as the solution scales. Market forces unlocked by low cost cross border money transfer via ChangeInEx will create demand to drive the extension of mobile networks and internet, and increase access for all, alongside digital identity and financial inclusion. 

Online opportunities to earn, ramping up from unskilled to highly skilled work, will also motivate education, improving literacy and numeracy.

In the next year, ChangeInEx plans to launch in Africa, the Middle East, and Latin America. Our initial target markets have populations of about 7 million (Lebanon), 12.3 million (Rwanda), and 50/126 million (Colombia/Mexico). Their diasporas are respectively estimated at 8-10 million, half a million, and 3 million/30 million.

If our solution can serve just one tenth of the people living abroad who want to send money home, we can have millions of end users within the first several years.

We expect the much larger economic effects to kick in as a result of the entrepreneurial dynamism when money can be exchanged for work online, as well as for charity and social support. 

We are working on getting our first remittance channel (US-Lebanon) connected.

We have currently built the back end solution, and are talking with banks in Lebanon about building our capability into their mobile apps and connecting to their core banking software (bank integration). The central bank governor agreed to license the solution; we have strong interest from several banks and a commitment from the Association of Banks in Lebanon (ABL) to move forward. Unfortunately the August 4 explosion in Beirut destroyed the ABL offices and the headquarters of many of the top banks. While the environment is challenging, the need is so great in the economic crisis and our solution addresses the heart of the problem (the need for dollar liquidity, remittances, and reemployment) so we are confident that we can get this done in the coming months.

We get from “zero to one” by creating a connection between a local bank and a correspondent bank. As soon as the first transaction occurs, we have a new standard for automated compliance that is rapidly scalable. 

We have laid the groundwork, having met with governments and banks in more than a dozen countries in Africa, Latin America, and the Middle East. Several countries are prepared to move forward as long as another country is using the solution already. So Lebanon is very important to connecting these other countries.

We have a suite of proven technical solutions to solve this problem, including: A partnership with IB, the biometric company trusted by US Customs and the FBI; delivery in the AWS cloud, the use of Amazon’s cryptographic QLDB database to make blockchain scalable; and proven messaging software that has cleared millions of transactions.  

The main barriers are not technical, but regulatory.

Post 9-11 banking regulation has increasingly pushed the burden of proof that a transaction is benign onto financial institutions. With implementation of the US PATRIOT Act, regulators across the globe increased barriers to entry into the formal financial system. Government enforcement actions costing financial institutions more than they were making in entire markets caused many financial intermediaries to pull out of developing markets altogether. The risk of reputational and monetary damages that enforcement actions bring are a barrier to using innovation to formalize the informal sector.  And the biggest regulatory barrier is not the burden of the rules themselves: It is uncertainty about what regulators will do in the future. This suggests a solution. (See next question!)

How to solve the regulatory barrier to tech innovation:

Our CEO, a former regulator, understands that government partnerships are the key to allowing innovation to disrupt old business models. Companies would like to use the tech, but are afraid of regulatory risk; ChangeInEx aims to have companies reprice that risk by giving regulators a data pipeline to gain their participation.

The answer to regulatory uncertainty is partnership. Governments need an incentive to participate in pilots. ChangeInEx offers regulators a tool they do have never had before — an unprecedented level of transparency into what is going on in their regulated institutions.

ChangeInEx relies on a legal theory of consent. (Somewhat similar to the way US Treasury’s FATCA has been implemented in many countries.) This gives sovereign countries (local regulators) a way to move forward without, in most cases, requiring a new law or regulation. So partnerships with known actors like WB, MIT, and the Gates Foundation can help ChangeInEx convince sovereign regulators to make the choice to participate — the main obstacle to the implementation of our cross-border standard for digital identity, title, and transactions.

The ChangeInEx business model relies NOT on getting licensed in every country, but rather working as a service provider to already-licensed entities in those countries (banks, MNOs, PSPs, insurance, savings companies, etc.). This gives us better prospects for scaling quickly while ensuring that everyone in our value chain is fully compliant with laws and regulations.

Full-time: 2

Part-time: 3

Other/Partners: 12

Our team brings deep experience and relationships in:

• Regulatory Mindset. Our CEO is a former regulator; many of us have substantial political experience and relationships in key bureaucracies. 

• Banking Industry. From former senior regulators to crack legal advisors to the C Suites of global banks, and a banking utility CEO on our board, we understand the good and the bad of traditional banking and how to unleash its resources rather than try to put it out of business.

• Technology. Our founding CTO and technical advisors & biometrics specialist have a powerful pedigree of results delivered. 

National Security, Foreign Relations in the Developing World.
Our team leaders have on-the-ground knowledge and personal connections in our pilot countries and with unbanked populations.

ChangeInEx is partnering with Integrated Biometrics, to bring the best hardware scanners to record most inclusive and robust unique physical identifier: fingerprints. Our developer, Valoores, has a long track record of writing banking software (even for central banks) and retail supply chain software (for clients like CVS).

Our customers are Banks & MNOs, but we must satisfy FOUR groups. 

This is why they will use ChangeInEx:

Financial Institutions (Banks closed millions of accounts derisking effects of post 9-11 regulation.)

• Reduced regulatory risks & compliance costs
• Cheaper faster safer cross border transfers
• Recovery of lost markets
• Large volume of new customers
• Better cyber security, anti-fraud

International Regulators 

• Better AML/CTF enforcement
• Diversifying portfolios of regulated banks increases their soundness
• Biometrics & cryptography technology leapfrog regulated entities past growing security threats and fraud attempts

Nation States  

Greater access to financial services... 

• Speeds financial inclusion and economic growth
• Accelerates digital inclusion by making telco signups more profitable
• Diversifies the economy
• Facilitates tax collection
• Increases foreign remittances
• FORMALIZES THE INFORMAL ECONOMY

End Users

• Get the Right to Buy & Sell online
• Higher wages via online work & study
• No more waiting in line to pay utility bills in cash!
• Cheaper, faster remittances

Essential business model point: 

We charge volume-based activity fees, NOT lump sum payments. 

A typical Western Union payment is a flat fee of $25. That’s fine if you are sending thousands of dollars. But you cannot earn $5 on Fiverr.com and get paid that way! 

Our end users pay 1% of any cross border payment, which is split between ChangeInEx and the FIs providing the accounts. This is only possible by using technology to automate the compliance process. Our mission is to unlock the cross border gig economy to give people in tough spots the dignity of earning their daily bread.

Our model is a financial utility designed to scale globally. The main revenue source is activity fees for cross border transfers, followed by activity fees for domestic transfers. We have VCs interested in scaling our growth, based on providing better faster cheaper remittances. So we are focused on getting our first channel operational (US-Lebanon).

Additional modules may include e-governance solutions like digital voting, title registry, social insurance accounts/payments, secure supply chain, and health/vaccination/immunity records. We are beginning with remittance channels, however, as this is the clearest case where we will save consumers a lot of money on something they are already buying.

ChangeInEx is pre-revenue. We are bootstrapped, self-funded and pre-seed invested from friends and family. We have taken $150K in convertible notes to supplement direct expenses incurred by founders (two of whom have worked full time on ChangeInEx for two years; several have worked part time for four years). We also have a development agreement with Valoores, the company who built the back end solution for us and is doing the bank integrations—their software contribution will convert to equity under the same terms as the convertible notes.

We are in between funding rounds at the moment; once our first channel is turned on (US-Lebanon; delayed a bit by banks being disrupted from the Beirut explosion, as the majority of their headquarters offices, adjacent to the port neighborhood, were destroyed in the blast). Once that channel is showing some revenue, we expect to raise a mid-seven figure Series A to fund integrations in other countries we have laid groundwork in (in Middle East, Africa, and Latin America).

[Decline to share for now, as we are not in fundraising mode.]

For our global approach to digital identity through financial inclusion, the main barriers are not technical, but regulatory. 

Harmonizing regulatory frameworks to establish an automated compliance standard through a consent based identity system removes reputational risks and enforcement penalties that are obstacles to innovations to formalize the informal sector.  

Winning the Mission Billion Challenge would help us raise awareness, gain valuable exposure, and help us achieve bilateral agreements between sovereign governments, to upgrade international banking relationships to push property rights beginning with digital identity to the periphery of marginalized populations most in need.

ChangeInEx is interested in signing up international correspondent banks and cooperating with local governments and regulators in our key target markets, and anywhere where people feel the pain of financial and digital exclusion.

• We are interested to explore partnering with the World Bank and the aid agencies of Australia, France, and the UK, particularly with respect to the urgent need for relief and rebuilding in Lebanon. ChangeInEx grew out of helping refugees from the ISIS genocide in Iraq. Roughly a third of the current population of Lebanon is refugees from the Syrian War. So working with World Bank etc, on giving digital identity so that refugees can earn their own daily bread online would be an ideal partnership.

• On a global health project, we would like to connect with the Gates Foundation. A secure transparent supply chain is an additional use case for the ChangeInEx digital identity and indelible ledger system—and there is some interest from the US State Department on this. We want to make it possible for pharmaceutical and logistics companies to get life-saving medications into sanctioned environments (like Iran, Syria, Venezuela, Zimbabwe) in full compliance with all US Treasury (OFAC) requirements. We could help the Gates Foundation expand one of its successful programs into a sanctioned country.  We are ready to do a Proof of Concept as soon as we have an NGO, government, or pharmaceutical client we can take through the US Treasury licensing process.