A new digital currency hopes to offer financial services to the billions of people in the world who are excluded from conventional banking systems. What does it have to do to reach these people? And what's the current state of play? We took a closer look.
The startup Humaniq wants to establish a new cryptocurrency and use it to serve one particular target group: the 2.5 billion people in the world who have no or only limited access to formal banking systems, otherwise known as the "unbanked". They usually belong to two groups - either people who live in regions in which banks don't have a large amount of private customers - particularly South and East Asia, Sub Saharan Africa and South America. Others are people who don't have enough necessary identification to open a bank account.
These unbanked individuals don't have huge sums of money, but they could profit from smaller financial services like microcredit schemes, and added together (they constitute just under half of the entire world's population, after all!) they have considerable economic heft.
An affordable Android phone and a simple app
If the system is to really work and be accessible to everyone in this group, there are a few factors that are essential.
- It requires a simple and universal method of identfication.
- Access to the system must be guaranteed for everyone.
- The system has to be as user-friendly as possible, to make it accessible for people regardless of their educational background, age, etc.
- The individual components of the service, e.g. registering and transactions have to be free, wherever possible
According to Humaniq, future users of their service will be able to use it equipped only with their face, a mobile phone and access to the internet. The company assumes that an Android based smartphone costs from around 10-15 USD. The phone's camera combines with facial recognition software to ensure a secure login - asking you to make a range of different expressions in order for you to identify you. The Humaniq app is designed as simply as possible - with animal symbol pins and a clear layout - and the currency only works with amounts in whole numbers.
At first, the system will offer bank accounts and currency transactions, before moving on to services such as peer-to-peer loans, insurances and wage payments. These advanced features should be developed by third parties, possibly new startups. This open approach should also allow for innovations that the founders of Humaniq hadn't originally thought of.
Starting a currency and watching it grow
At the start of the currency's life, coins first had to be created that have a value for the user.. The Initial Coin Offering (ICO) ran until the 27th of April 2017, where it was possible to exchange Ether, Bitcoin and US Dollar into the new currency. Nearly 12,000 transactions raised over five million USD. Now the currency is being traded on various different cryptocurrency exchanges.
In order to help grow the network of people using Humaniq, new users are rewarded with a small amount of Humaniq coins (HMQ), and recommending the service to others can also bag you a bonus. That means that every new user creates new coins, although individual users can only receive a limited number of coins as a reward. These amounts cause the absolute number of HMQ to grow, although the sum of all possible coins is defined as five times the amount of coins that were created during the ICO. After that no new coins are emitted within the system.
We take Humaniq for a test run
When we took a closer look at Humaniq, it looked like they had really understood the needs of their target audience, and looked pretty promising. One of the biggest technical challenges is bound to be ensuring that the biometric identification system is completely secure. The prototype of the app – although it still basically not operable – looks well designed. It will be interesting to see how easily the 2.5 billion people that the service has been designed for will find it to get connected to the network. Those who are now participating in the currency system since the ICO probably already have access to official financial services and have a certain amount of capital. How will the two groups now do business with each other?
But there's one aspect of Humaniq which makes me have some reservations though. I logged myself into the personal dashboard, a tool that was used to carry out the ICO and that can still be accessed online. Even when calling up the site over HTTPS, the form used to create an account is sent over non-secure protocol - basically, you send your passwort for your Humaniq account through the internet in plain text. And in this portal, various different tracking scripts are loaded, including for example, roistat.com, yandex.ru and google-analytics.com.
Tracking isn't always a bad thing. But when you're in a space that enables financial transactions, you should be cautious and it should be clear what you're actually doing. That doesn't necessarily mean that the ICO transactions weren't secure. But it doesn't make a good impression when a bank-like company seems not to fulfil even the most basic security requirements. Hopefully when the system is developed further, it's an aspect that will gain more attention.
The transaction area also has an online chat function, which was helpful when it came to general questions. But when I voiced my concern about the safety issue, no answer came for nearly 25 minutes. When I posed the question again, I was asked to give them my email address. My chat partner, Lee, would get back to me.
This article is a translation by Marisa Pettit of the original article that appeared on RESET's German-language site.