Limited access to basic financial services is not only an issue for people in developing countries. Even in North America, there are still a substantial amount of underbanked and unbanked individuals.
According to research by Mintel, 34 percent of Canadians are either underbanked or unbanked. That means that over a third of Canadians do not have either a chequing or savings account, only have a chequing account or who use only alternative financial providers, as they have no formal bank accounts. While in the United States, around 28 percent of the population is underbanked or entirely unbanked.
Fintech startup Digital Escrow Services aims to tackle this issue through their new Ethereum-based mobile app Branche, which will provide cheque cashing and payday loans to North America’s underbanked. The Ontario-based fintech startup aims to leverage cryptographic technology and mobile Internet access to provide financial services for those struggling to gain access to basic financial services. This is where Branche comes in.
The mobile app Branche will initially provide cash chequing and short-term loans. Through the use of irrefutable Ethereum-based smart contracts, cryptocurrency-based value transfers, a peer-to-peer lending model, and digital payment gateways, users of Branche will be able to receive the fiat currency they require without having to go through a traditional financial institution.
This will enable the underbanked population to gain access to much need basic financial services, but will also allow individuals who want to become lenders to obtain good returns on their loans. Branche also intends to incorporate what they call vendors into their platform. Vendors will be small businesses, individuals or community organizations that provide financial services through the platform and, in return, generate income through transaction fees, thereby enabling them to increase their income by becoming financial intermediaries. Clients will be those who use the financial services provided through the Branche platform.
“Branche will use cutting edge blockchain and security technologies to bring together our Clients, Vendors, and Lenders to ensure a mutually beneficial experience, and the improvement of all their financial lives.”
Furthermore, Branche intends to offer cryptocurrency-based pre-paid cards that allow users to spend bitcoin using Visa cards through a partnership with Shake Pay.
Digital Escrow Services (DES) also puts a strong focus on being a social responsibility and, therefore, intends to lower the cost of borrowing for short-term loans to help underbanked individuals avoid predatory high interest bearing payday loans. By leveraging the peer-to-peer model and attracting socially responsible individuals and small businesses to become part of the Branche platform, DES wants to push down interest rates for borrowers while still making it worthwhile for lenders to grant loans.
To become a client on the Branche platform, the user will need to provide a valid government ID, proof of their current address and a cell phone that is capable of SMS text messaging. Future vendors, which can be any business or organization that want to act as a financial intermediary, need to undergo an application process to ensure that they meet legal and regulatory requirements. Lenders will be able to simply sign up to the platform, then start granting loans and other types of funding once the platform has officially launched.
Branche’s ICO taken sale is anticipated to be live by early December 2016, during which Branche Loyalty Tokens (BLT) will be sold. Branche Loyalty Tokens will allow initial token holders to receive financial rewards occurring from future users’ in-app transactions. DES aims to deliver a “fair ICO” by not pre-mining any tokens and capping the initial token supply to cover the initial funding needed to develop the platform, amounting to $3.5 million.