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EveryPay

Goal

Analyse the banking situation and problems faced by people in developing countries and explore how Bitcoin could provide a potential solution.

Outcome

I designed a secure mobile payment system and implemented the required applications with a focus on security aspects.

Role

This was my individual bachelor's thesis project so my tasks included research, planning, writing, design and programming.
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Problem

It is estimated that a staggering 2 billion people do not have access to or use formal finances services such as a bank account. In other words, 38% of the world adult population are "unbanked".
The reasons are multiple but mainly poverty and long distances to traditional banks, who cannot profitably open branches and provide infrastructure in rural areas of developing countries.

This is an important problem to solve as improved access to financial systems is not simply a convenience but has been shown to directly and positively impact job creation, reduce income inequality and increase consumption of services and goods. These are all important objectives as part of the G20 goals that aim to strengthen and grow the global economy.

Research

A solution to this massive problem proposed by governments and think tanks is to create digital and mobile payment systems. Digital payment systems benefit all stakeholders:

  • For governments, they provide transparency and digital records to prevent fraud.
  • For senders, the transfer cost is lower than banks.
  • For receivers, they provide a quick way to get money and store it safely.
As a result of the rapidly increasing mobile phone ownership in developing countries (80%+ in Africa) together with initiatives by governments and mobile network operators (MNOs), mobile payment systems have grown quickly in popularity in the last few years.

The most famous and successful is M-Pesa in Kenya (used by 61% of the population) which people can use to trade telephone credits with each other. However, this is actually a private system which is completely owned by the Safaricom MNO and not compatible with normal banking infrastructure.

Users cannot even send or receive money to other countries which means that remittances have to be sent using expensive money transfer companies such as Western Union (12% fees, 2-3 delivery time).

Ideation and development

The goal of this project was to determine whether new cryptocurrencies such as Bitcoin could be used to replace closed systems like M-Pesa and how such a system could be designed.

Bitcoin is an open-source, peer-to-peer digital currency and payment system. It functions very similarly to regular money and can be traded between people, companies and organisations, but it has no physical representation. Instead of being issued by a country, it is controlled by a global computer network and can be used by anyone to make fast and cheap transactions.

In order to use Bitcoin, a user must have access to the internet and hardware/software that can handle a "digital wallet". I found out that although 3G network coverage is predicted to be very low in developing countries during the next 5 years, basic smartphones are beginning to be available at undxer 30$. In other words, people have the necessary hardware but can't afford or don't have access to mobile internet yet.
This connectivity challenge led to the creation of a system architecture with a "gateway" - an intermediate device (a high-end Android smartphone) that can connect 2G telephones to the internet. Users communicate with it using SMS which it passes on to the Bitcoin network using 3G/4G/Wi-fi.

Solution

SMS Interface
The initial solution was a service which users can interact with by sending SMS messages to a gateway phone. The messages contain commands to control a Bitcoin wallet, e.g. to send money or check the account balance. However, this is not the most user friendly interface nor the most secure.
Smartphone interface
The app was designed to work on the smallest, cheapest and least powerful Android phones on the market. These devices do not even support 3G networking, so the application sends encrypted messages over the 2G network to the gateway. All of this happens in the background without bothering the user and allows secure Bitcoin transactions without any internet connection!

Results

I successfully implemented a proof-of-concept of the system I had designed and thereby proved that it can actually be done! I also discussed it with an African entrepreneur based in London who had experienced these problems first-hand. He believed that this kind of system has potential but may require government support or local expertise to market it.

Overall, it is difficult to say whether Bitcoin could replace current mobile payment systems. It is a typical "chicken or egg" situation where people and businesses will not adopt it until others have done so too. Additionally, the current volatile price and unclear legal situation are problematic. For this reason, the system was designed so that it could connect with any financial system.

I received the Corporate Programme Partnership Award from my department at Imperial College London for outstanding achievement in the project.

Project report

If you are interested in the technical details and security analysis, please see my complete project report.



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