We just announced our second crowdfunding round on FundedBeMe and already hit 60% of our funding goal, a good time to look at our journey ahead.
In the campaign video we demonstrate how you can discover where others are spending their cryptocurrency and we announced that we would tie your identity to transactions, a sacrifice of anonymity to the benefit of widespread adoption. A big no-no for some, although something we’ve stated we’d do since day one. So why choose this difficult path when already faced with plenty of hurdles in an insanely competitive market? Because it’s the right thing to do in the long term. And as anyone who’s been around in this space since the early days can tell you, it’s all about the long game.
In the beginning…
When we founded Safello in 2013 we started with the simple idea of bringing greater compliance and security to a market that was plagued by hacks and scams. We incorporated in the safe geography of Sweden that wasn’t affected by the financial crisis as much as the rest of Europe. We registered as a financial institution and managed to find a top 4 bank to open accounts for us. We then pushed out the first version of our platform to help customers buy and sell bitcoins without Safello holding any of the coins. Now we have tens of thousands of customers and processed many millions worth of Euro, Swedish Krona, Danish Krone and British Pounds in- and out of the crypto economy with an equally simple business model, taking a fee between the buy and sell price. Great stuff, but never our end game. Our goal has always been to get more people into the cryptocurrency economy to spark widespread usage, even if we have to call it blockchain — only half-joking here.
The on-boarding problem
Whenever new technology takes the stage, there’s a chicken-and-egg problem to reach mass adoption. Imagine one of the first phone calls:
Alexander dials number two.
Alexander: ”Oh hey Antonio, I meant to call Thomas.”
Antonio: “Ah, you got the wrong number, that’s one.”
Alexander:”Right, my bad bro. Arrivederci.”
When there is no one to call, who do you call? *Whispers: Ghost Busters* No seriously, you install landlines. Similarly, how do you activate a population to use cryptocurrency? This has proven to be a challenge. Companies have tried mining, tipping and giveaways to kickstart the conversion of average joe into the crypto economy. Still, by far the largest on-boarding instrument is direct conversion from regular currency to cryptocurrency and vice versa. Why so? Simple, because there’s a carrot at the end of the stick: profit from trading. Following this logic we may start to explore what carrot is missing to convince a non-crypto enthusiast to go through the educational process as well as the KYC process to join the crypto economy.
Our discovery process
At Safello we’ve taken this question to an extreme, as finding the killer app for Bitcoin/Ethereum/Blockchain is a tough nut to crack. Many attempts have been made and buzzwords like remittance are thrown around to explain blockchain’s potential to fix a crippled financial system
As it turns out, building remittance corridors isn’t as easy as it seems and often relies on the same financial system blockchain technology it’s supposed to replace. More worrisome is the fact that even a 25% discount on Amazon purchases apparently won’t do the trick to get people excited about cryptocurrencies. Perhaps financial gain is not the answer to unlocking the potential. If not, then what is?
Social is everything
We’re still in the process of figuring out what’s what, but we have made some key discoveries. One we can already share, our relationship with money is changing.
Our financial life continues to be a siloed experience in a digital world that has all turned social. I remember the first time Spotify started sharing my music on Facebook and was confronted with my — let’s say eclectic — taste of music on display for everyone to see. Soon enough it became the norm and we now enjoy the natural discovery of music through our friends’ ears. And this change in our relationship with music lead to a vibrant playlist culture that consequently lead to further social discovery of great music.
The Spotify example I love because it so accurately portrays the subtlety between intrusion and utility. The reason why I initially was put off by the automatic sharing of my music was the result of Spotify not properly communicating to me that it would be pushed to Facebook. Even when I tell people today they are often surprised that their entire song history is directly published to Facebook. In the financial sector there was a company called Blippy that tried to do something similar. It forced users to get a Blippy card that automatically broadcasted these purchases to their circle of friends. But our relationship with money is more sensitive and Blippy is not around anymore.
How different things could’ve been for Blippy if they followed Venmo’s model. Recently PayPal CEO Dan Schulman spoke at the Microsoft Envision conference and mentioned perhaps the most important metric for the entire FinTech sector that went unnoticed by most. From the Geekwire article:
…the typical Venmo user opens the app four-to-five times per week, but not to make payments.
“They are just seeing what their friends are doing,” he noted.
There it is. Users opening up the Venmo app not to make payments nor to check their balance or see where they are with their budget. No, Venmo users open up their app four-to-five times per week just to see what their friends are up to.
The exchange of money of course always has been a social interaction. Even though we tend to be very private about money, there are unseen money relationships that affect us all. In our research we discovered that money influences us on multiple levels that transcends the usage of an app or the bills we pay. It can affect our self-worth, social standing and overall mood. Money’s emotional impact on our lives lends itself well for isolation, privacy, a personal experience that shields us from the embarrassment of public opinion. To break out of this way of thinking is challenging, but to Venmo’s credit they succeeded with this in a meaningful way. They found the sweet spot between intrusion and utility that worked.
Now we could just try to copy Venmo, but what works well for them wouldn’t necessarily work for us and could limit the potential of our platform. We therefore asked ourselves the bigger question first, why Bitcoin/Ethereum/Blockchain? How can this disruptive technology be used to change our financial lives for the better? And how does social interaction fit into this or even accelerate it? We did exactly that and it lead to another discovery, hint: it has something to do with identity.