01 Aug MIT Champions Financial Inclusion
MIT recognises KlickEx and the Pacific Development Foundation for connecting communities in the Pacific with high efficiency, high access financial services, leading the world in innovation and Future of Work programs in Asia and the Pacific.
Following on from the Financial Times ranking KlickEx as the #3 highest growing business in all of Asia in 2019, this recognition from MIT, which places KlickEx in the world’s top 60 Future of Work enterprises, is a timely reminder of the quality programs we have in place, spanning such a large part of the world.
Read on below to see the questions and answers from MIT and our Foundation as we discuss the risks and challenges facing economies and Financial Inclusion in the 21st century.
What is your opening statement?
Polynesia is larger than Africa and Asia combined: Its guardians, 695,000 humans, are the most remote people on earth. KlickEx connects them, the otherwise forgotten.
Tell us about the environment in which your Inclusive innovation is operating. Outline any challenges.
The Pacific and Southern Oceans cover almost 30% of the world’s surface, and 50% of its oceans. The oceanic region of Polynesia, the dotted atolls that house the human guardians of this important resource, is larger than the land-masses of Africa, and all Asia, combined.
With less than 0.01% of the wold’s population, these people have an enormous ecological and environmental responsibility, afflicted economically and socially, by the tyranny of extreme distance.
The population density of South-East-Asia – 3,000 miles to the west – is around 153 people/km^2. In Polynesia – it is less than one person/100km^2. The population density of South-America – 5,000 miles to the East – is 56 people/km^2; 5,600 times more people, excluding New Zealand, and Hawaii.
Nothing exists here – without struggle for scale.
Our Challenge, is to Find, Educate, and Train those willing to explore, in Banking, Health and Education, Financial Services, and Medicine. To date – we have operations in 8 countries – and we have, in a few short years – on-boarded more than 180,000 people – accounting for almost 80% of key adult populations in our innovative, ground-breaking work – that has, according to the UN, directly lifted household income by approximately 20% of GDP per capita.
Our products have targeted income, jobs, technology, and training, and of course – financial inclusion. The arrival of satellite communications in the 1990s and Fiber-Optic ocean-cables in the 2010s, has vastly improved potential. It has been our job, to turn opportunity into tangible benefit.
What is your vision, or goals, for your organization, and state the impact that you are aiming to achieve. Give examples of your success.
Our vision is that every Pacific Household, has a passive income, greater than its GDP Per Capita was, in their country, in the year we started. Primarily – this is to add an average of USD 3,500 per year in savings generated income through greater work, opportunity, health, and savings options, available to each family.
When we began – countries like Tonga, and Samoa had dependencies on remittances that accounted for 20%-40% of their nations GDP; and Remittance Costs were averaging 27% for money coming from Australia – and 22% for money originating in New Zealand, sucking millions of dollars per week from these distant economies.
By launching one of the first truly digital remittance programs in the world, in partnership with the UNCDP, KlickEx dropped these costs to around 3% – and saved these small communities more than $1m per week. In 2013, IFAD announced KlickEx the highest penetrating, lowest cost cross border mobile money service in Asia, and what is now the British Bankers Association, awarded KlickEx the Community Banking Initiative of the Year, at the Financial World Innovation Awards in London, 20,000 kilometers away.
Our mission is to translate vibrant, subsistence barter economies, to digital ones, connected by platforms where work, investment, savings and education have out-sized impacts as the communities transition to a connected world.
Our vision required almost USD 2.3b in accumulated savings and returnsto execute it in full – and already – we are almost 20% of the way there – just from phase one (2013-2018).
Describe your service, what you offer and how it affects those you serve.
Our service, although intended for macro-economic use – was put to into service by the United Nations’ Pacific Financial Inclusion Program in 2012, to build mobile money systems, servicing the 80% of the Population that was, at that time, un-banked.
In the second year of its operation – KlickEx was profitable. And it continues to cost about $4 per capita per year – or about $8 per active user per month – to generate what must be some of the most universal and rewarding results at a national scale, of anywhere in the world.
By addressing the Cross-Border Payment issue first, we built the grounds for mass adoption, with a clear market impact and use-case. The huge scale of success in our first 18 months, resulted in more than $500m transacted (by some of the smallest economies in the world) – which lead directly to (a) raised living standards, (b) nearly 400% “development” bank and savings accounts (in Tonga – an expansion by 20% of the households), (c) increased purchasing power parity by nearly 11% (due to both lower cost imports and larger remittance receipts) as well as (d) widespread adoption for the first time of a formal financial product.
By 2014 – we had added real time international payroll systems as part of the Recognized Seasonal Employment Program (RSE) placing more than 10,000 Pacific Workers (10% of the labor-force) in high-paying jobs in New Zealand and Australia, in conjunction with the RSE Employers Association….
Our scale increases annually.
Who is your average user? Describe how your innovation has overcome barriers to reach them. Why was this not possible a generation ago?
Our average client is a 48 year old mother of 4, living on less than USD1,200 per year; 60% more than 4 hours from the nearest town of 10,000+ people. However – our impact is truly a cross section of the adult and working society.
While KlickEx has offered unique and pioneering digital services, including payment systems, mobile wallets, fee free savings accounts (in up to 8 currencies), e-commerce solutions, and even National Payment infrastructure (that runs the central bank and cheque payment (imaging and clearing) services) — no success is an island. 30 years ago – KlickEx’s platforms would have hardly been possible without the mobile phone. They would have been less efficient without the internet; they would have been too foreign without the familiarity of Social Media, and the rapid progress in technological advancements in computing, security systems and telecommunications.
When we launched KlickEx – we looked at running the systems needed on AS400 mainframes. The cost to do so would have been around $10,000,000 in hardware, to begin with. By 2008 the costs of server-farms had made the application possible, and affordable. And these small sub-scale independently sovereign markets were suddenly a viable, sustainable proposition, with imagination.
Give tangible examples of the difficulties faced by your communities, and the profile of the markets you support.
We have almost a million accounts, in a region more than 30% of the worlds’ surface (taking it to the extremes) – but 0.01% of its population.
We are saving over $1m per week – to a population with GDPs per capita under USD3,500 on average (and only about 100,000 households) – which is extraordinary:
https://www.worldometers.info/world-population/polynesia-population/ (Adults are about 40% of this).
Moving away from the highly impressive percentages – and penetration numbers – we now actually reach 184,000 people in a region that has about 280,000 adults, across an area (including this time, Australia, New Zealand, and Hawaii) of more than 136 million km^2 – or five times the combined size of the USA and China… put together – who had never before had mobile money systems, formal banking (by in large) or sophisticated digital products, to manage salary, receive job training, health care, and (in some cases) forms of micro-insurance, too.
What is more incredible – is that we keep growing in this region – at a rate of 700 people per month- with no retail marketing budget what-so-ever – at all; given the penetration already – it’s mind-blowing – on budgets that are self-funded and tiny.
What is your competitive advantage? What makes you special? Who are your main competitors?
Our competitive advantage is our first mover scale, our incredibly high rates of efficiency, our high rate of creative innovation, the happiness of our teams – and now the deep levels of trust we have in our communities.
We brought products to market, and achieved overwhelming scale, that the World Bank and many others said were impossible to build, uneconomic to establish, and had no-market-fit (which they later attempted to copy afterwards, with embarrassingly poor results).
During Cyclones/Typhoons our systems stay online; and provide an impact that usually exceeds foreign aid by around 10 times, at critical points of emergency; and now… we build the national payment systems of these countries too – so we operate the kiosks that do bio-metric scanning and ID in remote villages, manage employee background checks, handle salary payments, run the National ID services and Central-Bank payment-systems.
Our main product emulators: the World-Bank and Western-Union.
Please outline any risks facing your business. Describe any risks faced to date, and how you overcame them.
Our main risk is the issue called De-risking. De-risking is where banks close off accounts for other financial institutions in “emerging markets” outside the control of the affected financial institutions servicing the emerging market.
Our response is to build our profitability, and become a fully licensed bank (with a triple A credit rating, we hope) in the send side country. We have the support of our local pension funds – to back and fund such a purchase – we are going through the regulatory process at the moment.
There are many many other operational risks – but we have been through most of these as we scaled, very very very quickly in 2013-2014 from processing under $200,000 per month in transactions – to almost $2m per day as our popularity grew in 2014-2016.
We had major staff recruitment scaling issues – as we went through a 10x recruitment drive in 11 months (2014) and then a technology upgrade to handle more than 1000x the scale of our pilot program (2015).
In 2016 we were hit badly by de-risking of the remittance product; but since have had a major diversification of services (including Payroll, RSE Employer Trainer/Health Provider, Insurer, and System Partner to the Central Banks).
Our next risk is the failure to continue to exceed customer expectations and to spend too much time looking at what we have done already – and overlooking that our goal is still 80% underachieved: To create wealth at a scale unprecedented in the Pacific Islands.
Who is the founding team?
KlickEx was founded in 2006 by a team of two – the Current CEO, who was previously the COO and the Head of Regulated Services.
In 2009 it was joined by an external CEO, and non-executive directors – until 2013, when the company was bought out by the original founder. Following 2013, its sales rocketed from $2m per year – to over $250m (in principal moved) and its products began a long course of constant diversification.
What skills to the founders bring to the organization?
Robert is a former HSBC banker and NZX energy trader, with University Degrees in Finance, Economics, Statistics, and Political Science. In 2017, he was awarded a New Zealander of the Year Medal, for Services to the Community (Local Hero award) and in 2012 and 2013 he was named the Hi-Tech Young New Zealander of the Year, in two successive years.
Focused on building national scale platforms for banking and financial inclusion, under Robert’s leadership, KlickEx has delivered platforms that reach the un-banked in unprecedented scales in micro-economies, covering mobile money platforms, to Central Bank national payment systems, and almost everything in between.
Robert keeps up to speed on global best practice, through speaking engagements at the UN, World Bank, Asian Development Bank, IMF, and the Commonwealth Secretariat, and has undertaken graduate studies in Financial Engineering at Stanford (2012), Cyber Security and AI at MIT (2016), and Executive Governance at Harvard Business School (2019).
KlickEx has a leadership team of 8, a full staff of 31, 17 women, 6 people over 60; and fluent in 8 languages.
What is the scale and geographic spread of your team?
We began our journey in New Zealand – and have our main service, call center, and product engineering team based in Auckland, its largest city. Auckland is also the largest city in Polynesia – and 6 countries in the Pacific have more citizens who live in Auckland, than in their home Countries (Tonga, Samoa, Cook Islands/Rarotonga, Tuvalu, Niue, Tokelau).
Our second largest support office is in Australia – with compliance and banking relationships are centered. This office is closest to the airport (Brisbane) which connects to more Pacific Island capital cities than any other airport (followed closely by Fiji, and Auckland)
Our third largest office is in Tonga – where our FX, Compliance, and wholesale teams sit. This is also our largest market – and where we have the most users per capita.
In Samoa – we have our 4th main office – and this was here to sit on the American side of the Date-line. We are regulated in Samoa by the Central Bank – and like in Tonga – have to maintain an office in-country to provide the services we offer.
Finally – we have a UK office, again for regulatory purposes. This give us access to important EU legislation and compliance oversight – and dates back to an era where Australia and New Zealand had extremely limited regulations, which were in many ways – the cause of the such severe de-risking epidemic in New Zealand in particular – but also in Australia too.
What technology platforms do you use? How do you use technology to Innovate, and what is your path to scale?
Our technology platform is the key to our success. It is not as key as our vision or mission – or quality of our customer care facility – but none of that would be possible without the highly automated, efficient, and accessible services that run almost 24/7 in a market full of 10am-4pm competitors (talk about exclusion for 9-5 workers!).
In 2017 we launched a ground-breaking partnership with Technology Company IBM – where we trialed their Blockchain product for cross border payments, insurance, FX and inter-bank connectivity. The process taught us a great deal about scale-ability and the already highly competitive effectiveness of our system. Technology provider partnerships already include IBM, Vodafone, Digicel, the National Bank of Tuvalu, the Central Bank of Tonga, Western Union, Pay-Pal, and more.
Without our technology – we would not have been able to take Tonga from 3,000 electronic domestic payments to more than 2,000% growth in its first year (and probably 100% more growth by the close of its second year) it if wasn’t for the readiness of our technology. Originated from “big-bank” world, our team and technology is already built to manage more than 10 payments per citizen per day; or to compare that to WeChat and Alibaba – more than 770,000 payments per second – per billion in population.
From this core infrastructure that has been so key to mobilizing so many people into core digital services in the Formal Financial Sector; we expect to copy and repeat this process in the 2019-2022 phase of repeating this regionally.
What is your commercial model, and how is it sustainable in respect to Financial Inclusion?
We operate our core financial inclusion platforms at cost – and sell commercial platforms and partnerships (such as mobile money, utility invoicing, insurance and Payroll services) to commercial clients looking for cost efficiencies.
We recently competed with the World Bank, and Montran, to install national payment systems into Tonga (and 6 other countries) and beat the World-Bank subsidized bid by more than 90%. We don’t necessarily take a for-profit approach to offering national services – but do retain a value added service model where we can earn, upgrade, and innovate our solutions.
Even though the World-Bank platform was subsidised by the New Zealand government to the tune of $4m, the Tongan Government still selected us due to the total life-cycle cost, and over-all benefit to the Tongan economy – including the speed-to-market – which in our case was 9 months, and in the WorldBank’s case, more than 6 years and counting.
How do you measure your success? What three goals will you achieve, if successful in your mission?
We use market penetration (number of registered Adults (one year active; Quarterly Active, and Monthly Active). Active means purchasing or engaging in at least one financial product or benefit per time period. This doesn’t include people that use our systems for general information, statistics, or price-checks (exchange rates, interest rates, etc).
We then also use our financials to gauge how well we are doing compared to peers in other parts of the world. We are presently saving hard to register as a full digital commercial bank; able to offer not-for-profit credit cards (very clever); non-for-profit pension and superannuation products, as well as more enhanced insurance and risk management services.
Our three goals would be:
—-Achieve Annual Passive Incomes for 35% of Household of GDP-per-capita ($3,500) already at 20%.
— Achieve One Savings Account and one insurance product per Capita – even children.
— Gain a tripleA credit rated Bank License in NZ.
What will winning the MIT IIC grand prize of $250,000 mean for your organization? How will you put it to use?
We will repeat our installation of the National Payment System of Tonga to 5 other countries – FREE OF CHARGE – giving them the most advanced, regional, inter-linked payment system on the planet. There are still 16 micro-states in the Pacific that do not have some or all of the products we have built for them – and winning this prize will enable us to empower the whole region.
This would increase our profit to $2m p.a.
Then we could look extremely closely at other regions to expand to next: Africa, Asia, and the Caribbean would be ideal phases.
Do you have any awards or external recognition?
Selected Awards & Community Recognition
https://www.klickex.co/klickex-exchange-system/ (Scroll to bottom)
Media Attention: www.klickex.org/media
We have used this recognition to become one of the most respected, highest growth companies in our region and markets. We have enormous digital penetration; which has been hard earned over the past 5 years in a part of the world very unfamiliar to most.
The end game of this is to become a full digital bank – with incredibly customer-centric offerings built around innovation and long run social and civic benefits, as we have very much, already done to date.
We now have the scale to excel.
How did you find out about the MIT IIC challenge? Is there anything else you would like to convey to the MIT IIC organizers?
Our founder, Robert Bell – has been an MIT Forum Judge in the MITEF-Greece Competition for over 5 years. He is also an MIT Alum, and a judge of the MIT IIC challenge, Europe.
We are also participating in the Pacific Financial Inclusion Program’s innovation program, where we are proposing to build a giant e-commerce platform in the pacific, linking the real time national payment systems, mobile money systems, and consumer gateways in a world-first for multi-regional, multi-currency payment services.
There really is a lot more to us than we could convey here.