Despite the fact that most businesses are throwing the word “blockchain” around for its marketing hype, there are companies out there with real customers willing to experiment with the technology to discover its full potential. This is the story of NEXXO, as told by the company’s COO, Gunnar Skoog, in an interview on how using the blockchain internally for their financial services led them to building a platform for 260 million underserviced and underbanked small business owners!
Hello, Gunnar! Thank you for taking the time to answer our questions. You have been the COO at NEXXO Network for over three years. Can you tell us more about your responsibilities within the company?
Sure, my role is to run our various country operations with a focus on marketing, sales, and what we call ”customer success”. I am also leading the Global Expansion Team.
NEXXO has been an active business since 2014, but most of your work is behind the scenes, as you work with small businesses and their employees. For those who haven’t heard about your fintech solutions yet, what was the company like before getting into the blockchain?
We have carefully built our technology step by step with a focus on delivering solutions with the customer experience being “Easy, Simple, and Fast.” Using blockchain technology doesn’t change those guiding principles, it’s just a way for us to deliver products and solutions better, faster, and with a more predictable outcome.
When did you realize there are millions of underbanked and underserved small businesses? More than 260 million business owners are in this situation, right?
We started out as a “payroll” company, but soon realized our target audience was the underserviced and underbanked owners and operators of small businesses. That’s where we found success. From there, we decided to focus on those customers but widen the products and services.
Today, we provide them with a corporate account and multiple products, both on the acquiring and on the issuing side. We are simply the bank branch coming to them. The numbers come from World Bank data sets.
When did you consider blockchain technology as the solution to the financial services these companies need? What were the steps you made to ensure this is the right technical solution?
Although many people throw the word “blockchain” here and there to make their failing business models get a techie makeover, we believe that blockchain technology is a lot more impactful in the financial services industry than any other industry.
We initially used blockchain technology to encrypt card transactions, customer deposit slips, as well as e-commerce transactions, which helped us lock such transactions and make them immutable to unauthorized changes. Such an approach has lowered our cost of securing data and our overhead to triple audit information pre- and post-transaction.
Today we are finding more and more uses for blockchain technology through smart contracts for loans and other financial applications.
Once you’ve figured out that using the blockchain will help you reduce costs and deliver the financial services where banks considered it unworthy, what steps did you make towards the software implementation? What was the process like for you? Did you outsource developers or hire internal talent?
We implemented IBM Hyperledger as our main private and permissioned blockchain engine. IBM Hyperledger was chosen primarily because we needed to impress our bank partners with the IBM brand.
We had to hire a dedicated team in tandem with our own technology team to build a private and permissioned blockchain platform because we are not allowed to make confidential financial information float across a publicly distributed blockchain platform.
It took us a while to understand and deploy our blockchain; and we are now very glad we did so, as we can foresee the true power of the blockchain in helping us reduce costs across many financial products.
Do you find that the blockchain’s ideals of decentralization aligned with your mission of the democratization of financial inclusion? How about the current middleman which would be removed in the process? You are basically eliminating yourself, right?
Yes, absolutely. We believe that financial system decentralization delivered by blockchain technology will be key in lowering the cost of such complex financial products, thus making them abundantly available to billions of underbanked and underserviced individuals.
Relating to us eliminating ourselves, it is actually a part of our corporate culture; if we don’t cannibalize ourselves, then someone else will.
You opted for an architecture made of private blockchains that are keeping the financial activity of your customers hidden from the public eye. This is one of the local data confidentiality requirements, right? What other requirements do you have when entering a new market?
When we open up a new market we are aligned with a local bank who does all the daily settlements for us. Our processes are 100% aligned with their processes.
We are also aligned with the Central Bank and, for obvious reasons, follow all their KYC, AML, and other requirements.
MasterCard is a strategic partner to us in all markets and, for the same reasons, we follow their systems and processes.
We are 100% compliant and in line with all local legal requirements in each market we operate in.
QPay is your pilot market in Doha, Qatar, and it proved itself extremely successful. What issues did you have when trying to enter the market? How did you tweak your general solution in order to comply with the local requirements?
Entering a new market is both costly and very time and resource demanding. What we do is not easy and we have many stakeholders involved.
The main issue is coordinating all the activities and managing everyone involved in the setup process.
All our products and solutions have been 100% compliant from day one. What we have tweaked is the user experience, like language, and other local demands.
The NEXXO platform, with QPay being live and serving thousands of customers, makes you a profitable business like any other successful business. Can you briefly explain to us your business model? How is the use of the blockchain affecting your business?
Our value proposition is to provide financial products and solutions that are in line with our customers’ ambitions of generating profit and growing their businesses.
The customer experience must be:
Besides that, we need to be very cost effective. This is one of the fundamental reasons why we are implementing the blockchain; it will reduce our operating costs, meaning we can keep our prices very low.
Qatar’s payment solution is in place. There are many more regions to come: Vietnam, Pakistan, Egypt, even India and China. Do you consider your business model scalable enough to enter these markets in the next three years?
Yes, very much so. All the hard work we have invested in a few markets will now be copied and pasted into 6-8 new markets over the next 36 months.
NEXXO is issuing an ERC20 utility token, which will be distributed through an upcoming ICO. But the token is different than the other thousands of tokens, right? Your token is pegged to real money and you have a buyback system designed to drive token demand. Why is this model better for token holders?
You are correct, our tokenomic model is pegged to real fiat cash generated from our business revenues.
Furthermore, our token buy-back programs are directly linked to our business performance; in fact, the more we grow, the more utility we generate and the more tokens we buy back.
Unlike other tokens, which have very weak utility, our utility is backed by USD, creating substantial upward demand pressure onto our token price. After all, more upwards price pressure is what token holders want when investing in any token.
Finally, we know that small businesses are the backbone of the economies of the emerging markets and you’re looking to empower this underserviced market segment. You are actually forming a group of enablers scattered all over the world to help you identify those business owners who need your help the most. Can you put yourself in the shoes of an enabler and show us how you would pitch your solution to a small business owner?
We are empowering all these millions of small business owners who today are very much cash oriented, and therefore financially handicapped in terms of having access to fundamental banking services.
We help them start digitizing their businesses with products like smart POS’s, corporate accounts, payroll solutions, salary cards, micro loans, etc. With these types of solutions, they grow their businesses, reduce risk, increase revenues, and reduce cost.
Who would say no to that?
We bring banking to their doorstep. We distribute our products via a network of enablers who are well known and trusted in those small business communities.
Hence our tagline “Let’s grow together!”
Thank you so much for your time. We appreciate your responses. For those who want more information, where can they find more details about NEXXO?
My pleasure! Go to our website: www.nexxo.com.