Banking without banks: Bit2Me is building the ‘Uber of finance’

The October 2015 Fintech Americas’ Hackathon in Miami, sponsored by Visa and Cobiscorp, awarded a grand prize of US$10,000 to Bit2Me, a small startup based in Alicante, Spain, for its new mobile app, Hive.

“Hive allows users to self-organize themselves around a financial peer to peer, human network that only need our user-friendly mobile App. We want to be the Uber of finance for doing banking without banks.”
— – Leif Ferreira, Bit2Me Founder and CEO

Brave New Coin spoke with Bit2Me founder, CEO and CTO, Leif Ferreira, who explained his vision for Hive, how it works, and how it is very different from his flagship service.

While Hive is in the early stages of development, Bit2Me has already proven itself a pioneer in the field of remittances. The service enables users to turn Bitcoin into cash at more than 10,000 legacy banking ATM machines in Spain.

In order to allow ATM withdrawals using Bit2Me, Ferreira created a back-end system that connected banks, his website, and the Bitcoin network through a payment gateway, a mobile App, and a chrome extension. The website was launched on January 5, “with some bugs that later were solved,” Ferreira concedes.

After a testing period of three weeks, users were able to start sending money to Spain through Bit2Me in February, Ferreira recalled. All that’s needed are bitcoins and a Spanish mobile phone number to send your funds to. Bitcoins are changed into Euros automatically.

The recipient receives an SMS message with a PIN, and can go to any ATM that supports Hal-Cash to withdraw the money. The sender will also receive a PIN, to pass on to the recipient. The two pins are needed for withdrawals, and are sent separately to avoid theft and fraud.

The company’s partner banking networks include many of the major bank chains in Spain, ING Direct, Bankinter, Abanca, EVO Bank, Caja Popular Bank and Targobank.

In addition, Bit2Me users can also buy bitcoins at 150 banks in seven countries, Spain, France, Germany, Austria, Belgium, the Netherlands and Italy.

Ferreira’s new, award winning app, is designed to go far beyond bitcoin access. “Hive and Bit2Me are very different,” Ferreira explained. “I was thinking before about the remittances market (because bit2me is used for this sometimes) but we never started creating a solution. Hive goes further, to the finance market.”

“Hive allows users to self-organize as a financial network in a ‘peer to peer’ world, in which financial products such as deposit remittances, loans, and investments are all backed by the Blockchain, undoubtedly the most disruptive financial technology in recent decades. Thus avoiding intermediary companies.”
— – Ferreira

In what he is calling “the Uber of finance,” Hive was conceived to go beyond sending, storing and receiving money, which most bitcoin services allow in some form already. Lending and investing are both major features of the Hive app, via the P2P network.

“The people don’t need to buy bitcoins. They only buy balance. The bitcoins are invisible for users.”
— – Ferriera

There are no fees for using the app either, Ferreira confirmed. The only fees users will see are charged individually by the people in the network, such as exchange rate fees or loan interest rates.

“In Hive, the ATMs are people, and they do not have to change bitcoins to Euros or other currency. You use these people to add a balance to your account, similar to making a deposit at your bank, and later you can use them for different ways of doing banking with other Hive users. They can: Send money, make payments, purchase investments, do some lending… All this using blockchain technology underneath.”
— – Ferriera

At first glance, Hive will remind many of ‘invisible bitcoin remittance’ solution Abra, the overall winner of the prestigious Launch Festival earlier this year. Abra is another smartphone app-based finance service that uses Bitcoin’s rails underneath a fiat-denominated service, that is in development.

Both Abra and Hive seem to have the same central concept, using people as the ATM machines, and both apps show users on a map display.

The similarities end there, however, since Abra appears to be focused only on remittances, while Hive intends to offer a range of banking services.

“One user can add funds using his local network of ATMs, and withdraw funds too using this local network. But the users only manage money in these cases. With this balance, they can use it to send a remittance, invest with it, use it for payments, etc.”
— – Ferriera

Ferreira pointed out that pre-launch information on Abra shows, “their focus is in remittances.” And they are different because, “they only maintain the value of your money for 72 hours.”

Nonetheless, both networks seem to be very driven to offer a game-changing remittance service. Research from the World Bank  shows that 2 billion people, or 38 percent of adults in the world, do not have access to basic financial services.

A peer to peer remittance and basic banking application could make a huge difference to the unbanked, wherever there is access to smartphones. This is especially true in India and China, the two countries with the largest share of the unbanked.

"Universal access to financial services is within reach – thanks to new technologies, transformative business models and ambitious reforms."
— – Jim Yong Kim,  World Bank Group President

While the World Bank data shows that China has a large proportion of the world’s unbanked, the country is also home to one of the largest shadow banking economies. People hearing the term “shadow banking” may think that this must be shady business, something bad or unfair, perhaps even criminal. Shadow banking preceded regular banking, and has been part of the financial system in most countries for a long time, and is broadly defined as financial activities outside the regular banking system.

The Financial Stability Board’s (FSB) 2014 “Global Shadow Banking Monitoring Report” estimates that global shadow banking assets reached $73 trillion in 2013, 20% more than global GDP. China’s shadow banking assets were almost US$3 trillion at the end of 2013, according to Financial Stability Board estimates.

A recent report by the Fung Global Institute, in Hong Kong, estimates shadow banking assets in China at 51% of GDP in 2014, about US$5.2 trillion, up from 43% of GDP in 2012. IMF estimates are slightly higher. Total credit growth in China from 2009 through 2013 was dominated by shadow banking, but this wild growth was brought under control in 2014.

Both Hive and Abra seem to have positioned themselves to take advantage of this market. Nevertheless, timing, distribution, and location mean just as much in this kind of race, if not more, so it might all come down to something as arbitrary as which country they chose to target first.

“Hive will be launched worldwide when it is ready, but we are planning to market it only in certain countries at that time… We think that the countries we choose are very important. For the moment we can’t say the names of the countries,” admitted Ferriera.