For this research phrase, our primary objective is to identify the optimal payment solution for Cheeri. While traditional financial service providers tend to overlook non-custodial solutions, cryptocurrency technologies provide a viable alternative. However, the technical and operational complexity to achieve non-custodial transactions via third-party service providers (such as Cheeri) is still a high bar to our target customers. Regarding these obstacles, we are excited to report that after conducting detailed study and testing, we have identified Interledger as a promising solution. Additionally, we are pleased to observe that OpenPayment, which facilitates non-custodial transactions, is progressing rapidly.
At the start of the research project, Cheeri encountered several challenges, including clarifying market needs and positioning, identifying suitable Interledger account provider services for our use cases, and hiring the right Senior Software Engineer. We subsequently applied for a 3-month no-cost extension, which allowed us more time to resolve these challenges one by one.
Here is a summary of what we have achieved in the past 5 months:
- Launched v1 - impact funding matchmaking and about to launch v2 - impact measurement and reporting
- Validated business value proposition with target organizations
- Expanded market research and identified market positioning
- Identified client partners for co-development in the next stage, including a social enterprise intermediary in Hong Kong, Social Enterprise Hub in Taiwan, and a nonprofit in Canada
- Assessed the scope of work regarding ILP stack and Open Banking
- Developed working POC using OpenPayment protocol (Rafiki version)
- Added System Architect and Senior Software Engineer to our team.
1/. As our proof-of-concept shows, Cheeri is on track to integrate impact-funding platforms into the Interledger ecosystem. In the first quarter of 2023, we compared OpenPayment APIs with banking APIs offered by leading banks in Hong Kong on a variety of metrics, including the functionality, implementation effort, business readiness, licensing, and running cost. We concluded that in general the development of OpenPayment is one of the most viable solutions to meet our needs. In April, we completed a proof-of-concept to verify the viability of applying OpenPayment APIs to Cheeri’s core payment use cases. The result is quite promising, as OpenPayment does offer a sound approach to tackle the hurdles around payment managed by third-parties in a non-custodial manner. Upon completing the POC, we estimated the implementation effort for completing the funding module and identified a list of follow-up tasks to do in the implementation stage, including testing and integrating new OpenPayment features into Cheeri. In the meanwhile, we are looking forward to potentially integrating more digital wallet services rolled out by our peers in Hong Kong and SE Asia.
2/. Our impact funding process allows for automatic reimbursement in fiat or crypto based on standardized metrics and impact-driven milestones. We have successfully integrated the first set of standardized metrics, GIIN’s IRIS+, into our solution.
3/. After consulting with philanthropy specialist, impact analysis expert, social enterprise advisor as well as conducting dozens of user interviews, we have confirmed that philanthropic foundations, intermediaries and impact investors are willing to pay for a service that would help them manage their fundees' impact measurement and funding at the right price point, confirming that subscription-based SaaS model is a viable business model.
4/. Purpose-driven organizations that are under- or unbanked, can potentially avoid high financial transaction fees and access funding across borders. Our research shows that ”organizations transferring funds internationally may lose from 3% up to 10% of the funds in transaction fees and inefficiencies caused by having to go through multiple intermediaries such as banks, agencies, and governments.”
By comparison, Cheeri aims to provide a funding solution which is peer-to-peer and non-custodial, eliminating most of the bureaucratic processes that inflate the cost of money transfer. If we leverage Interledger and OpenPayment protocol to offer account service over cryptocurrencies, it is estimated that the cost of transaction fee to be around 0.5%, which is 83%-95% less than the traditional approach. Once Interledger is widely adopted by more wallet service providers using L2 technologies in the ledger layer (e.g. Lightning Network, Polygon network, Optimism, and more), the basic cost of money transfer will be miniscule and the actual cost to Cheeri users can be further reduced.
5/. We analyzed the feasibility of adopting the DAO model and issuing GiveCheers ERC20 tokens on Ethereum blockchain to align the governance needs and financial incentives among project stakeholders, charity funders and impact organizations. From our study, we found that maintaining Cheeri as a privately-owned startup project would be a more desirable approach, because Cheeri doesn’t need massive bootstrap capital to start with, and the business can grow in an organic manner once we have the right product-market fit. Without the need of bootstrap capital from the wider public to kickstart the project, the need of establishing a DAO to solve governance and trust issues is minimized. Furthermore, the startup business model is also easier to understand by Cheeri’s customers, i.e. charity funders and NGOs, who are in general less tech-savvy and might not be very familiar with cutting-edge innovations like decentralized finance and DAO.
6/. In terms of legality, our research illustrates that by using a non-custodial approach, we can minimize risks of being subject to regulatory requirements. Cheeri does not need a money transfer license; we only have to make sure our Interledger account service providers have the necessary licenses in Hong Kong and SW Asia, regions that Cheeri operates in.
Cheeri helps social enterprises and nonprofits obtain sustainable, continuous funding. Through making it easy for impact funders and purpose-driven organizations to prove their impact and manage funding, Cheeri aims to level the playing field as well as enhance collaboration between funders and funded, in support of UN Sustainable Development Goals and positive social change for their beneficiaries.
ILP-powered funding is especially suitable for cross-border philanthropy benefiting purpose-driven organizations that are under- or unbanked.
Here are what our target customers say about impact funding:
“Social enterprises are not good at writing proposals or getting funding… We wish the funds to be not too troublesome and not too little…”
“We want alternative funding sources to help us stay in the game to maximize our chance of survival.”
[Cheeri] “will help [impact organizations] look better when contacting investors, and pitch to funders more effectively.”
To gain deeper understanding of our target organizations as well as to promote our service, Cheeri has been publishing an "impact story" series on our Medium blog. The series reveals the journeys of social entrepreneurs and nonprofit organizers, their ups and downs in achieving different social missions, and potential support they need in order to thrive, especially in measuring impact and getting funding.
So far, we have published 3 articles regarding the impact journeys of a socially inclusive studio catering to People with Disabilities (PwDs), a social enterprise that promotes transformative reading, and an eco-education permaculture community and charity in Hong Kong.
Our first posts were picked up and reposted by HKGoodPost.
Next, we will turn the table around and publish 3 more interviews with foundations and intermediaries who fund these social enterprises and nonprofits.
By June 2023, we aim to complete the impact funding flow, which makes us ready for onboarding first customers and for piloting Interledger-enabled impact funding.
Here are our next steps:
- Collaborate with peers who are building wallet services using OpenPayment to streamline the user onboarding process
- Adopt the latest development and tooling whenever OpenPayment SDK evolves
- Continue with development cycles to perfect the user experience, and integrate the funding module (powered by OpenPayment) into core modules of Cheeri.
- We are keeping a close eye on the development of OpenPayment protocol as well as peers who aim to offer the wallet service to third-party service providers like Cheeri.
- We are also open to any kind of ILP collaboration, including pilot testing, use of SDK, UI/UX integration, and early customer onboarding.
- Last but not least, if you are a social enterprise, nonprofit, philanthropist, impact investor or CSR manager looking to define, measure, analyze and manage impact, join us today!
We're grateful to the core development team of OpenPayment, who has been very responsive in Github repositories, helping developers solve all kinds of problems regarding using OpenPayment. In addition, we thank Interledger for lining up the OpenPayment development community in the Slack channel.