Platform Consumers

In this article we examine the evolution of consumers from retail consumers to platform consumers, as businesses move into the ecosystem and marketplaces emerge to manage B2C and peer to peer sales.  We  observe how platforms have changed customer expectations and behaviours and discuss the impact on businesses, and how their service models have evolved as a result.

Platform marketplace

The 21st century has been characterised by many social, economic and technological developments, but nothing has changed the way customers interact with businesses more than the emergence of platform enabled retail.  It has changed the way people buy things, the way they shop for things, their expectations and their behaviours.  It has also revolutionised aspects of retail that have led to the emergence of platform giants and opened up markets for retailers in completely new ways.

The platform revolution is ongoing.  Retailers, producers and customers are moving into the ecosystem economy, supported and led by more sophisticated and more specialised platforms.  While it has made significant changes to the way we work, shop and think about consumption already, many more changes are in store.  We explore some of the future state changes in other parts of this section.

What’s a platform?

In technical terms, a platform is a technology or set of technologies that supports the running of other technologies. Specifically in the context of marketplace platforms, a platform is a technology that supports the distribution of content from producers to consumers, or between each other (prosumers), without the need for a dedicated retail outlet.  They take various forms – we are all familiar with Facebook, YouTube, LinkedIn, Twitter and other social media platforms, primarily designed for sharing content, and with a business model based on advertising and paid content; others are more obviously dedicated to giving small (and increasingly large) producers access to a wide range of customers, such as ebay and Alibaba.  Other platforms are dedicated to specific markets and audiences, such as Uber or AirBnB (rides and rooms) or piecework such as, taskrabbit, or  

There are also platforms dedicated to various specialised services, such as payments (PayPal), document sharing (dropbox), petsitting, car sharing, bikes, houses, gardening, you name it… and of course, porn.  Spotify and Netflix are the best known media sharing platforms which, like Amazon, both sell on their own behalf (Netflix and Amazon are also production companies) and provide a platform for third parties.  Crowdfunding and peer to peer lending platforms are also applications described elsewhere in our articles.

The characteristics of a platform described by Sangeet Paul Choudary in Platform Scale, are three key conceptual layers: a network/marketplace/community layer, which includes the community of consumers, producers, prosumers and their interactions; the infrastructure layer that manages the interactions and the platform availability, and the data layer, where analytics support the effective functioning of the others.  

The key differentiator of a marketplace platform is that it supports consumer / producer / prosumer interactions, so other large commercial web systems don’t fall into this category directly, although many large commercial sites do run on some of the big platforms aimed at small and larger businesses, and if you are using a dedicated website for a small business, or even a large one, you may well be interacting with one of these without being aware of it.

A short history of marketplace platforms

The history of online platforms is inextricably linked with the development of two key access facilitators: web browsers and search engines.

Following the development of the World Wide Web, initially for academic purposes, by Tim Berners-Lee in 1989, the first cross-platform web browser was developed by fellow English mathematician Nicola Pellow in 1991.  Technologists slowly started to realise the potential, and by 1994, a few false start platforms were emerging on the world wide web, hampered by poor bandwidth and limited browser capabilities.  The milestone browser Netscape Navigator, launched late in 1994, when Mark Zuckerberg turned 10, started to take hold as Amazon launched in the books market in 1995, alongside e-Bay (originally AuctionWeb).  

Netflix started its online DVD service in 1997, the year Larry Page and Sergey Brin were writing their research paper, Amazon went public and Jeff Bezos issued his first famous letter to shareholders.  PayPal followed in 1998, while Netscape plummeted from market dominance, as Microsoft pursued an aggressive bundling strategy to get Internet Explorer to market dominance.  Thanks to the escalating browser war and growing usage, browsers were improving while  infrastructure developments, particularly bandwidth, improved accessibility and usability significantly.

Towards the end of the 1990s, while organisations like the ones we were working within were moving from intranet and flat websites towards building their own functional commercial sites, Amazon, e-Bay, YouTube and Netflix were paving the way for many more enterprising entrepreneurs to identify the opportunity offered by the internet and increasingly user friendly functionality, among them Zappos and the Chinese online marketplace AliBaba.  By 2000 most schools and businesses in developed economies had access to some form of broadband access, although most private users were still on dial-up modems, and governments were prioritising public broadband access, recognising the growing importance of the web in people’s lives.  

It was then, on the wave of the boom, that incumbent businesses such as supermarkets and banks started launching their own online sites; Sofie was responsible for one of the first online wealth managers in 2001, while Walmart, Safeway and Costco all started providing online services.  Although banks and large retailers had the advantage of infrastructure and existing customer bases, they were slow to learn the lessons from the early platforms, with Amazon in particular capturing a growing market, partly thanks to its 1999 launch of i-Click, allowing faster purchases but also thanks to its growing range of products, culminating in the launch of Amazon Marketplace in 2002, where third party sellers can sell via the platform.

With e-Bay, Amazon Marketplace, AliBaba and a growing range of more specialist B2C platforms emerged, fuelled by the early successes and learning from some early failures.  In parallel, the acquisition of PayPal by eBay in 2002 enabled the development of secure payments over peer to peer platforms.  This accelerated the development of peer to peer marketplace platforms, enabling small payments to be transferred securely without compromising personal payment details.  

AmazonTurk was the first peer to peer service exchange site, launched in 2005, enabling individual producers to sell intelligence based services via a basic marketplace to buyers at a set price.  This is also when YouTube, the peer to peer video sharing site, was born, the brainchild of ex-PayPal employees, which rapidly caught on to become one of the fastest growing sites of 2006.

With the release of the iPhone in June 2007 and shortly afterwards, the rival Android phone, platforms for sharing Apps arose, allowing for both distribution of phone-enabled apps by existing companies, and the reshaping of the business model for a large part of the games industry.  At the same time, Netflix started offering online streaming for a subscription, alongside Hulu.  

Since then, many peer to peer marketplaces have been developed, in areas as diverse as education, lending, travel, car sharing, clothes, recreation, venues (we mentioned dog sitting) currency exchange, media  and of course the general commerce, and peer to peer service sites.  

Founded in 2008, AirBnB was the first marketplace for people to share spaces in their homes, while Uber (2009) was the first to offer rides in people’s cars at scale.  Both grew in parallel with the skills sharing sites, which have all had a significant impact on supplier behaviour which we discuss below.  Peer to peer lending has changed the dynamics of a certain class of startup business, while peer to peer selling has changed the cost and dynamics of running a retail business.  But the biggest impact has been on customer behaviour.

User generated content and social platforms

While selling things is always a prime motivator for developing technology, communication is another basic human need that has always exploited new technology as it became available, and online chat rooms existed before browsers were developed, enabling groups of related people to communicate simultaneously, so the move to the world wide web was inevitable.  Putting chat rooms and interaction forums on internet sites also enabled people who were interacting with a commercial service to exchange information and commentary, and led to the development of global special interest or general interest groups, hosted by a variety of organisations.  

As browser technology developed and it became easier to curate commentary, asking for content from users became more widespread, and “below the line” comments were born, inviting users to comment dynamically on content such as news sites.  In contrast to Amazon’s product reviews, which were rigorously curated and therefore not dynamic, these online and “below the line” fora encouraged immediate exchange of views.  Where sites set up dedicated comments and information exchange fora, many gave birth to broad online communities, and there are today long-running informal communities associated with many news sources, with some well-known regular contributors and, as has been well documented, the rise of the internet troll and flame warrior.

But the real communications revolution happened with the rise of the pure social platform, Facebook being the most successful to date, although many other user generated content sites such as LinkedIn, Twitter, YouTube, Pinterest, Instagram, etc. are also extremely popular, where the interactions and user generated content are the whole point of the site.  These sites allow and encourage the development of relationships between users via a variety of tagging protocols, unrelated to validated purchases (as with Amazon reviews) or a particular subject matter interest.  More than any previous forum for exchange of views, these new platforms have created alternative stars, with Facebook, YouTube, Instagram and others providing a platform for exposure for some unlikely new celebrities.

Information over social media has also started to take on a value of its own for platform prosumers, with growing respectability as more establishment and respected figures started to use it as a communications channel – in particular Twitter, which is widely employed by politicians, scientists and media figures to reach a wide audience.  Forums such as Medium and Quora invite longer content on specialist subjects, changing how we perceive content and content providers, as we’ll explore below.

As the social platform has evolved, there’s also been a convergence of chat applications such as Slack, WhatsApp, WeChat and Messenger towards adopting wider and more integrated functionality, starting with file sharing and group chats and developing towards payments and other integration features, and to all extents and purposes these are now also fully fledged social platforms.

The barrier between social and marketplace platform has become more blurred over time; while social platforms have always needed to include a commercial element in the shape of advertising and behavioural data sales to maintain revenue, they are now taking on more service partners and providing more commercial opportunities to their customers, with millions of businesses represented.  Payments over social media is an important milestone in this development, and with platforms now seeking banking licenses, it is clear other financial services will follow.  

Ecosystem links between a wide variety of sites have increased, partially in a bid to reduce the proliferation of identities, and with the rise of the megaplatforms, now many commercial and social sites can be accessed via, and share data from, social platforms such as Facebook or Twitter.  Nearly all commercial marketplace sites offer the option to share comments or content via the social platforms and some are starting to emulate more features of social platforms; the ecosystem is now in your pocket.

Circular economy platforms

As marketplace platforms emerged as a key way of how people did business, 2003 saw the birth of, one of a growing number of platforms dedicated to peer to peer exchange between people for no money.  In some cases, as with freecycle, people simply advertise their unwanted things, so that somebody local can pick them up and make use of them instead.  Others, such as LETS or the CES (Community Exchange System) are locally based trading systems that use an internal digital currency to reward people in the community for goods or services, that are exchanged peer to peer.  These platforms share characteristics with locally issued physical fiat currency (such as the Brixton pound) and are generally managed based on trust and local community values.  

These schemes are making use of the internet to expand the concept of circular economies in local areas.  More recently, platforms have started to use web technology to exchange alternative units, to encourage green behaviours, such as the startup Bundles, which instead of selling washing machines, sells washes to consumers.  This model allows an uber-like sharing economy for household appliances, reduces unnecessary usage, and also encourages manufacturers to create longer-lasting machines.

Customer uptake and behaviour

The emergence of platforms as part of our everyday lives, combined with smartphone and tablet delivery, has profoundly impacted how we interact with businesses and each other.  But as well as behaviour, it’s changed our attitudes to information, privacy and identity.

Customers and marketplaces

It’s hard to think back 25 years, and many of us weren’t active retail consumers that long ago anyway, so there is a growing number of people who have never experienced anything else.  The most obvious impact of platforms is our changing approach to purchasing.  In the early and mid 90s, we experienced a global boom in hypermarkets, with retail stores getting larger, selling a wider variety of goods, and increasingly building on greenfield or brownfield sites out of town.  In cities, large supermarkets dominated, while markets and traditional retailers were shrinking and closing their doors.  Most people drove to the supermarket or hypermarket to do a weekly or fortnightly shop for groceries and household goods.  

While in urban Europe most high streets would have butchers, fishmongers and greengrocers, in other countries and in rural areas, many people would have to drive to one of these, as the supermarkets encroached on traditional businesses.  Clothes, books and electronic goods were bought at high street stores, which at the time were becoming increasingly dominated by a limited range of chain stores.  Department stores enjoyed a healthy trade.  

Many stores catered for specialist tastes, but you didn’t get variety – if you lived in a certain area, you might have access to a Chinese supermarket or even several, but other towns would have none.  Specialists would exist only in larger cities, often clustered together.  

Source: Kozuch

Mobile phones were only just becoming available and not widespread in ordinary populations, so communication between retailers and customers was by telephone or  letter.  While mail order was common, it was time-consuming, involving choosing items from a catalogue, waiting for the delivery, then sending back any unwanted items, via the post office.  

Shops were open at limited times and almost exclusively during the daytime, so most of our shopping was done at the weekend, and particularly on a Saturday.  Because of the limited range of shops available, customer stickiness was high, with customers typically visiting a small number of shops regularly for the same type of goods.  Visits to city centre shopping centres or specialist stores were logistically challenging because of travel and transportation of goods, so reserved for special occasions or needs.  Shopping at either was done at pre-planned times, during the day and concentrated at the weekends.  Unplanned needs would see you going to a corner shop, if you had one, which opened for longer hours, but rarely overnight.

Consumer expectations of goods were consequently limited mostly by what was available easily in the same locality, or a short car journey away.  While an increasingly wide variety of food was made available thanks to hypermarkets and supermarkets, your choice of books, music, furniture, clothes, electronic items and household goods was limited by what you could buy locally, or via mail order companies that you had gone to the trouble of signing up for.

Most customers also weren’t very aware of how reliable the goods they were buying were before purchasing, how they were made, or where they came from.  It was hard to find independent information about customer satisfaction other than that supplied by manufacturers outside stores, where the interest was in making a sale.  

Specialist shopkeepers, whether the butcher, the bookseller, the carpet salesman or specialist staff in department stores, were valuable mines of information for recommendations.  Recommendations also spread through word of mouth, but primarily through the media, or through advertising, and it was becoming hard to tell the difference.  The first “sex and shopping” novel, Julie Burchill’s Ambition, published in 1989, saw a pronounced increase in sales of some of the brands mentioned between the pages.  

Manufacturers and retailers were also able to manage their image based on what you saw and experienced in their stores.  The few ethical retailers, such as the Body Shop (now seen as a pioneer of ethical retail), were regarded as a bit fringe and possibly cranks.  Nobody had a clue whether large retailers were paying taxes or employing people ethically, unless it was specifically investigated and published in the media.

Today, the high street is still holding on by its fingernails, and we do still enjoy physically visiting stores, particularly if we’re seeking expert advice, but increasingly we shop online, giving us access to an incredibly wide range of goods, inlucing subscriptions, event tickets, and services, many of which we haven’t heard of and don’t need.  This has changed customer behaviour significantly:

  • Buy anytime – particularly useful for busy people, now we can shop from our desks at work, while travelling, after hours or at 3 in the morning if we choose.  Platforms and online shops allow us to keep adding stuff to our baskets, only paying when we check out or on delivery.
  • Buy anywhere – great for those with restrictions to mobility (such as children).  We can purchase on transit, at home or while away.  We can order a grocery delivery for a particular time, while on the other side of the planet.  And we can buy stuff from anywhere in the world.
  • Buy anything – whatever you’re looking for, you’re more or less guaranteed to find it on the internet.  

These aspects have made buying things much more convenient and saved us a lot of time, particularly for mundane purchases such as groceries, or specialist purchases such as sport related products or exotic ingredients, which would otherwise require a special trip.  It’s also led to the more questionable benefit of:

  • Buy in any condition: purchasers can now buy something online while in their pyjamas, while drunk, while depressed, while sick, while fuming over a row (possibly on the internet!) or in any other state, including several that would, 25 years ago, have prevented them entering a shop.  While this means that, legally, retailers have to give customers a cooling-off period, many purchasers fail to take advantage of this.

And it’s changed our expectations of shopping too.  Life used to be a lot simpler:

  • Choice – we expect to be able to choose from a wide variety of options, either for the same type of product, such as different varieties of food produce, or different individual products, such as books or music.  Although studies have demonstrated that the platformification of book and music sales has tended towards larger sales for a smaller number of titles (see Plebocracy bias for the mechanics of this), there’s also a much longer “long tail” of low-volume sales for other items.
  • Price – We no longer expect a fixed price for a fixed product.  Amazon has done more than any other retailer to lead us to expect lower prices, and temporary prices, while the ability to compare multiple instances of the same product with different service options, allows us to customise the service we’re buying to some degree, for example guarantee conditions, or different delivery options.  Where in the past, the price of goods may have been fixed seasonally, based on popularity and trends, platforms like UBER have taken variable pricing to extremes with their dynamic surge pricing.
  • Immediate delivery – Amazon has been a big part of shaping our expectations not just of instant delivery, but also of paying a premium for faster services.  The impending drone deliveries will bring down delivery times even more.  Other retailers and platforms were early to allow users to select delivery days and timeslots, responding to customer convenience; the UK retailer Argos was one of the earliest to offer not only same-day, but timed deliveries, at a premium.  
  • Buy anything – still in development, but we can now buy increasingly expensive and more significant things, alongside cheap and insignificant things, services, experiences and dreams, over platforms – with auto manufacturers now selling cars alongside platforms offering programming, custom-made t-shirts, housework, holidays, paternity tests (yep, really!), gaming and many, many more
  • Information – we expect to know not just product specifications, but information about other customers’ experiences, alternative options, etc, at our fingertips.

We expect to be able to pay in a variety of ways, too, and we’re becoming increasingly reliant on electronics payments services.  Many of these today are linked to our bank accounts, but it’s also possible to load money onto an increasing number of services, either through a traditional payment or using electronic money of some sort, now including digital currencies and increasingly, cryptocurrencies such as bitcoin.

Customers and Information

As well as changing our purchasing behaviour and expectations, platforms have fundamentally changed our interaction with, and expectations about, information.  We are now comfortable sharing personal information, and expect others to do the same, with varying degrees of openness, depending on our culture, demographic, and the type of information in question.  

  • The most dramatic change from a commercial perspective is in the availability of, and consumers’ willingness to share, information about products, services, and the companies that supply them; this has resulted in the need for manufacturers and service providers not only to listen to their customers, but also to curate their social profile in a completely new way.
  • Of course, social platforms allow global communities to share every other type of political, social and cultural commentary they choose, and this is often associated with products, services and the companies that provide them, much more than in previous years.  A company’s values become an important part of its positioning with consumers.  
  • This in turn, is linked to how consumers position themselves both in relation to political and social ideologies, and the extent to which they identify with companies and products associated with those ideologies.  With consumer awareness, comes a growing trend to associate consumption with ideology (“lifestyle choices”) which presents both opportunities and headaches for producers.
  • Of course, we’ve also seen the rise of products that are basically people – rooted in celebrity endorsement, platform celebrity now exists as a valid career choice, and people make a (sometimes very good) living out of endorsing products on the internet, encouraging people to emulate them and creating the growth of online image as a key type of social status indicator in some societies and demographics.  It’s also led to the rise of social profile being more respected, and valued above, valid expertise.
  • And this results in the proliferation of personal information being supplied by individuals over social and commercial platforms; personal opinions, experiences (often of products), anecdotes, photographs, trivia and other banalities.  And, of course, kittens.

Key to this dynamic is the way that platform reputations are influenced and manipulated.  Today’s platform reputations are shaped by opinions; these are, and will still be, open to manipulation and influence by scale, intelligent analysis and crowd dynamics such as information bubbles.  We describe this in more detail in the article on Plebocracy bias.

We believe that this will be one of the areas that will see the greatest evolution in the next few years, thanks to the growing adoption of technologies such as blockchain, AI and behavioural reputation systems; while the use of data to manipulate and shape opinions is widespread today, the opportunities presented by validatable data and sophisticated behavioural analysis mean it’s now possible to create and use reputations based on facts instead of opinions.  Of course, many people do, and probably will continue, to choose information that reinforces their opinion over factual information.  How this evolves will shape much of how platforms and commerce interact in the future.

Businesses in the platform age

As platforms have influenced customer behaviour, so they’ve provided both opportunities and challenges for businesses.  Transparency (real or perceived) is now a prerequisite, especially for larger businesses with a significant exposure to social opinions, positive or negative, and a need to curate them.  Positioning in relationship to political and social attitudes is now a key part of every business strategy: today, Tribe beats Product – it’s no longer enough to produce something great, your customers have to identify with people who use your product, or with your organisation.  It’s also easier for businesses to both gain and lose reputation and credibility through factors beyond their control.

The rise of the megaplatforms is problematic for other large and small businesses.  In some cases, commercial platforms can leverage their scale and market value to undercut traditional players, resetting customer expectations with uncompetitively priced offerings to destroy competition, before leaving them in a monopoly position.  Amazon is so strong in the book market, and is becoming a market leader in many other sectors, that it can dictate prices to primary producers and secondary sellers.  Uber is openly undercutting local taxi services with the stated intention of destroying traditional providers, allowing them to reset prices as a monopoly after competition has vanished (although this strategy is having variable success).  

Regulations can’t catch up with platform economics, and global platforms don’t suffer from national restrictions; their scale makes them essential to many national economies and they seem immune to traditional inconveniences suffered by smaller platforms and retailers, such as paying tax or treating workers ethically.  The other side of this coin is an opportunity for labour and regulatory paradigms to shift, to both support and benefit from this new economy, but as with all market innovations, regulators struggle to catch up.

However, the opportunities are also significant.  Today, businesses don’t need a global distribution network, or even advertising, if they can maintain a strong profile on social and commercial platforms through well curated consumer opinion.  This means that the focus on holistic, full-stack services is now less important to strong distribution and sales, than a positive and well curated public image.  Smaller businesses can achieve global footprint through creating a tribe, or building association with an existing, powerful tribe.  Niche suppliers can build a global audience as scale is no longer about saturation, but cultural reach.


Platforms have changed the way consumers behave, how they think about products and services, how they interact with businesses and how they perceive companies, influence, celebrity, information and each other.  This has significantly reshaped how businesses need to respond.

We think, however, that while significant change has already resulted from platforms, that these changes are still at the early stage of evolution.  A combination of new technologies and a growing depth of generations that have always lived in the platform economy, provides the landscape for the next stage of evolution, into the ecosystem economy.


The Money revolution – recycling value to drive sustainability

The gig economy.  Microfinance.  Crowdfunding. ICOs. Co-opetition.  Alternative finance.  Disintermediation.  The shape of finance and how businesses are being funded have already seen some fundamental changes, but this is only the beginning.  We’re starting to see the same sort of paradigm changes in finance and money, as those that hit print media when the internet came along.  Just like popularly held perceptions of books and news media over the last two decades, our concept of what money is and how it’s invested are being challenged.  In this article we explore the impact of these changes on how money is moving around in the system and what this means for small and micro businesses, particularly in developing economies.

Where does money come from?

Money is a token system designed to make exchange of value easier than barter systems; money represents a universally accepted value which can be exchanged in fixed or variable amounts for goods or services.  Much early money was made of precious metals such as gold, and was in effect a token/barter system in itself, where precious metal was the agreed standard unit of value, and these were then superseded by more symbolic tokens such as paper money and coins with limited inherent value.

Historically, however, most currencies were still underpinned by a relationship with precious metal, usually gold, with central banks issuing currency notes based on a “gold reserve” or a store of gold which could be exchanged for the notes and coins, on request.  This led to nations storing large gold reserves, especially Great Britain, which, thanks to its empire, amassed significant gold reserves and became the dominant currency of the 19th Century world.  The gold reserve system survived into the 20th century, when the limited supply of gold and the diminishing dominance of the UK Pound resulted in countries adopting increasingly protectionist monetary policies, including deflation, impacting international exchange rates.  This was hugely exacerbated following the first World War, when the war debt of most developed economies created a downward spiral in currency availability, production and employment that led to the global depression of the 1930s and eventually to the second World War.

Bretton Woods

In response, the major economies met to agree international monetary policy, culminating in a 1944 meeting of the world’s dominant economic powers at Bretton Woods.  The resulting Bretton Woods agreements amongst other things reversed exchange volatility between those countries by agreeing to pin currencies to the US dollar, which in turn was pinned to the gold standard.  These agreements also resulted in the formation of several international bodies, such as the IMF and eventually the World Bank, as well as underpinning modern international trade for the subsequent decades.  Following WW2, the US dollar was easily identifiable as the dominant global currency and other countries, particularly the UK, were significantly weakened by their war debt, and under the Marshall Plan this indebtedness to the US was further extended.

As economies recovered, however, the relative stability of exchange rates played into the hands of speculators, and as non-central bank currency investments and exchanges grew with the increasing scale and power of the international banks, while the gold supply again failed to accelerate in line with exponential growth in global production and trade, it became apparent that the gold standard was no longer tenable, and it was formally abandoned by the US in 1971. The gold standard has been blamed for everything from depressions to wars, and since 1971 has effectively been replaced by the dollar standard for most developed nations, with the dollar still the default “safe” currency used in local and international commerce within countries with less stable economies.

The modern global monetary system is therefore no longer based on gold or on any other identifiable asset.  Bretton Woods functioned based on the assumption that the then dominant economic powers would retain a level of stability in relationship to each other and the global economy, while allowing for development, but was underpinned by the assumption that the state as a monetary authority underpins all currency and currency exchanges.  Money as a token functions where the authority responsible for issuing the money is trusted to retain its value against the value of goods and other currencies.  Consequently, most trusted money is issued by government-controlled central banks, which effectively means that the value of the currency is directly linked to the trust in the government and its ability to manage the economy well.

Modern currencies

Central banks control the amount of money in the system directly through issuance of currency, and indirectly through controlling how much other banks can issue in debt.  Hence, while licenced banks can “print money”, there are limits on how much they can release into the system, and requirements to retain sufficient liquidity to provide for disasters, so it’s effectively controlled by the central bank and ultimately by the government of the country.  Because this type of money (sovereign currency) is so intrinsically linked with the risk of the country’s economic policy, there’s a popular perception that it’s in some way guaranteed by the government, and while this isn’t actually the case, the close coupling of currency and monetary policy means that there is a de facto relationship.  

Consequently, currencies associated with high risk states face more volatility and lower value than currencies associated with strong states.  Events such as change in economic policy, depressions and wars impact the value of currencies, but even the anticipation of change is enough to impact their value – the markets don’t like uncertainty, as any financial professional will tell you – so as well as real risks, the value of currency is often strongly impacted by market perceptions, which may prove to be valid or not, at a later stage.  To avoid this kind of volatility between close trading partners, some currencies are “pegged” to other currencies, for example the Euro or Dollar, which increases their stability.  However this can also lead to more volatility when circumstances change, for example the unpinning of the Swiss Franc from the Euro in 2015, which caused a massive leap in its value.  

Sovereign currency is usually regarded by populations as safe and stable, but its perceived stability is in fact something of an illusion – most currencies don’t survive that long, the average life being 27 years according to Chris Mack, who also points out that “According to a study of 775 fiat [i.e. currency declared by a government to be legal tender, but is not backed by a physical commodity] currencies by, there is no historical precedence for a fiat currency that has succeeded in holding its value. 20 percent failed through hyperinflation, 21 percent were destroyed by war, 12 percent destroyed by independence, 24 percent were monetarily reformed, and 23 percent are still in circulation approaching one of the other outcomes.” While some phenomena, such as inflation, are a natural result of growth, it’s important to recognise that money isn’t stable or as permanent as it may seem.

Digital money

Digital cash has, of course, been around for some time in various forms; it’s a long time since everyone used cash for everything and most money circulating in the system (around 95%) is electronic rather than in the shape of notes, even in countries where cash use is high.  This has traditionally resided in banks, although the last few decades have seen the rise of non-bank held digital money, either where a provider issues an equivalent to an amount of fiat currency (for example as an e-wallet/payment card) or their own currency, such as airmiles or other loyalty points.  In this case, the value of the points is associated with the value of the services offered by that company, although in the case of airmiles and some other loyalty schemes, multiple companies have collaborated on some schemes, so that the points can be spent on multiple airlines.  However this type of digital cash, although it’s been in circulation for a long time, is still so fragmented that it’s not convenient for normal transactional use outside of the issuer(s).

Over the last decade, we’ve also seen the emergence of cryptocurrencies, starting with Bitcoin, which was first described in 2008 and started circulating the following year.  In contrast to fiat currencies such as sovereign currencies, Bitcoin and many other cryptocurrencies are not underpinned by central banks, governments or any form of underlying asset.  These cryptocurrencies are popular largely because they aren’t dependent on any central authority, and because of the ability to transact without traditional KYC and validation controls, which we discuss elsewhere.  However, because they’re not underpinned by a state’s economic policy or an underlying asset, their value is volatile as it is driven purely by the market, which is heavily influenced by events and predictions.  Other cryptocurrencies, such as SolarCoin, are underpinned by assets (renewable energy is a popular one) and we will soon see the emergence of central bank issued cryptocurrencies, or CBDCs, to bring the benefits of cryptocurrency together with the stability of sovereign fiat.  This in itself presents many challenges; see our articles on cryptocurrency and tokenisation for more on this topic.

Money going into the system

Money is today an essential for nearly every type of transactional activity; access to nearly every type of goods or service is via a financial transaction where the good or service is exchanged for money.  It’s convenient, because it represents a commonly agreed standard for valuation, and it’s easy to use.  Prices for goods and services can be set and easily communicated in a value system understood by sellers and purchasers.  Consequently, it’s also essential to support the growth of businesses, as money is needed to buy things before they can be converted into goods or services for sale – in exchange for more money.  

Prices are fixed by the business selling the good or service; however how much money people are prepared to exchange for things, including services, may vary over time depending on a number of factors including availability, quality, fashion and so on.  Supplier businesses will base prices on a combination of the cost of providing the good or service and the price consumers are willing to pay for it, however the price it’s sold for may not reflect the cost of production.  In many cases, goods are sold at a much greater cost than the cost of manufacturing and distribution, for example where an item has a high value because of fashion, such as the iPhone.  In others, businesses may choose to provide services or goods at a loss, for example Uber, which is pursuing a policy of undercutting local suppliers in order to strangle the competition, in anticipation that reduced competition will enable it to raise prices in the future.

Money is put into the business system by investors and banks, with the ultimate goal of making more money; this may be a simple investment in, or loan to a company, that then makes some money and returns the investment or loan.  The difference between investments and loans are that investments are buying a piece of the company (equity) whereas the loan just buys a promise to pay back the loan (debt).  However, both types of money going into the system are designed to produce more of the goods or service, for a return of (it’s hoped) more money.  In theory, the amount of money a company is worth (value) is based on how much it will gain from producing goods or services in the future, and therefore how much money the investor or lender will get back.  

Money staying out of the system

The relationship between equity and debt capital, and production is, however, not straightforward.  In addition to simple movements of money to pay for production, it is also possible to bet against movements in the value of companies, debt, goods and money through various financial instruments, interest rates or currencies.  This is because the future is uncertain and valuations of companies or goods are, at best, an educated guess, while of course the relative value of different currencies and interest rates fluctuates.  

Companies may do better, or worse than their forecasts, while many other factors can affect the price of goods – poor weather can lead to scarcity of crops; wars or natural disasters can impact production of goods and the value of currency and any kind of uncertainty in the markets has a negative impact on nearly everything (except the price of gold).  Financial markets have evolved to gamble on the movement of prices, including at the second and third degree via derivatives, which were originally created to manage risk in international trade, but now are traded as assets in their own right – you can buy a derivative, that’s in turn structured based on someone’s bet about what will happen to a portfolio of equities, which in turn may reflect the value of real companies.

Company valuations, in turn, often don’t reflect the likely returns of a company and may be high or low for lots of reasons unrelated to their forecast profits.  Fashion and FOMO (fear of missing out) artificially inflate some types of company or individual companies, particularly in areas where there are a lot of highly visible successes, such as Silicon Valley, or as exemplified by the boom.  Other businesses by contrast, particularly novel business models, are generally undervalued as investors don’t want to invest time understanding them and more likely than not, deciding against the investment anyway, such as AirBnB, which was famously assessed by Y-Combinator incubator as “a terrible idea”.  While investors take risks in comparison to lenders, even they have a need to minimise risk and expect to make money at a portfolio level; luckily for AirBnB, Y-Combinator thought the founders were worth taking a risk on.

This means that for equity or corporate bond (debt investment) derivatives, in addition to gambling on the returns of a portfolio of companies, you are just as likely to be gambling on the expected impact of reputation, fashion and availability on the valuation of companies, even if you never expect that company to return profits directly to you, or at all.  There are many well-publicised examples of companies being valued at millions or even billions of dollars, which have never been profitable and whose ability to return a positive return on investment (ROI) is unclear; where valuations are based on either an assumption that something that popular must make money at some point, or, more realistically, that a large global platform like Google or Amazon will acquire it for vast sums – which does often happen.  

Structured financial products are designed to make it easy to participate in these gambles, without the money necessarily going anywhere near the underlying company’s books.  In particular derivatives are complex products, based on the performance of a number of underlying financial products, which may be equity, or bonds, commodities, futures, etc. designed to hedge across a number of products or markets to reduce risk.  Debt structured products and the opacity caused by their complex structures, were widely blamed for the 2008 financial crisis, where investors buying structured products had no visibility of what they were actually investing in.  Which is fine as long a the underlying product keeps performing, but as we saw, defaults brought the whole house of cards down.

So a significant amount of value now resides in money markets, rather than in actual companies, and the function this money performs is making more money.  It’s impossible to know how much exactly, but it’s estimated that total global derivatives are valued at around a quadrillion USD, as opposed to between 80 and 90 trillion in money and 70 trillion in stock markets globally.  So over ten times the global money supply is tied up in speculation on movements of value.

Investment inequality and SMEs  

Much of the value of speculation is derived through changing prices and values, which in the capitalist system historically, has tended towards the positive thanks to continued growth, positive interest rates and reduction in the number of people in poverty; the global amount of value created keeps getting bigger.  For investors, this means over time, a continuous growth trend, and positive incentives to keep investing in companies, commodities, securities and derivatives.  The positive impact of this is that cash is available for companies to grow, however there is a downside. Not every company can participate in this liquidity opportunity, as nearly all investments are in listed companies – that is, companies with the scale and history to have its securities accepted onto a stock exchange.  

Globally, 99% of companies fall into the “Small and medium sized enterprise” or SME category, meaning they have fewer than 250 employees.  The EU average SME size is 4.1 employees, meaning that the overwhelming majority don’t have the scale to list, and in developing economies, the figure is even lower.  However, SMEs employ more than half of the workforce in developed economies, and the vast majority in developing economies, where they employ up to 80% of the workforce.  Yet over half of these don’t even have access to basic bank loans, let alone sophisticated financial products.  The global credit gap for SMEs is estimated by the World Bank at USD 2.6 trillion.

This creates a highly polarised economic environment, where most of the world’s investment capital is concentrated in a tiny minority of companies, supporting less than half of the workforce.  As we’ve seen, the rewards for senior leadership of these companies keep growing, again creating massive economic disparity between the leaders of listed companies, and both the smaller companies and the workforces of the larger companies.  So while globally, there’s a trend for the number of people in poverty and financial exclusion to reduce, there’s a parallel trend for the gap between the wealthy and the poor to increase, leading to social problems in developed economies and deprivation for large numbers of people in developing economies.

Source: U.S. Council of Economic Advisers

The financial system is stacked against these SMEs, with multiple barriers to entry – first, the lack of formal listing means they’re not in a position to issue securities.  Shareholder investment in non-listed companies is typically limited to small amounts from friends and family, except in the rare cases of companies (usually technology based) that attract Venture Capital funding (less than .05%).  Second, they find it harder than large organisations to prove credit or trading history, because of lower volumes, meaning bank loans are more expensive if they’re available at all – bear in mind over half of them don’t have any access to credit, and many micro-businesses are unbanked.  Third, even where there is willingness to invest, for example through crowdfunding, the administration of multiple small loan to large numbers of tiny enterprises is complicated and costly, meaning they’re a poor choice for investors.  And while many micro-financing schemes have sprung up, they’re still not widespread enough to make a significant impact, or attractive enough to compete against traditional capital markets, except for ethical investors prepared to take more risk.

And small businesses are a risky investment: many fail.  But of the SMEs that fail (which is actually less than half, in the first two years), many fail because of challenges with cashflow and a lack of access to capital investment.  As the World Bank and other NGOs have found, early investment in small companies can get them over the hump of building a business and lead to ultimate success, especially for micro-businesses in developing economies run by people, disproportionately women, who are unable to access traditional financial services.  One of the startling results of the exceptional success of M-Pesa, is the huge growth in numbers of female entrepreneurs now able to run successful businesses, purely through access to a basic transaction history that allows them to break through the credit ceiling.

Money going back into the system

But things are beginning to change.  A combination of growing awareness of investment opportunities, opportunities presented by evolving technology, growing social responsibility in investors and the desire to experiment with non-traditional investments has led to a growing alternative investment market for SMEs in developed and developing economies.

Crowdfunding and micro-finance

Crowdfunding is a growing, although still niche, investment approach where entrepreneurs, usually at the idea/pre-seed stage, raise capital via online platforms to support early stage or growth stages in their business.  While most commonly used in developed economies, entrepreneurs in developing economies are also increasingly taking advantage of the opportunities offered by these platforms, although the barriers to entry can prove challenging.  A 2015 report for the World Bank highlighted the top challenges for African entrepreneurs seeking crowdfunding, highlighting that it isn’t suitable for every business, entrepreneurs are expected to bring a large network of potential investors with them, and that it’s a time consuming and difficult activity.  The same points apply to entrepreneurs seeking crowdfunding in developed economies; those with a tangible and significantly different product are more able to raise money than service providers or more traditional types of business.  

Crowdfunding is usually run on an equity basis, so entrepreneurs are selling parts of their business to the investors in the form of shares.  This means that there’s a lot of paperwork and due diligence involved, which is handled by the crowdfunding platform, but it also comes at a cost, with entrepreneurs handing over around 10% of capital raised, and legal obligations which can prevent entrepreneurs from some countries participating.  

From an investor perspective, crowdfunding can be a risky activity, especially to the many small investors involved, who will select investments without relevant investment knowledge.  Large investors also participate in crowdfunding, however the majority are smaller and likely to be inexperienced.  

Microfinance, by contrast, is the lending of small amounts of money as debt capital to microbusineses and SMEs who wouldn’t normally have access to financing, usually organised by NGOs, governments or consortia of corporations, which again can be facilitated by technology platforms.  Although microfinance rates of return can be healthy, the primary motivation for microfinance is to kickstart economic growth in the poorest populations, at which it is extremely effective.   See our article on crowdfunding and microfinance for more details.


Initial Coin Offerings, or ICOs, and Token sales have been with us for a few years, with pioneering offerings from 2013 (Etherium raised via a Token sale in 2014), but 2017 has seen an explosion in ICOs, fuelled by skyrocketing value in bitcoin and etherium coins.  Token sales are effectively a type of crowdfunding capital raise, where blockchain firms issue their coin in exchange for other coins of value, such as bitcoin or etherium, as a mechanism for raising money, whereas an ICO confers ownership rights of some sort, with the money usually being raised to support development of the firm.  

Unlike traditional stock offerings, ICOs have to date been unregulated in traditional capital markets, although regulators are starting to classify them as securities in some markets, and this trend is likely to continue.  As a booming phenomenon, ICOs have seen a fair level of fraud and opportunism, with an estimated 10% (possibly higher) resulting in phishing or ponzi schemes, so greater regulation is welcomed in some quarters, although the blockchain community has traditionally been antithetical to intermediaries, so there is resistance in many quarters.  Formal security regulation is likely to result in ICOs being more widely accepted as standard investment instruments by the wider investment community

ICOs and token sales both offer a window into an alternative investment future, and a mechanism for alternative forms of value to start reaching the mainstream. Many ICOs are currently being launched (as of 2017) on the basis of little more than a white paper, but once the phenomenon crests the hype curve and becomes accepted into wider investment culture, it’s likely they will start to open up a much wider range of opportunities for investors and entrepreneurs, especially as more types of business start using cryptocurrency as a means of value transfer.

Alternative money providers

Necessity being the mother of invention, alternative solutions tend to arise where traditional financial services aren’t supporting large numbers of people.  Working with Eastern Europe over ten years ago, people were starting to use mobile-based payments services because they didn’t have access to banks – and we thought it would never take off in developed economies!  The celebrated African alternative payments service M-Pesa, that runs over a mobile phone and doesn’t need the user to have a bank account, has revolutionised finance in West Africa and many other developing economies.  

Launched by Safaricom in 2007, M-Pesa is a simple money transfer and payments system which allows users to store value in an e-wallet on a SIM card.  Originally set up as a vehicle to facilitate microfinance, it was soon adopted as a payments tool and relaunched as a remittance and payments service.  Kenya was an ideal market for M-Pesa – the service was inspired by the practice of Kenyans exchanging mobile credit in lieu of cash, and with a market where only 17% of the population originally had a bank account, growth opportunities were significant.  It’s estimated that nearly 100% of Kenyans have now used M-Pesa, which is an astonishing development in 10 years, but what’s even more significant is that it has opened up access to the traditional financial system, with the customer base for one of the national banks growing from half a million to 11 million customers in the same timescale.

Kenya, and Tanzania, where M-Pesa launched subsequently, had the right conditions for M-Pesa to succeed and grow rapidly – low access to traditional finance and concerns about security for physical cash.  The existing network of mobile kiosks provided the facility to exchange to physical money, and although M-Pesa was originally launched by Telco operators, it now partners with some local banks as well.  It’s able to run on basic phone units, and in areas where people don’t have access to private phones, shared phones are used, with each individual having their own SIM card.  Anecdotes tell of people sewing SIM cards into their clothes, to transport money securely.

As we mentioned above, one of the most significant developments M-Pesa has enabled has been the empowerment of many female entrepreneurs to develop their small and micro-business, significantly rebalancing economic power for those communities. By enabling the vast majority of people to transact, M-Pesa has enabled bottom-up, entrepreneur-driven development across whole segments of the population.  While microfinance and top-down investments are important to supporting economic development, bottom-up, community solutions such as M-Pesa tend to enable longer term success, as they aren’t reliant on third party support.

M-Pesa has now launched in South Africa, Afghanistan, India, Eastern Europe and other markets, with varying degrees of success.  Although M-Pesa enabled many people to leapfrog the traditional finance system in Kenya and other markets, it’s a relatively low-tech solution which now faces competition from more sophisticated remittance services in other countries, but it illustrates how the right technology, available at the right time, giving access to basic financial services, can transform millions of lives and enable populations to be successful without the need for external intervention.

Alternatives to capital markets

As we discuss in greater detail elsewhere, traditional capital markets, while still massively dominant, are now complemented by alternative investments, powered by alternative exchanges and now, thanks to the rise of tokenisation and blockchain technology, alternative approaches to securitisation.  Although it’s early in the evolution of these vehicles, we can see applications of this technology enabling a parallel capital markets economy, characterised by transparency and low administration costs, with significantly less need for brokers or human intervention in structuring and executing instruments.

In such a scenario, a primary tokenised asset class could be issued and owned by community members, above which sits a securitised set of primary investment products based on the direct owners’ tokens, also managed through contracts and digitised tokens, but at a level of abstraction away from the direct ownership layer, to be traded on open markets.  This enables long-term investment by funds such as pension funds and other large investors with full transparency of the underlying assets, as well as putting money back into the hands of the community.  Using smart contract and blockchain technology, a virtual SPV would issue the securities, initially in partnership with local banks or asset managers but eventually without the need for intervention, as assets and transactions can all be managed with automated execution rules.

It would also be possible to create a full derivative layer, which would allow full trading on open global markets, however eventually we anticipate the need for derivatives would dilute, as through tokenisation and the sophisticated marketplaces it’s possible to create through smart contracts and tokenised ownership, it would be possible to hedge across a portfolio of asset classes without the need to create derivatives..  We envisage as tokenisation grows, so will  the two layer securitisation model, potentially creating the opportunity for a market in balanced derivatives while the technology matures, but longer term simplifying how capital markets work.

Such a model could tokenise a wide class of assets, with value pinned to a those assets or to a globally stable compound index, to avoid FX risk and fully utilise the global nature of cryptocurrency, without creating a currency with the volatility of free floating cryptocurrencies such as bitcoin.  This would ensure that investment in businesses could be made in multiple countries with relatively low risk.  Security coupon rates could also be pinned to this asset or index to ensure parity with actual value.  

Looking forward, as governments start issuing sovereign cryptocurrency, traditional money markets and exchanges are likely to also become disrupted, creating opportunities for cryptocurrency based assets and securities to enter standard portfolios.  We see this as the ideal opportunity to expand to green SME investment, supported by the same marketplace, securitisation and capital markets logic.

Community investment

Marketplace applications of blockchain technology and artificial intelligence also present opportunities for local and global business communities to cross-invest in a self-sustaining ecosystem which can survive beyond the availability of top-down overseas investment.

Blockchain technology offers an opportunity to overcome the barriers to investing in SMEs, by defining and executing loans that have traditionally required significant administrative effort, in a transparent and low-administration way.  In addition, delivery track records can be proven based on customer interactions and delivery, which don’t need to involve traditional bank-based transactions.  The combination of blockchain technology with business logic, further ensures that investments can be tied to firm evidence that sustainability and delivery objectives have been achieved.  

Advanced contract technology also offers an opportunity to automate much of the administration underpinning administration of complex multi-party investments, including terms, rights and the management of financial transactions.  A hybrid solution where a technology platform, enabled by blockchain and automatically executing contracts, could support complex SME investment funds by reducing administration and increasing transparency.  We anticipate this will result in reduced challenges associated with investing in small and medium sized enterprises in developing economies, and also have the benefit of helping SME communities in developing economies collaborate through increased community trust, leading to more sustainable community behaviours.

Such a global system could also overcome some of the typical challenges for small investors, enabling people to invest in businesses similar to their own, but in different parts of the world, without having to overcome the usual equity ownership challenges presented by crowdfunding.  This would give global community members the opportunity to invest in businesses they understand, reducing risk and enabling them to participate in the development of their global business community.


Money is today an essential part of how we operate, and particularly how businesses operate.  But because of the way that money has been traditionally structured, the availability of money to different sizes of business is distributed in a way that has led to gross inequality between large and small players, and between developed and developing economies.  Too much money is tied up in the business of making more money, instead of promoting actual growth, while the entrepreneurs employing more than half of the world’s workforce, who are also those most in need of money to grow and succeed, are missing out.  

The nature of money is changing, and with it, approaches to financing, which are already making huge differences in developing economies and enabling entrepreneurs to be more successful.  Through further technical developments, we also have the opportunity to revolutionise the way capital markets and global investment communities work, opening up opportunities for the billions of unbanked and underserved microbusinesses globally.

International Sustainable Investment

In this article we explore the world of sustainability investment, the scope of the challenge and the barriers faced today.  We discuss how growing awareness and technology are working together and how current developments in financial technology will help remove some of the barriers.

The Sustainable Development Goals and investment

Meeting the UN’s 17 Sustainable Development Goals (SDGs) by 2030 is looking challenging.  While nearly every country signed up to the Paris Climate agreement in 2015,  the USA, has since announced it will be pulling out, causing a schism in the G20 group of nations and consternation at home and abroad.  While many US businesses have confirmed that they will continue to work to achieve these goals, and the vast majority of the rest of the world’s countries are still signed up, as the second highest source of CO2 emissions globally (after China) at over 14% and one of the highest emitters per capita, the domestic policy of the USA directly affects the whole planet.  As the largest single contributor to development aid, changes in US policy impacting medical services and women’s health also threaten many of the SDGs.

Although some critics have said they are not sufficiently aggressive, the SDGs set out an ambitious agenda, and even without the withdrawal of US support for some key areas, present a challenging set of targets.  Some, such as no. 1 (No Poverty), are further challenged by global events such as climate change and war.  While global trends are largely positive in areas such as equality, poverty, education and sanitation, further progress needs significant support, estimated at 2% of world GDP, of which around half needs to come from the private sector.  Governments have been broadly supportive, although commitments have been matched unevenly, and private investors are increasingly eager to support the SDGs as the impact of climate change becomes more obvious and the urgency greater.  

Several investment strategies and vehicles exist which support sustainable development investment, giving investors confidence that their money is going to sustainable activities.  And while these have in the past been regarded as niche, strong track records mean they are now attracting the interest of ordinary investors, because sustainable investments are typically with companies that are run not just sustainably, but well.  

Sustainable investment vehicles include:

  • Stocks (equity) in green companies: many investors choose to purchase shares in companies engaged in sustainable activity, such as renewable energy or circular economy activities, however there is also a wide range of opinions about what constitutes a green company: a mining company that invests heavily in community development may be offsetting some of its negative impact by benefiting education or health, or an oil company may be cleaner than other oil companies.  Purists would argue that neither of these counts as “green”, although there is also an argument for encouraging companies to move towards more sustainable operation in any industry.
  • Green bonds: bonds (fixed income products) which are subject to tax exemption, issued by banks or companies that are engaged in sustainable activities; many of these today are issued by construction companies building sustainable buildings, or green energy companies, in developed economies.  A subset of green bonds are “climate bonds” which may be issued by banks based on running businesses sustainably.  Although green bonds have been successful in limited areas, there is both a growing demand and a large need for sustainability investment which they have not been able to cover.
  • Social Impact Bonds (SIBs) are bonds issued by governments on behalf of charities addressing quantifiable social problems. If the charities meet their goals, investors are paid back by the government with an additional bonus. Although they have seen early success, measurement is extremely challenging and they tend to be highly localised to the countries whose governments issue them.
  • Green Foreign Direct Investments (FDIs): these are investments by large companies, usually in developed economies, building or acquiring businesses in other countries, usually developing economies.  Examples include a manufacturer building a factory in a developing economy, or a bank or telco buying into a parallel industry such as a bank or telco in a developing economy.  Green FDIs can be difficult to validate in some countries and industries, especially in some of the more needy countries where corruption and government intervention create barriers, and FDIs tend to be concentrated in areas with a strong history of FDIs, such as South-East Asia, leaving other areas relatively neglected.
  • Green Exchange Traded Funds (ETFs): these are instruments that mimic an exchange made from a bundle of stocks in green companies – because of the lack of consensus on what defines a sustainable company, the underlying businesses tend to be from a narrow range of “safe” sustainable businesses.

The sustainable investment scene is facing challenges; because of the complexity of proving investments are sustainable, and the lack of consensus over what a green company is, most investment vehicles tend to be focused on companies that would probably be operating in a sustainable way regardless, and on “safe” green targets such as renewable energy.  Even within this range, however, investment is not reaching areas where it is most needed, particularly in funding for sustainability infrastructure in developing economies, because of currency volatility and concerns about corruption.  

Meanwhile, the demand for green investments is growing worldwide as people become more aware of the impact of climate change and the SDGs.  Whereas in the past, investors in green securities were large funds, government controlled or otherwise, with the availability of green ETFs and opportunities offered by technology such as robo-advisors, members of the general public are becoming increasingly aware of green investment opportunities and choosing to invest in them.

Evolving perceptions of sustainable investment

For many investors, especially in the early days of sustainable investment, green investments were perceived as an alternative to profitable investments; funds wanting to present themselves as ethical would choose them, assuming that they would be less profitable than alternatives but because they wanted the positive association.  Governments provided incentives to encourage issuers and investors to participate.  

As a result of this perception, early investors in sustainable products tended to be from forward-thinking institutions with a clearly articulated sustainability or green agenda, while other investors overlooked them in favour of more traditional instruments.  Subsequently, as ordinary consumers and investors became more articulate about their desire not to support businesses that invested in “dirty” industries, more institutions started to invest in green instruments to gain public approval.  Over the last few years, however, there has been a visible shift away from this type of “lip service” investment in many large global corporations.  We think this is for a variety of reasons:

  • Growing awareness of the visible impact of climate change, including to developed nations
  • Greater visibility of environmental scandals thanks to social media
  • Some high profile scandals about FDIs, particularly associated with child labour, unsafe working practices and chemical exposures
  • Greater economic rewards from sustainable investments

This has led in turn to high profile pronouncements from industry leaders about their commitment to the green agenda, which then raises awareness and acceptance.  As noted above, most “green” investments are actually safe investments in well-run businesses that will generate positive returns – with some exceptions such as SIBs, which remain more altruistic/risky.  Many large corporations now have internal teams dedicated to sustainability, and are “walking the talk” in the way they run their own businesses as well as their investment portfolio.  

This move into the mainstream and general public perception of sustainable investments provides a positive outlook for sustainable investment instruments.  However there are, as outlined above, challenges to growing the scope of sustainable investment instruments, because of challenges with transparency, categorisation and risk in many economies and industries.  As the pool of investors grows, it will be important to increase the availability of instruments, moving from a fringe investment choice to the mainstream.  As one contributor described it, “we need to move from the concept of green investment, to this is just how investment works”, with all investment in businesses having an element of sustainability provenance.

Barriers to growth

As described above, there are some challenges to overcome in order to increase the range of investments under the sustainability umbrella.  This change is needed because there is an imbalance globally, with some of the most vulnerable countries and industries with the greatest need for reform not attracting desperately needed investment.  There is an estimated annual USD 2.5 trillion funding gap to achieving the SDGs, with renewable energy alone representing an annual USD 1 trillion gap.

What do we mean by Green?

One of the biggest challenges that we’ve heard discussed at G7 and G20 meetings, and hear repeatedly from investment managers, is that there is no commonly agreed standard for what is meant by sustainable, or green, investments.  While some areas are obvious, such as building a renewable energy generation facility, others may be borderline, such as making an existing business more sustainable by reducing its resource usage, installing green roofs, etc. without fundamentally changing the nature of the business to be more sustainable – they are still worthwhile things to do and to be encouraged, but potentially subject to reversal.  This leads to a lowest common denominator approach being taken to instruments such as ETFs, which play it safe rather than excluding investors because of underlying assets that may not appear sufficiently green.  

Government intervention

In many countries, overseas investors are discouraged from investing by the inappropriate level of involvement of government in investment decisions, particularly when selecting vendors for major infrastructure and industrial projects.  While government undoubtedly has an important role to play in these decisions, in many countries there is a perception, usually justified, that decisions are made based on relationships and bribes.

Other corruption

As well as governments, other political or corporate interests, military and private influence may also threaten the integrity of investments in many countries, with attractive financial incentives for those who can engineer the awarding of contracts or siphoning off of funds to non-sustainable activities or non-activities.  In some countries, corruption is so endemic that outside investment is routinely redirected, meaning funding sustainable enterprises is effectively impossible.

Currency and economic risk

Many of the countries which need significant investment also suffer from currency volatility caused by financial instability, wars, corruption or GDP issues.  High inflation, liquidity concerns or other volatility makes investment inherently risky, especially where projects will also need to purchase goods or services from additional countries, amplifying the exchange and transaction cost risk.


As well as the core challenge of defining what is meant by green, in some cases businesses are creating sustainable solutions in one area, while reducing sustainability in others.  There are many businesses in the energy sector in this position, expanding drilling or fracking, while at the same time investing heavily in renewables, while others may be inherently “brown” industries such as mining, but investing in community projects, education and healthcare.  As with the “less green” sustainable initiatives, the question arises whether the positives offset the negative behaviours, and environmentalists and investors are divided on this.


A by-product of corruption is that it becomes hard to validate that money is being spent on what the investors intend; companies may claim green credentials for activity that doesn’t happen, or conceal negative behaviours, such as pollution, from investors.  This creates an understandable reluctance in investors, leaving countries already suffering from corruption and volatility problems, doubly disadvantaged.

All of these challenges can be summarised as:

  1. Lack of confidence that money will be invested appropriately
  2. Lack of agreement over what investors want to support

It has been assumed that at some point in the future, there will be agreement about what “green” or “sustainable” means, however this debate has been raging for over 20 years, and hasn’t been resolved by the SDGs or any of the other milestones that have been put in place beforehand, while the problem of transparency is as old as investments.

UNEP, the G7, the G20 and fintech

Over the course of 2016-2017, we’ve seen a growing convergence between the world of sustainable investment, and the financial technology solutions that can help address these barriers.  The UN Environment Programme’s Inquiry into the financial system we need has been researching fintech opportunities, which it summarised in a report in December 2016, Fintech and Sustainable Development: Assessing the Implications, UNEP has been working with fintechs over the course of the development of this report and beyond, bringing fintechs to the table with policy makers from other NGOs and governments to start identifying solutions.  What was striking about those meetings to us, as technology people, was the huge gap in understanding about technology opportunities in policy makers.  However, as more fintechs were engaged, and through a variety of workshops and expositions, it became clear that policy makers are keen to engage technology in overcoming these challenges.

One of the themes that has emerged, is that there is no clear distinction between what’s green, what’s sustainable, and what’s inclusive; although clearly they’re not all the same thing, the edges are so blurred that it is hard to separate one from the others.  We also believe that achieving one requires the achievement of the others, so it is neither helpful nor easy to separate them.  Taken from this perspective, the SDGs are a good place to start when it comes to categorising and measuring sustainability, even if you can’t put them all in a single bucket.

In parallel, the growing number of practical implementations of technology in support of the SDGs, and in particular financial technology, has given policy makers confidence that these solutions can be implemented to solve real problems.  We’re describing a few here, knowing that many others which we haven’t yet thought of are likely to emerge before the year is out!

Emerging fintech solutions

Solutions to the classification challenge have already emerged, thanks to big data analytics.  There is a small number of platforms already available, that enable investors to select their investment criteria and see a match, for example if they favour projects supporting gender equality or eradicating poverty, or for emission reductions, so that investments can be tailored to the investor.  These solutions enable a wider body of investors to access a wider variety of sustainable investments, increasing the scope of sustainable investments, although provenance and corruption may still be an issue for riskier countries or industries.

Tokenisation of green initiatives over blockchain is also becoming more common, with a variety of initiatives involving tokenisation of renewable energy or carbon offset schemes emerging, enabling community ownership of energy resources, facilitating targeted investments in green projects.  While tokenisation in itself is effectively a type of securitisation giving confidence to purchasers that the underlying asset is clean, these tokens are also easier to transact than traditional securities, as they can be traded over blockchain for other cryptocurrencies, or for fiat currencies via cryptocurrency exchanges.

Meanwhile, robo-advisors are starting to make it easier for normal people to participate directly in green investments, via ETFs, and we have already seen the mainstream robo-advisor WealthSimple trading a Green ETF as part of its standard portfolio of products.  

In addition, a body of research and some emerging solutions take these trends further, combining blockchain, smart contracts, cryptocurrency and analytics to build investment instruments such as green bonds, or funds, with a high degree of traceability and auditability.  Hiveonline is engaged with several such initiatives, using blockchain and contract technology to add confidence to investors seeking new sustainable investments where previously some of the barriers described in this chapter have proved to be too great a risk.  The case study below demonstrates how the technology can be employed to increase transparency and reduce risk in a green bond scenario, and similar applications are also in development for green FDIs and overseas SME community investment.  These applications carry the same benefits of traceability and auditability as the solutions described above.

Case study: Green Bond benchmarking and validation over blockchain

This case study describes a green bond platform hiveonline is building on behalf of Stockholm Green Digital Finance, in partnership with a Swedish asset manager.


Green bonds have attracted positive results with investors keen to support them.  However, the issuance of green bonds is subject to a complex validation process which disincentivises organisations from issuing them, and results in limited availability for investors.  Additionally, because of challenges of validation and auditing, the issuance of green bonds outside of low-risk countries creates further barriers as investors cannot be confident that the outcomes will meet sustainability criteria.

Blockchain technology offers an opportunity to add transparency and confidence to green bonds by defining and measuring criteria associated with sustainability. These have traditionally required significant administrative effort to measure in a transparent and low-administration way.  The combination of blockchain technology with business logic, further ensures that confirmation, payments and other events can be tied to firm evidence that sustainability objectives have been achieved, as well as offering the opportunity to solicit additional evidence where required.  

Advanced contract technology also offers an opportunity to automate much of the administration underpinning management of investors in green bonds, including terms, rights and the management of financial transactions.  

The solution is a hybrid, where a technology platform, enabled by blockchain and automatically executing contracts, supports traditional actors in the green bond lifecycle by reducing administration and increasing transparency.  This results in reduced challenges associated with setting up, investing in and administering green bonds, so that the market can expand both to a wider range of issuers and a broader geographical spread.

The Solution

The system can capture and measure criteria for non-financial achievements, provide full transparency of financial interactions and the assets that they were exchanged for end to end, together with reputation management that evaluates the quality of performance.  The measurement and reputation system are based on assets relevant to the achievement of SDGs, while the underlying cryptocurrency provides the full traceability of transactions via blockchain technology.

The system is based on contracts underpinning the bond, which can be set up to execute based on the provision of evidence in the form of documents and other digital assets, that are measured by the system against the criteria based on the SDGs.  For example, an underwriter may choose to evaluate a bond based on zero emissions, certificates demonstrating renewable energy production facilities or insulation criteria for buildings.  Once set up and agreed with the fund, this information is written to the blockchain as a transparent and immutable record.  

When the criteria have been achieved, the issuer uploads assets demonstrating that the criteria have been achieved, which triggers positive feedback and can be configured to execute payments, press releases, or other transfers of assets.  This ensures that pre-agreed criteria are met, reducing ambiguity and the risk of fraud and providing confidence for investors.

The system also manages the transfer of value via cryptocurrency, which can be created based on input of fiat, e.g. USD, and released as local currency (USD or other), minimising exchange risk and providing full traceability for every transaction.  The advantage of using cryptocurrency over blockchain, in addition to reducing currency risk,  is that every point of exchange for any unit of currency is recorded in a block of transactions that can be accessed by any party to the agreement, which allows full audits and confidence that funds are being used appropriately.

This platform, including setup of the contracts and provision of evidence, is delivered via a simple mobile interface, allowing multiple participants to interact with the contracts including, if required, crowdsourced evidence based on input from independent third parties such as local witnesses.

The reputation management system evaluates the quality of any completed contracts, assessing how well conditions have been met and the quality of assets received in evidence.  Investors can then see how well their investments are performing based on factual, like for like evaluations.


  • Increased transparency and confidence for investors
  • Significantly reduced administration around audit and reporting
  • Clarity or purpose for issuers and underwriters
  • Guarantees for issuers that funds are from reliable sources

With solutions like these, the need for standard definitions of green or sustainable doesn’t vanish, but multiple standards can co-exist comfortably, as investors have good visibility of what they are investing in, and can choose their risks accordingly.

The future of sustainable investing

Blockchain, Artificial Intelligence (AI), machine learning (ML), big data analytics, IoT sensors, behavioural reputation systems and other solutions we don’t know about yet can all help to expand the range of investment products and investments available to investors, while reduced administration and transparency provided by blockchain open up many more potential investment opportunities.  However, this additional transparency has big implications for the way that capital markets run, in that it also facilitates a much more direct relationship between investor and the end recipient of the investment.  

We think that this is likely to result in more peer-to-peer investment, particularly across business communities, and a convergence of “green investment” with “investment”, as the additional transparency gives greater visibility to investors of exactly what they are funding.  While not all investors may choose to go green, most will be uncomfortable participating in unethical or actively dirty investments, especially as green investments perform as well as, or better, than brown ones.

We therefore anticipate the future that our contributor envisaged, where it will be in the interest of all organisations issuing securities to demonstrate sustainability in some form, in order to attract investment.  

Beyond this, however, the additional transparency is likely to have an impact on the way that capital markets work; products that today require specialist knowledge can be largely automated, while transparency and the ability to maintain complex portfolios in tokenised forms, is likely to have an impact on the demand for many types of derivative products.  We address some other potential developments facilitated by blockchain and related technologies in the Money Revolution, and together we expect they will start to have far-reaching implications for sustainability investment, as well as the overall impact on capital markets.  We don’t anticipate an overnight revolution, but the growth of sustainable investments, coupled with the increased transparency available to investors and lowered administration costs, is likely to drive the next evolution in how capital markets work.


A number of investment products are available to support the development of sustainable businesses and infrastructure projects, however there is still a huge investment gap, particularly in countries where it is hard to demonstrate provenance or where corruption and currency volatility are a challenge.  Investors and environmental experts can’t agree on the meaning of “green”, or what the minimum and maximum criteria will be.

Technology is already helping spread the range of investments, and broaden the range of investors who can participate in green investments.  We see the work of fintechs like hiveonline in building end to end investment systems based on blockchain and AI as a continuation of this trend, and expect to see many more participants emerging with similar products and approaches to investment in the future.

While a solution for the funding gap must, necessarily, be the priority, we can also look to longer term implications of increasing transparency and rebalancing investments.  The future is looking brighter for green infrastructure projects in emerging economies, but it is also going to be an interesting journey for global capital markets.  Watch this space.


Green fintech – we can save the planet!

In this article we provide a broad overview, together with some examples, of how fintech can help provide solutions in support of the UN’s Sustainable Development Goals.  The UN and many other NGOs, together with investors, researchers and technology companies, are converging to start building solutions to some of the thorniest problems in this area.

The SDGs and the UNEP Inquiry into the financial system we need

The 2015 Paris Climate agreement between global leaders marked a change to the global sustainability agenda – agreement between all the key economies on what we need to do to reverse the damage that anthropogenic global warming is doing to our planet. In September 2015, the 17 Sustainable Development Goals (SDGs) for 2030 were identified.  In support of achieving these objectives, The United Nations Environment Programme (UNEP) set up an inquiry into Sustainable Finance, and have published a number of reports, working with government groups.

In December 2016 the UNEP Inquiry published their Fintech and Sustainable Development Report, which laid out a number of recommendations for how developments in Financial Technology (fintech) can help to address a broad range of the 2030 objectives through increased financial inclusion, community empowerment and financial support for sustainable infrastructure.

Fintech sustainability opportunities

How can fintech help sustainability?  There are a huge number of potential applications but some of the key ones are using distributed ledger technology (blockchain), smart contracts and cryptocurrencies to remove corruption and inefficiencies.  Applications include:

  • Food Trust and Supply Chain Traceability: by proving where and when crops, fish or meat come from, it’s possible to ensure sustainable supply.  Corruption in supply chains is endemic, and a decentralised, incorruptible, transparent record not only reduces opportunities for fraud, but can also ensure producers get a fair price for their produce.  This in turn can mean producers aren’t forced into short-term decision making by unscrupulous middle-men.
  • Reputation systems to build trust: it has been proven that when communities can trust each other, they can work together to make sustainable decisions.  While this works in small communities, it breaks down where people are not personally known to each other, and population growth, together with the move to cities, means that more and more people live in communities where we don’t know each other.  Blockchains are designed to provide trust within trustless environments and so can help build open reputation systems, helping community members to see guarantees and audit trails, to create trust without having to know each other personally.
  • Fractional ownership of assets: fintech can help communities to own resources in common, such as agricultural equipment or green energy sources, removing intermediaries and helping sustainable decision making.  Community ownership of shared resources can also turn individuals into both producers and consumers, trading surplus from their own solar panels or windmill directly with other community members without having to sell to a national grid.
  • Improved identity applications through traceability of use/ownership: especially in developing economies, people often lack formal documentation giving them access to resources such as water sources or land, which are critical to their survival.  Fintech applications can use other information sources such as interactions, to build behavioural identities that can be used without needing a formal intermediary such as a bank or government to validate.
  • Disaster prediction and management: combined with predictive sciences such as weather tech, fintech can help communities plan for and remediate natural and anthropogenic disasters, both by ensuring the right people are in place and by ensuring full provenance of supply chains.
  • Traceability of investment and tracking of development funds: technologies such as blockchain and cryptocurrencies can be applied to more traditional investment activity supporting sustainable resources, and with their superior traceability, ensure full provenance of the whole investment portfolio so that investors have confidence their money is being used on sustainable investments.

Use cases for sustainable development fintechs

Some of these solutions are already in the early stages of production, with pilots and young businesses springing up as the opportunities arise.  Tokenisation of renewable energy is probably the most mature, with communities able to support development of green energy facilities by transacting tokenised green energy, or carbon offset via carbon credits, while blockchain technology, combined with biometrics, has been used by the UN to track aid distribution to Syrian refugees in a large pilot.  We’ve also been lucky enough to have been engaged by UNEP and various government groups to build some pilot solutions in some of these areas, So while the technology is emerging, and the use cases are not mature, NGOs and investors are already participating in these scenarios.  

Below, we explain in more detail how the technology supports both top-down and bottom-up solutions.

Top-down solutions

Much of the sustainability agenda requires injections of cash from investors, donors or governments, to progress.  While there has been significant investment globally and this has led to a lot of sustainability projects being built, as well as the “greening” of existing industries, the success of initiatives varies between different geographies and industries.  In many cases, it is challenging to get green projects initiated because of currency volatility, lack of transparency, or lack of clarity about investments, while in many countries, the risk of corruption deters investors.  

Fintech solutions such as Internet of Things (IoT), artificial intelligence (AI) and blockchain can help by reducing this risk, creating audit trails, collecting and analysing data and creating greater transparency.  Our first worked example describes how blockchain can reduce the risk of corruption and volatility in a complex overseas donation scenario, and similar approaches are being taken to investment, as discussed in the International Sustainable Investment chapter.  By increasing investor or donor confidence in allocating money to countries or industries where transparency and corruption have been concerns, these top-down solutions can expand the scope of overseas investment and aid significantly, while reducing corruption and administration costs.

Example: Foreign Aid pipeline management over blockchain

An example of Foreign Aid management over blockchain has been achieved, with UNDP running the first successful pilot in 2017 with 10,000 Syrian refugees.  The solution we describe here is more holistic but shares many characteristics, including the use of technology.


Aid for disaster relief and longer-term development programmes attracts significant investment from governments, businesses and private individuals, but faces a huge logistical and reputational challenge.  Typical aid donation scenarios involve a donation in one currency, which is converted to a second currency by the global NGO distributing the aid, then another currency in-country and possibly further conversions as global distributors are used to support the emergency.  

Aid is also traditionally subject to significant “leakage”, with funds and goods diverted to corrupt officials or, commonly, local people taking advantage and selling goods on the open market.  Donations to aid funds typically lose around 30% to multiple FX and transaction charges and poor terms from banks, while administration is high and as it is very hard to trace funds there are corruption and fraud opportunities.

Aid payouts often take place in challenging circumstances; recipients of aid are likely to be displaced, lacking access to formal identity or traditional financial services.  Recipients of aid in the form of food or other transactable goods are also known to sell these on, so there’s always room for abuse, however reducing the interim stages such as merchants responsible for distribution, and ensuring end recipients benefit directly from the aid, is critical to reducing leakage.

Blockchain technology offers an opportunity to add transparency and confidence to donation pipelines, by creating an end to end audit trail of each transaction together with non-traditional identification techniques to ensure the correct recipients are benefitting, even if they lack formal identity or bank accounts.  The combination of blockchain technology with layered business logic, further ensures that confirmation, payments and other events can be tied to firm evidence that desired objectives have been achieved, as well as offering the opportunity to solicit additional evidence and assurance where required.  

Self-executing contract technology also offers an opportunity to automate much of the administration underpinning administration of overseas aid donations, including distribution to multiple suppliers and individuals, and the management of financial transactions.  

We are building a hybrid solution where a technology platform, enabled by blockchain and automatically executing contracts, supports traditional actors in the aid lifecycle by reducing administration and increasing transparency.  We anticipate this will result in reduced challenges associated with setting up, donating to and administering aid campaigns, so that the leakages, overhead and bottlenecks presented by bureaucracy and lack of confidence typical to aid campaigns in more challenging economies can be overcome.

The Solution

The system can capture pre-determined recipients of aid, such as medicines suppliers, individuals in need of support and local workers, provide full transparency of financial interactions and the criteria validating the flow of value end to end, together with a reputation management system that evaluates the quality of performance.  The measurement and reputation system is based on criteria relevant to the particular aid situation, combined with authentication such as biometrics which can be managed outside traditional KYC scenarios, while the underlying cryptocurrency provides the full traceability of transactions via blockchain technology.

Cashflow in Aid Pipeline example

The system is based on self executing contracts underpinning the aid campaign, which can be set up to execute based on the provision of evidence in the form of information such as iris recognition for individuals, or documents such as invoices for suppliers, that are measured by the system against the agreed criteria.  For example, in an AIDS treatment scenario, a local NGO may set up a campaign guaranteeing funds are allocated to supporting a hospital system, suppliers of medicine, and to the individuals concerned.  Once set up and agreed with the global NGO managing the campaign, this information is written to the blockchain as a transparent and immutable record.  

Recipients can then “cash out” the aid by triggering the self executing contracts – for an end recipient, this may be in the form of food provided by a merchant involved in the scheme, validated by biometric identity recognition, for example, as with the pilot run by UNDP with Syrian refugees, where on submission of evidence that the goods have been provisioned to the individuals, the system pays out to the local merchant in local currency.  Alternatively, a global supplier such as a pharmaceutical company provides evidence that a certain number of units of medicine have been supplied, and is paid in USD, or a local hospital pays their workers’ wallets, based on timesheets.  These events trigger positive feedback and will typically execute payments, but can also trigger press releases, or other transfers of assets.  This ensures that pre-agreed criteria are met, reducing ambiguity and the risk of fraud and providing confidence for donors and NGOs alike.

The system also manages the transfer of value (via a native cryptocurrency or one that is pegged to a fiat currency), which can be created based on input of USD (for example) and released as local currency, minimising exchange risk and providing full traceability for every transaction.  The advantage of using cryptocurrency, in addition to reducing currency risk,  is that every point of exchange for any unit of currency is recorded in a block of transactions that can be accessed by any party to the agreement, which allows full audits and confidence that funds are being used appropriately.

The reputation management system evaluates the quality of any completed campaigns, assessing how well conditions have been met and the quality of assets received in evidence.  Donors and NGOs can then see how well their campaigns are performing based on factual, like for like evaluations.


This platform addresses the major risks associated with aid pipelines today, i.e. reduced exchange and transaction costs, and “leakage” or diversion of funds by corrupt entities and individuals, because the money is fully traceable and can only be cashed out by pre-determined people or classes of people.  This in turn gives increased transparency and confidence for donors and clarity of purpose for local and global NGOs.  The administration traditionally associated with managing aid pipelines is also significantly reduced compared to standard approaches.

Bottom-up solutions

While top-down investment and donations are critical to supporting sustainable development, long term growth is best achieved by solutions enabling communities to support themselves.  We cover some of the opportunities in SME and Community Finance, and Money going back into the system.  Here we present an example of how such a bottom-up solution can work to support community growth without the need for top-down intervention.

As above, this is one example of a solution, and similar applications of technology can be applied to achieve the outcomes described above and in other chapters.

Circular Economy platform

Just like international investments, circular economies also face challenges of provenance, benchmarking, measurement and managing interactions, which can be addressed through applications of blockchain and self executing contract technology.


A successful circular economy can function very well in a small, close-knit community, however when running at scale they require technology to support the management of peer to peer transactions, or to support interaction with central or distributed intermediaries.  Obvious examples of this are platforms like AirBnB or Uber, where peer to peer transactions are managed via a platform, and the ability for customers to transact directly with producers has had a transformational effect on how these sectors of the economy work.

Such platforms can facilitate B2C distribution and interaction, however when measuring more qualitative elements such as behaviours and exchange of non-financial assets, emerging technologies present significant benefits of traceability, provenance, disintermediation and transparency.

  • Traceability: blockchain transactions and self-executing contracts offer a full lifecycle audit of value for asset exchange, together with restrictions on destinations for exchanges of value, so customers can be confident where their money is going.  
  • Provenance: blockchain records demonstrate the full lifecycle of an asset, which can be a digital representation of a physical asset, service or agreement.  This can also include evidence relevant to sustainability such as location of origin, chemical composition, species identification (for food), etc. so customers have confidence they’re buying what they intend to buy.
  • Disintermediation: self executing contracts managed through business logic peer to peer, remove the need for the traditional third party to intervene in managing transactions.  Through automatically executing contracts, complex business rules, such as those applying to irregular supply and demand in circular economies, can be encoded so that the need for administration and central intermediaries is significantly reduced or removed, taking much of the challenge and cost out of running circular economies.
  • Transparency: parties to the contract, which can be all members of a community, can have full visibility of all agreements and execution, meaning that communities can be self-policing, removing the need for third party auditing.

Furthermore, the use of internal cryptocurrency linked to certain types of activity can encourage a circular economy to promote sustainable behaviours, if used to transact for selected goods and services, which is extremely relevant to circular economy activities.  This is an extension of the typical e-wallet use we are familiar with e.g. Espresso House phone app, into a wider and richer marketplace economy.


The solution is based on self executing contracts and e-wallets, where assets and cryptocurrency can be transacted seamlessly over the platform via a simple mobile interface.  Communities using these contracts and e-wallets would be able to manage complex supply and consumption loops without the need for a central intermediary. In combination with Internet of Things (IoT) devices such as sensors, stock and distribution can be controlled and partially managed through automation, avoiding the usual challenges of complex supply and demand variations.  Additionally, using blockchain technology, we can ensure that community members are only transacting within the circular economy, by guaranteeing the origin of goods and services and allowing transactions only with nominated persons or classes of people.

Because that most circular economy initiatives are focused on outcomes rather than technology, this platform is delivered as a bundled packaged that can easily be configured and modified by less technical startups to meet multiple business model needs, for example integration with IoT devices to monitor supply chains, energy monitoring, etc and Artificial Intelligence technology where needed.  As the self executing contracts and payments interface is delivered over mobile, we extend our reach to communities with lower exposure to technology, supporting maximum community engagement, while offering sophisticated solutions.

By creating a base platform for multiple circular economy applications, the door opens for interoperability and interaction between an ecosystem of circular economies across the country and potentially globally.

Native cryptocurrency can either be pinned to local fiat or bespoke internal “GreenCoin”, or alternatively associated with a particular asset central to the circular economy in question (e.g. “SustainableFishCoin”).

Below we present two examples of how this platform can be used to support sustainable marketplaces.

Circular Economy Example: Community Farming and Urban Greening


Growing urbanisation, rising food costs and inequality are leading to malnutrition in urban poor populations, even in developed economies.  Meanwhile, more food is being imported as cities expand over farmland.  While governments are promoting urban farming, the scale and volumes of produce people are able to grow in gardens or open spaces falls far below a practical solution to supply urban populations with produce.

The circular economy marketplace, combined with green and agritech, provides a solution to these challenges in the shape of a pioneering example of holistic community based farming and greening, with a positive impact on disadvantaged SMEs and community segments alike.

Background / the problem

The division between rich and poor is growing, while the population of underprivileged and underserved individuals is increasing in developed economies, where certain sectors, such as immigrants, suffer from disproportionately high unemployment levels.  Access to fresh fruit and vegetables is particularly limited for poorer populations in developed economies, with many poorer regions in the United States designated “food deserts” because of the lack of access to fresh produce.

Many countries that have the climate for growing vegetables and fruit are importing large quantities, because the economics of rural farming don’t attract sufficient numbers of producers; this in turn leads to higher costs of produce which in turn, impacts the urban poor.

Given the high level of imports and the cost of fruit and vegetables, targeting urban greening and fruit/vegetable production in urban areas benefits urban communities by reducing food costs and carbon footprints.  In addition to the core marketplace system, developments in urban greening, both social and thanks to Agritech present solutions for creating a multi-layered food circle:

  • Vertical farms are aiming to bring food production back to cities, reduce carbon emissions and water usage and address the growing challenge of feeding the world’s ballooning urban population.  Vertical farms minimise the need for energy, water and pesticides.
  • Low-tech urban farms can be created on any open space or roof, as Copenhagen has shown in the last few years after dictating that any new roof with less than 30% slope has to be greened.  Schools, communities and neighbourhoods support urban farms across the city and this can also be achieved in Stockholm and its neighbourhoods, with appropriate organisation. While these don’t produce enough volume to be a primary food source, they help communities form an emotional connection with growing food.
  • Integral to urban agriculture is the introduction of bees to the urban environment.  Copenhagen and Stockholm have also demonstrated it’s possible to sustain a large population of bees alongside a greener urban environment, and we can learn from their experience while contributing to a reversal of the global decline in bee numbers.
  • Public fridges or People’s fridges, placed in strategic locations, can accept unsold food from retailers or private individuals, making it available for others to take.  
  • Autonomous vehicles for distribution as these become commonly available
  • Home management including cold storage management: as smart fridges emerge, we plan to integrate these into the supply chain removing friction from the ordering and purchasing process.  Using the self executing contract logic, this will enable consortia of domestic and commercial cold storage appliances, including people’s fridges, to collaborate on goods ordering and distribution management.

The solution

The solution is an integrated, community based holistic combination of the core circular economy platform vertical farming and urban agriculture supporting a local food circle, delivered by a consortium of local businesses.  Because of the scale of this solution, it is likely to be contracted by the government or municipality.  Large circular economy initiatives like this are also a key tool in boosting local small business economy and non-traditional employment, firstly building infrastructure and then operating facilities such as urban farms, beehives and vertical farms.

The solution includes sending waste to biomass energy sources, with internal cost allocation via the cryptocurrency.  Large producers such as vertical farms sell their produce directly over the platform to small and large consumers, including commercial or domestic cold storage units, distributed via traditional or automated distribution networks (or simply picked up at the source).  Small producers such as households create self executing contracts over the system, which can be bidded for by consumers including automated cold storage facilities, without the need for intervention.  Prosumers can therefore transact directly with each other and with commercial consumers, forming a core part of the food distribution circle, and reducing the need for intermediaries and associated overhead costs.

Thanks to  the cryptocurrency and contract logic, provenance is clear to consumers and distribution can be controlled to local markets as much as desired.  Opportunities for interaction with other circular or marketplace economies built on the platform also exist, with the option to transact directly with these circular or marketplace economies in cryptocurrency, maintaining the full provenance and integrity of the supply chain across multiple types of marketplace.

The platform supports rich reporting to such authorities, which allows the government or municipality the ability to monitor performance closely, based on the non-financial metrics such as volume of food distributed, number of unemployed people contracted to work, or distribution of fresh food in food deserts.  

This type of circular economy also provides a rich opportunity for education, again creating opportunities for employment in local urban populations.  

Sustainable Marketplace Creation Example: Sustainable Fisheries

While core circular economy applications such as the food circle empower communities to sustainable behaviours, other types of marketplace application can also support sustainability, in particular where scarcity is threatening populations such as fish.

Background / the problem

With global fish consumption doubling over the last 30 years, 1 in 12 people now depend on fisheries for their livelihoods and around 3 billion rely on fish as a primary source of animal protein. Despite this, 64% of fisheries are now overfished and more than 90% of all fisheries have no effective data management in place.  Because locating fish catches is challenging, even with GPS trackers, and once in the supply chain, fish are difficult to trace, validating sustainability is extremely difficult to impossible, and subject to widespread fraud.  

Meanwhile, quotas force edible bycatch to be regularly discarded, leading to waste and missed opportunities for additional cheap food sources and increasing the relative cost and footprint of fish that do make it to the table.  As with meat and other food produce, the supply chain is opaque and subject to fraud, however fishing is unique in that it is forced to harvest large amounts of edible food which is discarded, because of quotas designed to protect the environment.  

Technology opportunities

For the catch through to plate supply chain, there are multiple technology solutions which can be integrated with the core circular marketplace platform to address the fraud and provenance challenges.

  • Fish recognition technology such as Fishface, currently piloting in Indonesia, can identify species based on a mobile camera shot.  This software validates the species of the catch, and can record multiple species.
  • Cameras, designed to be incorporated in fishing nets, trace the time and origin of the catch together with GPS recording.
  • IOT integration with blockchain such as to tag fish once caught
  • Machine Learning (ML) can support both recognition applications such as the fish categorisation software, and matching applications supporting asset allocation such as the recipe allocation to specific types of fish

Additional future opportunities include IoT integration of autonomous vehicles into supply chains, which can be integrated into the supply chain at a later stage, IoT warehouse management and sorting, full integration into national cryptocurrency and further downstream applications of ML such as customised pricing and market-based storage management for caterers.  

The solution

The solution is a multi-layer aggregation of these technologies with the core circular economy platform of self executing contracts, wallets, payments and behavioural reputation system, delivered over smartphones.  Tailored cryptocurrency such as SustainableFishCoin or a standardised currency pinned to the local fiat can be used within the system to transact.

When a catch is made, in-net camera records catch and fishers scan fish.  The fish identification software then categorises and “counts” the fish, and the Platform logs  the fish types, location and timing of catch and fisher tags fish.  The platform then writes a hash record to the public blockchain identifying the origin of catch, and this is repeated for each box of fish.  The platform creates a self executing contract for core catch, demonstrating sustainability, which follows the fish through the distribution chain.

The platform identifies relevant recipes for bycatch, and writes the self executing contract bundling recipes with species/numbers.  It identifies relevant processors and catering outlets with access to distribution centre and alerts them with opportunity, prices and recipe options.  Catering outfits and processors bid for bycatch, and the contract makes allocations without the need for a retailer.

The fish is then landed at distribution centre, where it is sorted semi-automatically according to the contract terms (the target is eventually for full IoT automation).  The sorting is recorded onto blockchain, tracing forward movement of fish through the supply chain via IoT tags.  

For processors and catering outlets picking up bycatch, payment is made over the platform (if using digital or crypto currency) or can be made through standard payments channels, while for the main catch, purchasers are alerted directly and offered the opportunity to place orders via central contract; any residual is assigned via business rules to the distributor and the allocation recorded to the blockchain.

The distribution pickup is recorded on blockchain including full provenance and contract details, destinations of all allocations.  At the central distribution centre, the residual main catch is tagged and redistribution also recorded on blockchain, and this continues for any number of intermediate transactions.  At the point of delivery, the transfer to primary retailer (catering, processor or retail) is recorded, and provenance can be displayed (on menu, restaurant bill, packaging, price display, etc.) as required, with the certification for sustainability, including, if required, where the fish was caught.


In this article, we’ve described how fintech can support many of the UN’s Sustainable Development Goals, and drilled into examples of how top-down and bottom-up solutions can be created using these technologies.  We describe the technologies such as cryptocurrencies, tokenisation, blockchain, IoT and AI in greater detail in other chapters.

While many of these examples are in development and some of the technology is still evolving, it is key to note that the technology for all of these solutions exists today, and in many cases, is already in use.  We anticipate that these fintech solutions, and solutions like these, will become dominant in how capital markets and marketplace economies operate within the next few years.  This should be good news for the planet, and for economies, at the same time.  

Kay points:

  • Financial technology solutions, and particularly those based on blockchain, can help to accelerate the implementation of the UN’s Sustainability Development Goals
  • Top-down solutions include creative approaches to investment, including alternative approaches to investment products, crowdfunding platforms and aid pipeline management
  • Bottom-up solutions include community based platforms, circular economy and solutions that leapfrog traditional financial services
  • The technology is evolving, but there are existing precedents such as M-Pesa that demonstrate the impact that alternative financial solutions can have in supporting sustainability in developing economies
  • Sustainability challenges apply to developed as well as developing economies, and they can all benefit from these solutions

@SofieBlakstad @rallen_consult @wearehiveonline

SIF💚S – Green Fintech Events – Dates for your Diary

28 June 2017 – SIF💚S at Money20/20 & Copenhagen Fintech Week, Copenhagen Fintech Lab, Copenhagen, Denmark saw our first event that attracted an audience of engaged experts and learners

“Thanks for an inspiring session”

“Thanks Sofie et all – for a great and relevant discussion. This should (and will) be on the top agenda in the #fintech space”

6 October 2017 – SIF💚S at Copenhagen Fintech Innovation Week, Dansk Industri/Industriens Hus , Copenhagen, Denmark  

“we expect around 350 participants (c-level and decision makers in Digital/IT, Innovation, Strategy within the financial industry)”

16-18 October 2017 – SIF💚S at SIBOS – MaRS, Toronto, Canada

“SIBOS is about saving the banks.  We think we should be talking about how fintech can save the planet too.”

14-16 November 2017 SIF💚S at Singapore Fintech Fest and Hackacelerator in partnership with UNEP – Singapore

SIF💚S – Sustainability Innovation in Financial Services – is a series of events designed to highlight and inspire discussion about fintech solutions for green, inclusion and sustainability initiatives, in support of the UN Sustainable Development Goals.   We are working in partnership with Stockholm Green Digital Finance, the Green Digital Finance Alliance and the United Nations Environment Programme Inquiry into the Design of a Sustainable Financial System.  For further details and speaking opportunities please contact

GreenInvest G20 Meeting and Green Digital Finance

Continuing our supporting partnership with UNEP and the Green Digital Finance Alliance, the Stockholm Green Digital Finance centre and hiveonline were invited to Berlin to advise the G20 policymakers and representatives of the V20 countries – 46 countries made particularly vulnerable by climate change – on how fintech could help them. The 30-31 May G20 meeting’s focus was on how fintech can support developing economies, and the emerging green fintech scene was also represented alongside policymakers from representative countries.

Given the audience, this was an interesting challenge. Recent experience from the G7 meeting in Venice showed us that policymakers are largely unaware of the potential benefits offered by Fintech, seeing it as something of a technology trend but not relevant to them. We were invited to participate in Venice following some visionary research done by the Inquiry into Sustainable Finance, where Simon Zadek and others have identified many potential applications for fintech in achieving the 2030 Sustainable Development Goals, but communicating the opportunities and bringing them to life is challenging for an audience absorbed in long-running debates.

Fintech – why’s it relevant to the green agenda?

Simon and his team had planned for this and arranged an agenda designed to both challenge perceptions and include policymakers in active participation in solution making. After a warm welcome from the German Federal Ministry for Economic Cooperation and Development, we heard from a number of speakers giving a broad outline of the challenge we face, and painting a compelling picture of the scale and urgency of the problem. Discussions included the challenge of investment in green programmes, the challenge of defining what is green and the role of the G20 in managing through a period of financial transformation.

Solutions for a greener future

hiveonline was then invited to present alongside Ant Financial, SolarCoin, Mobisol and UN Women. Ant Financial are running a fascinating green behaviour rewards scheme, using gamification to encourage consumers, with an impressive 200m+ subscribers. This was a great segue into discussing the broader applications of reputation systems like hiveonline in empowering communities towards sustainability, by reducing investment barriers, credit barriers, community barriers and inclusion barriers. Nick Gogerty of Solarcoin built on this to talk about alternative financial instruments and tokenisation, the opportunity presented by encapsulated marketplace services (“small is the new big”) and how blockchain technologies can support marketplaces and trade, reducing emissions through carbon trading and tokenisation of renewable energy.

This panel led to a lively discussion and we were able to further elucidate some points, including that the scale and volatility issues associated with Bitcoin only apply to certain types of digital currency, whereas others are underpinned by assets, fiat currency or global indexes, while also highlighting the potential benefits for global capital markets, of transparency, reduced manual intervention, reduced transaction costs and opportunities for removing currency volatility through the use of tokenised assets. Some other key misconceptions about the need for internet connectivity to run fintech, the need for supporting banks and the reliance on a grid were also put to rest!

We heard the importance of fintech and inclusion for women, who are significantly over-represented in the 2 billion unbanked and 1.5 billion lacking formal identity, and how with alternative reputation systems and behavioural credit scoring, women can not only become key participants in the economy but also drive sustainable and community focused behaviours in their countries.

Managing adoption barriers in different economic cultures

A workshop to explore potential applications of fintech to real world challenges was a really useful way of helping participants understand the opportunities of fintech, while helping us fintech people understand the problems we’re trying to solve. I was on a team with participants from Argentina, where 30% inflation presents a challenge, Mongolia, which has very low technology penetration, as well as India, China and Egypt, where digital finance behaviour has already evolved rapidly, and we explored the opportunities offered by a digital currency / digital wallet system for countries with economic challenges and barriers to adoption. We’ll pick up on the outputs of this workshop in a future update, as there were many potential solutions identified.

Launching Stockholm Green Digital Finance

The next panel, on international cooperation and overcoming barriers, discussed how micro-equity and SME exchanges can broaden the investor base for SMEs and Cecilia Repinski, newly appointed Director of the Stockholm Green Digital Finance Centre, after formally launching the Centre and our partnership with UNEP and the Green Digital Finance Alliance, was able to put straight some misconceptions about “fintech for fintech’s sake” while explaining the ambitious programme for Sweden in both education about opportunities for fintech use and execution of pilot projects, supported by hiveonline’s technology.

Green Foreign Direct Investments

We were privileged to be joined by many key figures from the V20 – the group of countries made particularly vulnerable by climate change, and on the second day we focused on the challenge of green Foreign Direct Investment (FDI)s, and heard fascinating and compelling evidence from countries facing different challenges – Thailand, where zoning has been tried but faces challenges, Mongolia, where a large part of the economy is inherently Brown because of their reliance on mining, and efforts are being made to offset with sustainable community projects, Egypt and Ecuador, where attracting any investment in initiatives is a challenge, resulting in a massive shortfall across the board.

Challenges identified were different from country to country – FDIs are overwhelmingly skewed towards Asia, so Latin American and African countries are missing out, while corruption, bureaucracy and political favouritism were common themes. Countries are at different levels of development, with different industries and different investment challenges, but across all representatives there were positive examples of governments actively driving policies to improve things. The hard questions remained, of how to identify and measure green initiatives, and whether to insist on global standards.

Externalities and internalities

The 17 Strategic Development Goals identified after Paris 2015 are a good starting point for any measurement system, and are commonly used today, but imposing a single set of benchmarks across all countries and industries would be setting the bar too high for some, and too low for others. Some commonalities remain – Pindar Wong, of VeriFi, pointed out that externalities – the outputs of polluting activities – are borderless and equally destructive wherever they come from. However, there may be an opportunity to configure benchmarking of internalities within individual countries, industries and even regions/municipalities, to support a tailored set of goals which can be tracked and measured for the investments they cover. These could be matched with the goals typical to large investors, to ensure a strong flow of capital towards these projects.

A measurement system for green investment?

Although the NGO and government community has been struggling with how to define green investment for over two decades, one of the key conclusions of the meeting was that we may now be in a position to exploit financial technology to support a more complex, but more transparent evaluation and measurement system, suitable to a wide range of countries with differing needs and priorities. Although the ultimate goal must be to accelerate all countries towards a common approach to sustainability, such a measurement system could support attracting investment towards that state, especially in countries where investment is currently hard to attract, without compromising their green agendas.

Obviously a measurement system won’t solve all the investment problems, but we hope that by adding transparency and fairness to the way that foreign investments are managed, we can give greater confidence to investors that their green goals are being achieved, while reducing administration and waste in the management of funds at country level.

Looking forward

In summing up the meeting, Mark Halle of UNEP reiterated the scale of the challenge we still face, but highlighted the positive aspect that the inclusion of fintech solutions have brought to the debate. He directed the countries to actively include fintech solutions, including reputation systems, alternative financing instruments, and traceability solutions, into policy, to address some of the challenges faced by today’s green investment ecosystem.
We saw, over the course of the two days, a movement from problems to solutions, along with a shift from fintech being irrelevant, to being central to finding solutions for sustainable financial development and green investment. We look forward to working with UNEP, the Green Digital Finance Alliance and the G20 / V20 groups in building a sustainable finance system for the future.

hiveonline at the G7 in Venice

Sofie Blakstad at the G7 Venice

hiveonline is proud to have been asked to support the UN Environment Programme Inquiry into Design of a Sustainable Financial System, recently accompanying them to the G7 Green Finance for SME policy making meeting in Venice. Six of the G7 governments (all except USA) were represented, with a combination of Environment and Financial departments sending delegates.

Following an opening speech by the State Secretary for the Ministry of the Environment, Ms Barbara Degani, Advantage Financial presented their views on the future, with Fintech and future finance driving the agenda but also highlighted the shortage of equity capital available for research and investment. UNEP Inquiry paper co-author Nick Robins presented a summary of the findings, followed by analytical observations by PwC, which centred on the gap between the report’s ambitions and the backing of banks and nations to mobilise practical steps.

Continue reading “hiveonline at the G7 in Venice”

March Newsletter

Building Bridges

Following the Nordic tradition, the Bee has two homes and we attended the launch of the Stockholm Fintech Hub, hosted by KPMG, where the room was packed to capacity and 180 people had to be turned away!  The hub itself, based at the No. 18 shared working space in Stockholm’s Central Station, opened  its doors in March and a number of fintechs have already moved in. With 141 funded FinTechs in Stockholm alone, this facility is much needed.

stockholm fintech launch.jpg

We’re proud that the Stockholm Hub has asked Sofie to sit on its advisory committee, and represented it at February’s OsloFin Tech Fest in a lively discussion about collaboration across the Nordic Fintech Hubs.

Continue reading “March Newsletter”

Building Capabilities

If you’ve been following our series, you’ll know that we believe that whether you’re restructuring an existing business or building a new one, the base unit of building a service aligned business is a capability.  We’ve explored elsewhere the different types of capabilities (Case Managed and Core Standardised), how to structure services and the practicalities of building services.  This article is concerned with the practicalities of building a capability.

As a reminder, a capability is the base unit of the purpose of an organisation, something the organisation does to fulfil its customer proposition.  There are levels of capability, from top level capabilities such as “payments” or “customer relationship management”, to much more granular capabilities like “instant payments”, “customer onboarding” and beyond.

Continue reading “Building Capabilities”

Microfinance, fractional ownership and crowdfunding

We’ve described service alignment, ecosystems and how these impact trust in previous articles.  In this article we explore the impact of technology on community financing, and in particular how technology can support disintermediation of financial services and serve to empower communities in taking back control of their financial arrangements.  This is an opportunity for developing economies, where many people are poorly served by the financial system and exploited as a result, but also in developed economies where there’s a real opportunity to rebalance the power of individuals and small businesses.

We believe an effect of this empowerment will be to encourage communities to make more sustainable choices about how their environments are managed; community ownership will allow longer-term and more community focused decisions to be made, while practical applications of fractional ownership and cryptocurrency rewards for sustainable energy production will reduce need for fossil fuels and costs. Continue reading “Microfinance, fractional ownership and crowdfunding”