Money At The Edge: How People Stay Afloat in Venezuela by Alejandro Machado (Devcon5)

thanks for being here and thanks for staying to spy the typhoon I lead a project called the open money initiative and today we're going to leave behind a little bit for this talk for these twenty minutes these very technical talk these very technical keywords and we're gonna go back to basics to why this technology matters and how do we help people that need it the most so I wanna introduce you to Loreena who is a baker 48 year old she's from Venezuela the country where I'm from and she in order to get her money out and in order to herself escape from poverty scarcity she needs to convert her savings into US dollars which she did by using the black markets well back when it was illegal and dangerous and after that she need to fold the bills into her hair so she could cross the border safely because the border between Colombia and Venezuela is very dangerous the guards are very corrupt and they're just looking for any way to make income because the guards are as any Venezuelan living through a very difficult situation of economic collapse and hyperinflation as you may know so are the over money initiative we research how people use money in closed economies and collapsing monetary systems and this year we focus on my home country Venezuela and we did some what people called azide research we do we follow we borrow this approach from I do as one of our partners and collaborators we try to go to the places where these people live we have served them we set up different research methodology to collect qualitative data that tells us a lot about why people do what they do how people do what they do and we go beyond the statistics of this million percent inflation or whatever and really look at the human experience of what that is like and so you can think of it as a process of search more than research we are searching for inspiration for products that could help these people be more resilient and and better prepared for calamity so our methods vary depending on what our goals are this this year and this for this project we did ethnographic interviews which means we sit down with people we talk with them for about two hours and we try to get them to open up and money is a very difficult topic and subject to get people to open up about so we present them with some emotional cards and we try to like get them to get acquainted with us and sow some rapport and so we did some interviews in person in Colombia and we did some interviews remotely because we unfortunately couldn't enter Venezuela for this time around long story and we also did a dire studies we wanted to know what people's experience was like day to day and we followed people during week and these people were located in Venezuela thankfully what's up works and and it's possible to run a study so like this and we did what do we call displacement which are ways that we we could tell people hey you know for example this is there here some Bitcoin use it to buy something and tell us what you did and of course this is not to really get at the waste that people would be using Bitcoin ordinarily because it's a very like it's a very rough intervention but it's more about getting to know what is difficult about these technologies and and how do we overcome that and get inspiration for that and so the process in the end looks a lot like this we we have a lot of post-its from all the different interviews we try to sort them organize them and try to detect patterns in the data and so I'm gonna run quickly because this presentation is supposed to be 45 minutes but I'm gonna try to run quickly through the main themes where we organized our research insights on so first it's about confidence in Venezuela and networks of people have replaced the roles of companies and institutions which means the state and the companies are no longer operating or they are diminished in their way that they are cooperating so what is the fallback in those cases is you go and trust your neighbors or you your extended family and/or you go to the Internet and go to websites that that replace the need or replace that the use that you have for traditional institutions so for example instead of exchanging money by going to a bank the way you do it is you go through Facebook or Instagram and search for places that offer these informal service of remaining and transferring money abroad and then yeah like this here we see an example of this is a money changer who lives in Medellin and every day he prepares these images and sends them to their his entire network because he works as a money changer and one of the few ways that you can earn money in foreign currency in Venezuela is by doing a currency exchange so his sister in this case lives in Venezuela I mean she collaborated with him so they can get money moving from one country to another and this by the way does not involve cryptocurrency in any way I'm gonna be talking a lot about how people use money in general and a little bit about cryptocurrency because we did encounter some some use of that and then you know this is another example people use these like the feature of whatsapp that is like in circumcise their services and sending and receiving money because the thing is in if you are in a normal country like Japan like the US UK you can send money by just going to a bank and say oh I want to wire money to this bank and you know the corresponding banking system is complicated clunky has a little fees whatever but it works in Venezuela the this system doesn't work because the government doesn't allow banks to talk to banks outside we've had these sort of capital controls for about 20 years so the way that you do it is if you want to convert your money to money abroad you have to find someone that has a bank accounting the other country and you need to send him money first and then receive the money on the other side and this of course is prone to scams and abuse and which we'll see so this leads me to the second one in the Venezuela every transaction is forced to feel like a drug deal everything is kind of underground here I'm trying to send money to a foundation in Venezuela and I'm in Colombia and cinnamon in this booth this guy's telling me here you have to watch this number and it we'll let you know when the transaction is clear and everything's like it's like doing drug deals it's like doing doing you know very Shady it feels you know that you have to trust somebody and there's a lot of scams something that we found that was kind of unexpected at least for me was that despite scarcity and economic collapse some people are thriving you think Venezuela is a country that has impoverished so quickly that everyone must be you know suffering but in fact hyperinflation has made some millionaires because if you are well-connected like this guy we talked to the airman he was able to get a loan issued in bolivars and he bought an apartment in New York City with that loan and then since the bone was in bolivars he was able to repay it the next year I only if there was a million dollar loan and he paid it with $20,000 because the the value of the loan just collapsed right so there's people that can gain this system and and can get huge benefits and so that tells me that the system the economic system that in Venezuela are trying to impose actually elevates levels of inequality rather than making things more equal just really terrible and we also see people trying to take advantage of others by scams you know like this pyramid scheme type things where cryptocurrency is sometimes used because it's the easiest way to move money kind of in the in the in the shadow banking system like if you these people tell us that they they're not they don't see themselves as scammers that you see themselves as financial innovators but if you look at the the way that they are operating they it's probably not sustainable and so the the most vulnerable if you were interviewed this six-year-old lady who was about to fall for one of these scams and it's very common that the people that don't know or that are not very financial literate are falling for these things so this this happens in a situation of uncertainty and and economic collapse when people's ways to earn money are diminished we go to a resilient so when Italians have to endure constant swings between modern and primitive existences sometimes you are having a perfectly normal afternoon or or a normal day you go to work you have electricity internet it it looks like the same things are normal but then it's like the typhoon that's gonna hit that hopefully will not hit you know everything might just no we might lose power we might lose internet and these things happen in Venezuela so frequently that it's impossible to plan in advance sometimes if you have to take your kid to daycare and then they care that doesn't have that you seem like they can take care of them for you then you have to stay at home and then you can work go to work so these things pile on top of each other make like a domino effect so this is something like that's very important to take into account when you're designing for a product or products for for people like this right and of course it makes it very challenging income from the informal economy of an eclipses space to salaries so we interviewed this career woman who is a professor at the University and a professor at the University and she spends her days doing tasks that are way below her level of ability because she makes more money doing that than at her job as a university professor for example and this is not the only the only time that we encounter this we also talk to people who work as drivers doctors who yeah also those taxi drivers and if you notice it's very similar to what happened in Cuba any any profession or any occupation that interfaces with the outside world that is able to earn hard currency is then you know valued more and look because you can earn more money in it and then you do your job as part of like your role in society if you're a teacher if you're a doctor but you also have to have enough for your family to eat so you need to have taken these two jobs leaving Venezuela is going from a sinking ship to a life of a few provisions this we got especially because we focused in Columbia and we noticed like there was a lot of migrants coming which spoke with a lot of migrants people have this expectation that when they leave in as well everything will be all right but when they find themselves in a new country they don't have their support systems and as I mentioned the institution's probably don't work for them because maybe they don't have papers maybe they can't get a bank account so this is something that could take into account and then lastly this is my favorite category open nobody wants the Bolivar but it's necessary to survive so as you can see the Bolivar is only useful now to make home decorations and things like these and they're beautiful but it's also a sign of the tragedy that that's occurring right and then you know and you might think oh well no one's using the Bolivar like this is because like who would use such a worthless currency but in fact it is the currency that's most widely distributed and then if that's what people have to trade it will take a long time for it to be replaced by something a lot more convenient like say die or say the US dollar in cash even though it's making inroads especially use dollars in cash or making big inroads in Venezuela it takes a long time for local currencies to be replaced when someone is selling a product they have the power to choose how they get paid they have that like a symmetry of power right so for example we spoke with this guy who was trying to find medicine for his mom and he didn't have zel which is a interbank transfer platform in the United States it's very popular in Venezuela because there still are many people who have not many many but there's thousands of people who have bank accounts in the US and have registered Frizzell so this guy didn't have access to that and he the medicine he was supposed to purchase to require that like the guy who sold medicine was like okay do you you give me the money in zel or else I won't sell you the medicine which you know is it's kind of terrible for him but eventually he was able to find an uncle that could lend his account to him so you know just just he keep like the - mind-blowing right when you live in Venezuela there's no good way to say there's no ideal way to say so what we noticed was we spoke with three different people that have had it in different approaches but you'll notice that none of these approaches are actually ideal so we spoke with one very bright student who got into mining Bitcoin and save her money in Bitcoin of course it's volatile but she preferred it to having US dollars because she could pull it out at any time but it turns out that local bitcoins is the most liquid the most convenient way to convert from a foreign currency if you consider Bitcoin a foreign currency to to bolivars if you keep your money there in a matter of five minutes you can get the money in your bank account and you can pay for things which is really amazing then there's people that save money in dollars in cash but then it is unsafe so if you have someone that can keep the money for you especially if you live in an area where it's more unsafe then you try to keep it keep the money there and then we are starting to see digital money platforms being used so there's there's a company called err TM and uphold that are like enabling these kind of services they're not using cryptocurrency quite yet and some of these are still in its infancy they they have to become better at being mobile first and so on and at so the government actually blocked err TM from operating but it's a very simple block - to bypass so people need to have be PN's to access these serve some of these services and if you made a mobile app that like would bypass under there people would need to use VPNs that most in fact most people don't want to use VPN so as long as that is the situation then this will not reach you know mass usage so I want to talk quickly about opportunity areas we want to enable access and I'm gonna also go into the three ways the way that the the hierarchy that we establish right confident so we often say that you should make products in the crypt of space that avoid avoid having trust will challenge that and and we would say try to leverage the trust are is already existing between people right so what if for example we've had these are product plug ideas that like provocations from the research that we have so what if you had for example a program where there are digital banking ambassadors that would onboard people onto using some digital money platforms and you know the most exciting person in your community could tell the others you know this is how you would would be able to load up money and and use this these kinds of money systems in resilient category we need to ensure consistent access to our systems even under bad infrastructure so what if there's a way that we could enable offline mobile transfers even if it doesn't turn out to be extremely censorship persistent or extremely double span resistant because people often transact with with people that they're going to transact with again so it is in their best interest not to cheat the system in in most cases crypto bills I saw there's there's there are some crypto bills floating around this conference as well so this is like nice to see some look into the sinner idea and of a bill where you can verify that you know the private key has money and then you can like just use use as if or as if that it were a bill of foreign currency and then open we have we want people we want these services to be accessible to everyone in practice and not just in theory so if you had for example I USD wallet that you could cash in and out very easily that doesn't exist yet and USD wallet it can be a stable point it can be you know it doesn't have to be crypto although we would very much prefer if it were right money change your multiplier so we noticed that one of the things that people do to earn money in Venezuela is to be money changers to to be able to exchange money from one system to another and they earn some money hopefully in the in the good currency so what if we trained a lot of people to to become more nodes in this network of money changing and then we did it in a way that was safe for people to interact Universal point-of-sale system so if there were there was a way for people to pay in the in the mechanism of payment that is required of them and for example this this guy that had to pay was Elwood been in such a rush to find the way to pay because there could be a way for him to convert you know if he had those in cash there could be a way for example to convert to other currencies and then if we could have joined crypto accounts if you have a family member that knows a little bit more about crypto and is in Colombia for example you wouldn't even need to send the money if you share an account and you could load it up in one country and then you could use it in another and that could be interesting as well so when it quickly because I don't have that much time and to use a new crop of useful products that we've found since we did this research so coin is just released their wallet the light version of the wallet and give crypto is actually giving out cryptocurrency to people that don't need it and they're running some pilot programs or just interesting there is a new framework for open source wallets that are running on all low versions of Android which was not like this didn't exist before and this is like oh now open-source I'm going to present this in room D in a few minutes as well there's a committee called reserve that's actually allowing people to buy and sell dollars digital dollars and they have a stable coin so they are allowing people to do that with their bank accounts in minutes whele and they have a very seamless and very easy to use application for that but this it's great and then there's a company called value that's a lot of people send money from Colombia to Venezuela and there's something a huge problem for the 1.5 million migrants that are in Colombia and perhaps they could integrate some some of these ideas too for example instead of sending the money to bank everyone in Venezuela they could send the money to a wallet and it would stay in dollars that would be super cool as well so some quick takeaways for builders I want us to focus on what is useful because there's a lot of focus on what is usable and usability it's a great it's great conversation to have that you excited it's the design track it's all cool but I want us to focus on you know things that are actually very very useful rather than just useable and then I would challenge you know that the idea that we all need to work toward master and I would push us to go and work for products that some people really really need and it's easier to focus you know in you know solving a local problem a smaller problem and I want to just I want to think where is money restricted where are other places where we could conduct this research and we could get you know inspiring results and inspiring new products so thank you these are our sponsors and please follow us on Twitter [Applause] you