Introduction to the Problem
Traditional and current finance methods are dominated by credit and debit cards due to a combination of convenience, security, and technological integration. Credit and debit cards provide individuals and businesses with an efficient way to conduct transactions. The cards come with various security features such as fraud protection, liability limits, and advanced encryption technologies like EMV chips, making online transactions safer than cash transactions. Moreover, the global infrastructure supporting card payments, such as ATMs and point-of-sale systems, ensures a seamless integration with existing financial systems, leading to the widespread adoption by users.
However, the dominance of credit and debit cards is conditioned on the necessary infrastructure (i.e. point-of-sales systems) being in place to support the transaction and a bank account for verification of the user’s identity. These are conditions that 25% of the adults in the world, particularly in the areas of Africa and Middle East, are unable to meet. Without a bank account, they are unable to enjoy the benefits of digital transactions, and are considered as ‘unbanked’.
Scoping of the problem
As we seek to bring the ease of digital payments to these users, we define two areas of financial inclusion to solve in our project - Peer-to-peer payments and the secure transferring of money. We envision a digital payment system that allows individuals to make secure payments to their friends or business owners, without the need for a credit card or bank account.
Inspiration
We believe in empowering the ‘unbanked individuals’ by providing them with digital payment solutions that enable them to manage their own transactions independently. This approach offers sustainable opportunities, allowing them to bypass potentially unfavourable or predatory practices associated with traditional middlemen services.
From an investment perspective, we believe there is value for TikTok in establishing an early mover advantage into unbanked markets. Just as the widespread adoption of card transactions led to an ecosystem that reinforced their dominance, being first to provide digital payment services in these areas can position TikTok to establish a strong competitive advantage. This advantage can lead to a sustainable and high return on investment as businesses and services build on top of the TikTok payment platform. Additionally, the TikTok support digital payment service will likely increase user engagement and retention on the TikTok platform, encouraging users to spend more time and money within the TikTok ecosystem.
How we built it + What it does
PayOff is a solution intended to be integrated with the current TikTok wallet. However, without the access to the API, we have done a simple mock up to convey the key features of PayOff.
PayOff allows for users to make Peer-to-Peer payments from their digital wallet, even without a connection. This is done via the core features of:
- Unique QR codes for each user.
- Transactions carried out via SMS.
- Integration of top-up and withdrawal functionalities into the existing TikTok wallet.
When users find themselves offline and without connection, they may carry out payments by simply sending an SMS to the Twilio Messaging API server, and we are able to process their request of transferring money.
Challenges we ran into and how we tackled it
Preventing Abuse of the Offline Transaction System:
- We implemented a credit limit, considering that transactions are expected to be small, primarily for P2P payments or business transactions.
- Two-factor authentication (2FA) with SMS is used to enhance security.
- Transactions are verified by a server before processing, which also helps in maintaining a log of potential incidents.
- SMS messages are tamper-proof, ensuring that they cannot be edited.
- The solution integrates with existing infrastructure to ensure feasibility and ease of implementation, leveraging mobile phones for low adoption barriers.
- By building on top of the TikTok wallet, users can continue to top up their wallets through existing methods like convenience stores, Google Pay, and credit cards.
What we learned
Through this hackathon, we gained valuable insights into security measures for payment systems. In particular, we explored the implementation of Trusted Execution Environment (TEE) technology for securing offline transactions. While TEE technology held lots of promise, the challenge of maintaining an accurate online ledger led us to investigate alternative approaches. In our quest to serve the 'unbanked' with the TikTok's Wallet, we also examined existing solutions such as generating QR codes for payments at convenience stores, which offer alternative methods for financial transactions without traditional banking infrastructure.
What's next for PayOff
- Addressing Money Laundering: Ensuring the wallet complies with local government regulations.
- Enhanced Backend Measures : Implementing additional tracking for suspicious transaction volumes and amounts.
- Additional Authentication Layers: Introducing another layer of authentication within the app to secure transactions through tagging.
- KYC and Biometrics: Incorporating Know Your Customer (KYC) protocols, user biometrics, and device fingerprinting before transactions.
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