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Why fintech is Important for Gold

Robin Lee, CEO, HelloGold

 

For us at HelloGold, for many other fintech entrepreneurs and investors, this fintech phenomenon is so much more than the latest investment fad for us to realise the big payday. For all of us, the fintech revolution gives us the opportunity not just to reshape finance but more importantly to effect social change among the economically disadvantaged of the world. Nowhere more so than right here in ASEAN, the world’s third largest market. Nowhere more so than right here at our doorstep in Malaysia, at the heart of the ASEAN region, where we launched HelloGold. This is what those with an interest in making the markets work for the many rather than the few are getting excited about. And in the process, by bringing in people that were previously not buying gold, we create new demand for gold.

 

In the case of HelloGold, we are making gold-backed savings and credit products accessible to those who are underserved by traditional financial services. Put it simply, we “digitize” our gold bars and sell tiny little portions through our app. This enables customers to build a stash of gold at their own pace. And because our costs are low they can do it economically while protecting their savings against inflation and currency devaluation.

 

The credit part starts when customers have accumulated enough gold to borrow against it. There are many important advantages to this proposition. First, it allows customers to access credit without proper credit history. Second, the loan comes at lower interest rates because the loan is secured against the gold. Third, it gives customers an opportunity to build credit history. And,finally, it’s a chance for customers to borrow whilst benefiting from the potential upside of rising gold prices.

 

The potential impact on demand for gold is significant. It is estimated that there are $440bn of savings held in cash in Asia. And that 500 million people can’t borrow from financial institutions. So it’s not hard to imagine that a shift of a few percentage points on these measures towards gold would create a ripple in the gold market!

 

Why fintech? Start-ups like HelloGold are not encumbered by legacy infrastructure like sprawling branch networks or decade-old IT systems. Most importantly our infrastructure and business model can be scaled quickly and at very little incremental cost. This means that, as our customer base increases and reaches critical mass, we’ll be able to generate large profits despite charging small mark-ups.

 

There are obvious risks and challenges. For example, building a credible brand and earning the customers’ trust is an uphill battle because the gold market is tainted by so many get-rich schemes. Educating customers on the benefits of buying gold and borrowing against it is costly and time-consuming. And so on and so forth…This project requires entrepreneurs and investors that have a long term view and the conviction that, at the end of the day, we’re doing the right thing for us and for our customers.

 

The size of the prize makes it worthwhile though. In fact, more than worthwhile. We expect rising middle classes in China, India and SE Asia to drive demand for gold. Furthermore, the agreement on the Shariah Gold Standard has fully opened the bullion market to 1.6 billion people. There are many trends supporting gold and HelloGold is well positioned to benefit from most of them. For example,we’ve been named the first Shariah compliant mobile platform in the world. We offer the most convenient and affordable way to buy gold for the “man on the street”. And our partners have a strong footprint in 2 of the 3 key markets.

 

Given the sheer number of projects it’s sometimes hard to manage all the various initiatives. For this reason, we have set up a separate entity – the HelloGold Foundation – to develop gold-backed-tokens based on an Ethereum blockchain platform. The purpose is to further secure our customers’ data and provide full accountability when dealing with external partners. The project will be supported by an Initial Coin Offering (ICO).

 

All these initiatives are designed to both benefit and contribute to new demand for gold. It’s a virtuous cycle that, I believe, is best driven by fintech startups. Only they have the energy, flexibility and nimbleness to create products that change consumer behavior. For this reason gold investors would do well in looking how to nurture, incentivize and support gold fintech start-ups - as we all get to benefit from their success!

Disclaimer: Views are personal and not the views of the publisher.