Richard Hallewell is a serial disruptor and innovator in the financial services sector. He is the CEO of Ethecal, Founder of CPRAS and creator of the Universal Pricing Model, which is still used to determine processing costs for over a third of UK card payments. He has a deep understanding of the payments industry and is just as comfortable advising banks on the minutiae of payments legislation as he is advising the Government Banking Service on their strategic approach to payment security and cost efficiency. Richard is also Vice President of the Government Blockchain Association in the UK and a member of the British Blockchain & Frontier Technology Association.
Can you explain what Ethecal is doing as a business and why you are passionate about it?
Ethecal is tackling the poverty trap – or what is also called the poverty premium. This where people pay more for goods and services just because they are poor. A good example is credit – either people are excluded from accessing credit altogether or they pay much higher – often exploitative – interest rates, which obviously creates an ongoing vicious cycle of poverty. This situation does nobody any good. Responsible service providers are often unfairly vilified for this exclusion effect, but they don’t actually want to exclude millions of potential customers. Sadly though, the only tool that they have to help them make supply decisions is credit scoring. And yet credit scores are an insane basis for that decision as they tell suppliers nothing about the ongoing affordability of the applicant.
Ethecal starts with the premise of affordability regardless of a person’s credit history – what can they actually afford to pay each week or each month? We offer a personal finance management solution. Underneath that sits an AI which can understand a user’s income and expenditure patterns and categorise them. For example, this helps project forward cash flow. It allows the users to educate themselves on their own spending and improves both financial awareness and responsibility. The user can choose to share this data analysis as an alternative to a traditional credit score. This provides a better decision-making tool for responsible service providers deciding whether to accept a customer.
Blockchain is the foundation layer which then enables Smart Contracts that can help to ensure repayments are locked in and automated. This can save the user from themselves so their money is automatically in a protected pot and they can’t accidentally overspend before critical payment dates and that’s obviously as important to the service provider as it is to the user.
I heard you speak very movingly at the recent Westminster Frontier Technologies Forum about how your journey as an entrepreneur came about as a result of a personal struggle, would you be willing to tell us a bit about that and how you managed to come out of your difficulties to be where you are today as the Founder of two fintech businesses?
I know what it is like to be on the receiving end of the situations I have described. Fifteen years ago, as a single parent of 4 small children, I became disabled and ended up in a wheelchair. My business failed because I simply couldn’t go in and colleagues stole money from me, taking advantage of my situation at the time.
What people don’t realise about poverty is that it is not about not being able to have luxuries. You are choosing between heating or not having food for your children, being hungry, being cold, living in a constant state of high stress. It hurts you on a primal level – you become ill both physically and mentally, and it has catastrophic effects on children. Poverty is a horror story and a national shame. I clawed my way back up to start a new business which helps local councils improve their payment processing and more recently also started Ethecal.
Watching Don Tapscott’s TED talk on blockchain, was a game-changer for me. I realised I needed to get to grips with blockchain if I really wanted to create solutions that would serve the public good. I then had a key meeting with Jo Miller, Chief Executive of Doncaster Council. We talked about how broken public services were and how tragic the consequences were of having to enforce debt collection on good people who could not afford to pay and who would only spiral down further as a result. I realised we needed a step change and that I would have to drive that myself.
What is it about blockchain specifically that has allowed you to do what you’re doing with Ethecal that would have been harder to achieve before?
Blockchain doesn’t try to fix systems that are already broken – it offers possibilities to create something entirely new. That is transformational but it is also a huge responsibility for entrepreneurs like me who know what that could mean.
A lot of what we are doing at Ethecal could be possible without using a blockchain but what blockchain has done in a way is to make our solution more ‘thinkable’ and more achievable. As we pick away at the technical side, there are many areas where we don’t need blockchain. Instead, we see it blockchain as a secure underpinning and functionality-enabler. The key parts for us are the Smart Contracts – and payment automation elements which flow from that – and also advantages around personal data security. Why should a person have to go into a shop and show all their personal bank statements just to get credit to buy a phone, or a cooker? At Ethecal, we want to use blockchain to give that personal sovereignty and data privacy back to the individual.
The borrowers as end users of Ethecal clearly benefit from getting much-needed credit but who are the other players in the system? Is there also a benefit to other business users or public sector stakeholders?
We need to distinguish here between responsible providers and those who are irresponsible or exploitative. Responsible businesses can be enabled to open up their services to millions of potential new users. The Joseph Rowntree Foundation has calculated that 14m people are affected by the poverty trap, If we get rid of the “trap” then we are left with a huge new market for ethecal service providers. These suppliers will also benefit from having better data to enhance their decision making as well as significant efficiencies in processing costs, payment collection and reduced levels of default.
The public sector is potentially the biggest winner, however. The savings could be enormous, if you take into account the cost of additional support services related to poverty, they go well beyond income support and the traditional welfare benefits system. Other costs that are crippling the public purse come from factors like the extra strain on the health service and the criminal justice system, lost days at work and so on. And it is almost impossible to quantify the social impact on communities, family members, all the friendships lost and so on due to poverty and associated depression and ill-health.
Congratulations on winning an award at the recent Innovate Finance Global Summit. What do you think elevated Ethecal’s pitch above the other start-ups and what advice do you have to new entrepreneurs entering a pitch contest if they haven’t done it before?
It is hard to know but perhaps what sets us apart is the scale of our vision. Nowadays we see a growing movement of tech for good. Almost every venture is trying to solve some kind of social problem. Some of these companies have a more niche product but we are trying to create a new kind of economic and financial model that could affect the whole country. It’s so hard to get this scale across in a pitching competition– especially when you feel so passionately about it and have a strictly limited time to pitch. In a way it is horrible – and perhaps there is a better way to evaluate start-ups more fairly – but I think if you can bring genuine passion into it, people forgive for any stumbles and they remember the big picture vision.
One thing that helped me was that I have been listening to the amazing and inspirational Greta Thunberg recently. If you’re a social entrepreneur having to speak publicly about your vision, I highly recommend listening to Greta’s talks.
What stage is the company at in terms of its evolution and growth?
We are just starting out on our fundraising. The Innovate Finance Global Summit was our first ever pitch so we were very honoured to win an award. We had a good response from that event, and it has allowed people to know we are open for business. We have had a lot of initial interest from a banking platform which could really help us get off the ground. Longer-term, our vision is to get to 1.5m users over the next 2 years so we have lots of work to do!
Is Ethecal only focused on the UK or can you see it expanding to other markets in future?
For now, we need to stay UK-focused and build the business here. But we have already had interest from abroad both in countries with a similar economy to ours but also in countries such as India that have different versions of the same problem and a different context for dealing with it. Ultimately, we would love to offer a global solution that can help people out of poverty anywhere in the world.
If you wanted readers to take away one thing about your involvement in blockchain, what would it be?
I think I am most encouraged about being part of the wider tech for good community, who see blockchain as a decentralised technology that is built to be positive for humanity. So many more people would and could get involved in blockchain if they saw it in that light. There will always be people who are good on the coding and technical side, but we do need to start from the perspective of what blockchain can do for us and then map onto it the problems that you see. If the blockchain for good community can win out, the world will be a much better place.