Hi guys. Welcome to the Fintech Coffee Break. I’m your host Isabelle Castro. Today I had my coffee break with Bernhard Blaha, CEO of The People’s SCE.
The People’s SCE is a decentrally governed organization that powers applications built upon eCredits Blockchain. Aimed at empowering local economies, e-Credits are positioned as the people’s currency, offering an alternative way for customers and small merchants to interact, bypassing some of the operational issues SMEs have that restrict their competitivity.
Having launched in various European countries, they have found their strength in providing an ecosystem that facilitates transactions and interactions between local merchants and consumers. In the People’s SCE’s Luxembourg office, we spoke about the system and some of the challenges they have had to account for in their journey.
Isabelle Castro – Okay, Hi Bernhard. Nice to meet you.
Bernhard Blaha – Hi, Isabelle. Nice to be here.
Isabelle – To begin with. How about you tell me what gets you up and motivated in the morning?
Bernhard – I have a super easy time getting up in the morning and being motivated. Essentially, all it takes for me is waking up opening up your blinds, seeing a bit of daylight that’s necessary for me, and then I’m good to go. No coffee, no, nothing. Just a glass of water afterwards.
Isabelle – Perfect. Nice. So you are motivated from the get go.
Bernhard – That’s how it works. Usually, yes.
Isabelle – What attracted you to the People’s SCE and e-credits?
Bernhard – Well, it’s the whole sentiment behind the project and beyond the company, right? Because I’ve been working in the blockchain sector for what is it now, seven years, I think upcoming. And I’ve seen my fair share of projects are things and there’s one thing that the binding component that makes this whole thing accessible to the broad public and to the mainstream, as people say, that is what essentially the People’s SCE and E-credits are trying to fulfill.
I tend to quote a good friend of mine, who always says he’s a bit older than I am. And he always says, with Web3 technology, we are where the internet was in the early 90s, maybe. So it is there, we see some things that can be taken over by it. But nobody really has an idea of where it’s gonna be in the next 10, 20 or 50 years. And this whole opportunity for the whole industry, I see that combined in the People’s SCE, and that is what attracted me to it in the first place.
Isabelle – Nice, nice. So tell me about these e-credits, which kind of underlying, I guess they underlie what the People’s SCE does, right? The E credits. So what issues do they hope to solve? And how do they work?
Bernhard – Yeah, so we’ve created this, essentially, the brand that we are building, and the product that we’re building from the People’s SCE, and the people’s SCE is the company behind it, both of them equally interesting, but e-credits has the easiest pitch I have ever had in any of the companies that I built, or took part in building. And that is if you want to use cryptocurrencies in daily transactions, you make it possible.
That’s what the e-credits do. The way we do it is, essentially, we enable transactions at merchants for end consumers. So just imagine your everyday situation, you go to a bakery, you go to a grocery store, and you would like to purchase a good or a service. And then at the end, you’re at the cashier, and you don’t do the transaction cash, but you do it in cryptocurrencies and the technology to enable that.
But most importantly, I call the usability layer two. Enabling that this is what we build. And this is what the e-credit sees.
Isabelle – Okay, great. And so do you provide kind of interfaces and kind of hardware for people to do that really easily?
Bernhard – Pretty much yes. So we are mostly software oriented. And that means that end consumers mainly use our app. And cashiers can use whatever they want. So the easiest way to get started as a company, is to simply download the cashier app, sign up, and then you’re good to go as a cashier.
On the other hand, if you’re, for example, a larger corporate and you have tens, or hundreds or even 1000s of employees, and all of them might be cashiers, and use E-credits, then we also have POS integrations and so on. So mostly, we’re software oriented, but we can also use existing hardware POS.
Isabelle – Okay, cool. And what are the major issues that they’re trying to solve? Why would people choose E-credits over normal payments?
Bernhard – Well, I think there’s two perspectives to look at this from the first one is why would they use it over normal cash? And I would also add the aspect of why would they use it over normal credit cards? And the former one that’s pretty easy because cash is quite complicated, right? I’m not sure about you, but I’ve seen that ever since I started paying for my own stuff, which has been quite a while by now. I had the problem of never having the exact amount of cash that I needed, then I tend to travel very lightly. And so whenever I had my bills and got coins back, that would be a hassle.
Then additionally, and that’s more on the political and, and financial spectrum of it, cash is still to this day, the number one currency that is being used to conduct any kind of crime, or money laundering or terrorism financing. And that is something that cryptocurrencies can solve by itself. So that’s one side of it. And also something that a lot of merchants don’t see when it comes to cash is, there is a hidden cost of cash because they, the merchants always say you have a cash is free. So even if I don’t want to accept a credit card, I can still accept cash, because that’s free.
That is not true. Because at the end of the day, you still need your cashier to essentially count the money, bring it to the bank is left a banking fees involved. So there’s a hidden cost of cash as well.
Then there’s credit cards on the other side and credit cards they have been growing for decades now. And one of the problems that exists when it comes to credit cards is, first of all, there’s a lot of middlemen, and each of these middlemen, they are taking their share, that makes credit cards rather expensive actually.
Then the second problem is that they are rather slow. So the credit card usually as a merchant, you don’t get the money immediately. When it’s paid, you have to wait for a couple of days, in some cases, you have to wait for a couple of weeks until you get the money paid out and can actually use it. And just think of the way a merchant is using their stock, essentially, they’re buying it from someone, usually they have some payment terms that allows them to hopefully sell all the goods before they have to pay. So they that they don’t have to take the risk for their entire stock, which is massive, right. And if the credit card then goes ahead and says yes, we are going to take a couple of days, maybe a couple of weeks, then who’s paying for the stock? The merchant is.
So essentially, it cost him a lot of money because credit cards are much, much slower than cash or cryptocurrencies for that matter.
Lastly, there’s the security aspect. So it’s not news to anyone when I say that, that trade, essentially and all kinds of purchases, they shift to online more and more and more. And they have been doing that for I think, decades by now. And what that leads to is a lot of chargebacks on credit card systems chargebacks in this case, meaning essentially that somebody goes ahead and says, Hey, my credit card has been stolen. And I didn’t do the transaction. So please give me back my money.
The credit card providers then usually book the back. And the person who pays for that or that the entity who pays for that is the merchant. And they in many cases have shipped the product have provided the service. And still they have to pay for it.
These chargebacks are actually quite a risk when it comes to online purchases. Because depending on the industry, this is somewhere in the zero point something area, but goes up to the single digit percentage up to 5% In some industries, and that of course eats into the margin that the merchants have. And all of these problems are being solved by E credits and the way we are setting up this entire ecosystem.
And then usually when we’re talking about cryptocurrency-related, they always come to the question why e-credits over any other kind of currency? I tend to answer that with a counter question. That is, why hasn’t anybody or why isn’t anybody using other cryptocurrencies right now on the mainstream market, and very widely spread? The reason for that, in my opinion, after seven years in the industry, is there’s just no usability. It’s very hard to use for the merchant, it’s very hard to use for the consumer. You don’t really have the usability that you can use it just like you can use Apple Pay or Google Pay. And that is also what we are solving on that side of the spectrum.
Isabelle – Do you think that’s where you guys come in where your main role is making it more usable then?
Bernhard – Absolutely. So once again, to stress that quote regarding the internet, or the web three being where the internet was in the 90s? That is, that is what we’re doing. So it is there, everything works. We’re not reinventing the wheel here. We’re just making it usable to the public.
Isabelle – Yeah, I can see that. I mean, there are other payments, things that are being developed right now like A2A transactions, what makes e-credits and kind of the application of blockchain preferable to these other developments in the payments sector, which are trying to solve these very issues?
Bernhard – Actually, I have a very good example that just happened a week ago or two. And I think that’s quite interesting because what I did is I sent money from my bank account here in Luxembourg to a licenced financial institution. And they essentially sent me an email a couple of days later, telling me, please don’t send your funds there and ask them why. And they told me, well, it’s a crypto platform. That’s what they call it. And I asked him, okay, but the transaction I did had nothing to do with crypto. It was a safe transaction and I can actually prove I have documentation that these funds are still there in euros. I’ve never touched cryptocurrencies.
They told me yes, but generally, we consider this a crypto platform. And so you’re not allowed to send your funds there, your hard earned money, you’re not allowed to send it there. And so I started crashing them and asked him, so what is the criteria for a crypto platform? Because crypto platform is not a legal term, as far as I know, I assumed they were referring to a virtual asset service provider or something along that lines. And they replied that they didn’t really have that definition for the crypto platform. So I asked him to send me an exhaustive list or some kind of criteria that I could use to decide on if I was, according to their terms allowed to send my funds to the platform or not. And they didn’t reply to that, and or did not really give me an answer. They were just like, yeah, it’s subject to internal investigations and whatnot.
So I started questioning that again, and I asked them, Could you confirm to me that if your only criteria is that they have some kind of connection to cryptocurrencies that I would also not be allowed to send my funds to N26 or Revolut? And they, once again, just didnt reply to that.
The point that I’m making is, why are we doing all of this? And the reason is there is I would call it traditional finance, and there’s a big industry behind it, and they decide what we are allowed to do with our money.
That is problematic, because I do understand, and I’m very much in favour of any kind of compliance measures that have to be taken. That is just a sign of the time, I’m the last person to say, Hey, I would like to fund some terrorism over there, I’ll never do that.
I’m also the last person to launder any money, because I don’t see why I would do that. But I do understand that there needs to be measures taken to prevent that. However, those compliance measures are taken as an excuse to essentially decide what you can do with your money.
I put bet on the fact that this decision by my bank was not made due to risk reasons, it was made for one of two reasons, either, it is for lack of understanding, which is not what should happen in compliance, right? So if they restrict me from the use of my money, they should understand what they’re restricting. Or it was made for business reasons, meaning they don’t want people to get less dependent on the banking system that we’re having nowadays.
Both of those reasons are not good reasons at all. And that is why I think it is very overdue, to have a system where people can interact with each other, financially, or generally, not just financially, but also when it comes to values in general, without having middlemen that tell them what to do and what rules to adhere to, when it comes to me interacting with friends of mine. And that is why we’re billing this in the end.
Isabelle – Okay, so the credits is more kind of peer-to-peer payments.
Bernhard – Yes. 100%. So we are peer-to-peer, we are completely decentralized so there is not a single entity in the middle that can prevent any transaction from happening. And that is what we stand for. So essentially solving all of that.
Isabelle – Yeah. So once the People’s SCE kind of implements their software after that it’s decentralized. Okay, that’s really cool. So do you see this being applied on a mass scale? How would it get to that scale? If that is the case?
Bernhard – Well, that is always a point of discussion, right? Because what we’re talking about here is clearly a marketplace problem. So usually, a marketplace problem is referred to when you’re on the one side have to build the merchants and on the other side have to build the users and ideally at the same time, because you won’t get to the users unless you have the merchants and vice versa.
And yes, absolutely. The goal is to have this deployed on a mass scale. And we’re on quite a good way. So we started the product less than a year ago in April of last year. Right now we are at 120,000 active users. And I think we’re closing in on something like 5000 merchants, and for a year is pretty good.
In my opinion. I’m very happy with that, especially when looking at other companies that build up payment systems. That is quite some growth that we’re having there, which also shows the need that there is for a platform like this right.
And how do we get there? So, as I said before- two sides that we have to fill up, we have the user side. And at the user side, we can work pretty much like any other fintech or software company. We are doing a lot of digital advertising. We are doing a lot of out-of-home advertising. And that brings us on users, quite interesting and quite intriguing customer acquisition costs.
On the other side, of course, we have to do the more costly step of onboarding the merchants. And the way we do that is, essentially, we’re using the users that are really fans of our product that really love what we’re doing, and really love the mindset and the idea behind it, to go out there and act us what we call ambassadors, meaning they go to merchants, and they ask if they would like to accept e-credits. Usually, as they already have the first customer there, because usually, the ambassador is also a customer that would like to pay with a credit, it’s very easy to then convince the merchant that they should accept it because the target audience is clearly there already.
So that’s how we’re growing on the on the merchant side. And that’s how we managed to grow both at the same time. And that is working quite well so far.
Isabelle – One thing that kind of jumped out to me as a potential problem is that e-credits aren’t stablecoins. How do users like merchants maintain value when it’s not kind of linked to anything that we already know?
Bernhard – Yeah, that is an excellent point. Because, of course, I mean, the underlying problem is, as the merchant if I accept cryptocurrencies and cryptocurrencies are known to be volatile, and then ideally, at the end of the day, I sold a product for 10 euros and what the money the cryptocurrency that I got, is now worth 11 euros. That’s the better of the cases, and it’s still additional accounting effort that I have to take on, which is also not ideal.
On the other side, the product or the cryptocurrencies that I got for the product are sold is now worth nine euros. And so I lost one euro or 10%. It’s, of course, terrible, because I still have to pay my taxes in fiat currencies, and I have to pay my suppliers in fiat currencies.
The way we solve that is by a feature called instant trade, meaning as soon as the merchant gets the cryptocurrencies, they are forwarded to an exchange and exchanged into fiat currencies, meaning if they don’t want to leave them as e-credits they have zero risk exposure to the volatility of cryptocurrencies,
And they can adjust their prices according to what the price is of the E credit that day that is
automatically done. So essentially, the merchant says I’m selling a good that is worth the kind of course enterprise and cryptocurrency the majority of the vast majority of the merchant says, I’m selling a good for, again, 10 euros, and we automatically convert the price and suggest, okay, this is the amount you should be paying.
I didn’t mention that before. We are, of course, accepting payment in our native cryptocurrency e-credits, but we are also allowing for payments to be made with ethereum and other cryptocurrencies.
So it’s not just our native cryptocurrency. We’re allowing for multitude of them. And essentially, we do the price conversion. We do the automatic transfer, and via the API of the exchange, we also do the automatic conversion. So after a couple of seconds, or let’s say minutes, just to be safe, they have the actual fiat currency on their exchange account.
Isabelle – Okay. Yeah, no, my next question was going to be why you didn’t use ethereum or bitcoin initially, but you obviously do. Do you foresee any potential challenges in the future with the MiCA legislation? And the general increase in regulation?
Bernhard – Challenge? This is a very broad term. So yes, I absolutely do. I’m also a board member at Digital Association, Austria, which we founded in 2018, pretty much solely for the purpose of advising regulators on how to regulate cryptocurrencies back then. And we have done that for almost five years now. And we have essentially accompanied the MiCA from its baby steps on and given a lot of feedback on the topic as well.
I’m very happy that MiCA is out there. I really like that, as the European Union, we have something out there where we are actually trying to classify cryptocurrencies and essentially assign them to the regulation that other assets that fall close to these kinds of use cases for cryptocurrencies would also be assigned to, for example, if you’re going to the to the MiFID, regulation, there’s a lot of overlap there, and essentially, MiCA is filling that gap, and that is a great step. I really liked that.
However, in my opinion, it does not go far enough.
The reason I say that is what is the purpose of regulation? Usually it should be to protect the consumer and the regulation as it currently is. And as the state of MiCA, it doesn’t really do that. Because when I’m looking at the big downfalls of cryptocurrencies that we’ve had over the past couple of months and years, most prominently currently is FTX. Of course, MiCA will not have prevented that. It wouldn’t because there is no check in any kind of regulation that we currently have for liabilities on consumer health assets to the extent that it would have prevented FTX from acting the way they did. And I think that is where MiCA is lacking a bit.
It is a great first step, don’t get me wrong, I liked it. It’s there. I just see it as a foundation that has to be expanded on, and I hope it will be.
Isabelle – Okay, so this is just the beginning of the regulation, and you want more to come?
Bernhard – Well, I want more sensible regulation. Okay. So there’s, there’s always the two sides, right on on the one side, you don’t want under regulation, because that leads to problems, because we are trying to do everything right, we are based in Luxembourg, EU country with a regulator that does have a lot of expertise and cryptocurrencies. And we are very much willing to go for a licence should ever be one that fits the business model that we have.
On the other side, with under regulation, you still have companies that don’t do that, that just operate from the Cayman Islands, for example, in that specific case, and can still offer their services in the European Union to some extent, as long as they’re not ever advertising.
On the other hand, you have overregulation, and a very good example of this is what has been happening in China for the past couple of years, where they’ve always been going back and forth, trying to find some middle ground between, okay, we completely prohibit cryptocurrencies, any kind of cryptocurrencies whatsoever. And now we’re actually still allowing a bit of it. And that pretty much destroyed the market over there. And right now, there’s no real, no real use in starting a cryptocurrency company in China, even though that would be a very interesting local market for some companies. And that is what happens if you over-regulate.
For example, in the EU, we had a discussion. How long ago was it? I think, half a year ago, roughly, where there was a discussion on actually completely prohibiting proof-of-work consensus algorithms, which I do understand the reasoning of, but I don’t think there was any kind of second thought on this. Because in the end, what would have happened if that had gone through? Luckily, it hasn’t, is it would have just been other countries going ahead and not prohibiting that. And then entire value creation, that proof-of-work blockchains are still having within themselves would have just happened outside of the European Union.
Beyond that. The idea was that proof of work is kind of environmentally bad. And I do absolutely agree to that. However, I would rather have that high energy consumption in a country like Austria, where I know for a fact that the majority of the power is generated by hydro plants, or wind power, or solar power than in a country where nobody bats an eye if 100% of the power is coming from brown coal, which is, to my knowledge, at least I’m not the expert on that topic. But to my knowledge, it is the most environmentally damaging way of creating power that we have nowadays. And I’d rather go for the former than the latter.
So what I’m saying is, if something is regulated, there has to be a lot of thought put into that. And there has to be a lot of expertise behind that, to actually create proper regulation and not just destroy the market without bringing any kind of benefit to consumer protection.
Isabelle – Very interesting. I will ask you two more questions. First of all, what is your favorite quote?
Bernhard – I think for that one, I’d have to go with a quote from James Cameron. And he said, I hope I’m quoting this right. The best way to set goals is to set in ridiculously high because if you end up in an utter failure of your goals, you still fail higher than everybody else succeeds. And I do really like the quote, because it’s true. And I think it’s what failure culture should stand for.
Isabelle – Nice. I like that one, too. I’m going to use that. And okay, so the final question the curveball question. If you had 2000 euros and you had to double it in 24 hours, what would you do?
Bernhard – Well, what would I do without giving financial advice right now? That is the important part, right? Probably the best way to do that is to put a copy machine and try to get 4000 out of it. Because everything else that I could say right now is either utterly stupid or financial advice and, in most cases, actually both.
Isabelle – Okay. Okay, so put it in a copy.
Bernhard – Yeah, put in a copy machine, try to copy it, and try to get away with it. And, of course, just for the sake of it, this is a joke. Don’t do it.
Isabelle – Nice disclaimer. Nice disclaimer. How can people get a hold of you?
Bernhard – Oh, follow the People’s SCE. Well, we have two websites. We have thepeoplessce.org for the People’s SCE, which by the way, we haven’t really talked about. So please look that up on the internet is a very interesting concept.
And then of course, there’s ecredits.com for the actual product. So if you want any kind of information about companies, this is definitely where you could look them up.
If you want to get in touch with us, we have we are present on pretty much any kind of social media channel. So hit us up there. I’m also present on almost all of them. I don’t understand Tik Tok to this day. Other than that, I’m pretty much represented everywhere. So yeah, always looking forward to having contact with interesting people in that area.
Isabelle – Nice. I don’t understand it, either.
Bernhard – Okay, that makes two of us.
Isabelle – Perfect. Well, thank you for your time. It’s been really nice to meet you and talk to you. And yeah, have a good rest of your day.
Bernhard – Likewise, thank you for having me. Have a good day.
Isabelle – So as always, you can reach out and chat with me on my personal LinkedIn or Twitter at @IZYCastrowrites. But for access to great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook, or Instagram. You can also sign up for our daily newsletter, bringing news straight to your inbox.
For more Fintech podcast fun, check out the website podcast, where you can find more fascinating conversations hosted by Peter Renton and Todd Anderson.
That’s it from me. Until next time, enjoy your downtime.
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