OrunPay’s mission to provide financial freedom to all Cubans was borne out of frustration over their lack of autonomy to make financial decisions. Financial independence is particularly relevant today, where a choked Cuban economy, made worse by government mismanagement, stringent US sanctions and a serious decline in tourism brought on by the Covid 19 pandemic, is driving the need for fresh funds to reach the hands of the Cuban people. This is pushing Cubans to find innovative solutions to send and receive payments, as well as to manage their personal finances.

Cubans’ lack of financial autonomy is the result of several factors, including an undeveloped financial infrastructure (i.e. payment services, investment options, borrowing capabilities, etc.), a strong internal focus on Cuban government-led businesses and financial institutions, and US sanctions which stifle the Cuban economy’s access to external markets.

The US Embargo has blocked all US companies from working with Cuba, but this has also had a serious chilling effect on non-US entities as well. While non-US companies are allowed to work in Cuba, many do not out of fear of direct or indirect US reprimand. For example, the vast majority of European banks refuse to deal in any way with Cuban transactions, even when fully compliant with all rules, as a result of heavy fines imposed on several European banks because of their Cuban dealings. Consequently, many fully owned European companies, that are by law authorized to conduct business with Cuba, cannot make payments to their Cuban counterparties because their European banks will not authorize the transactions. The same happens for payment flows exiting Cuba because the receiving banks will not accept the payments. Ironically, this chilling effect has also harshly affected the Cuban private sector despite the intention of the US sanctions legislation to encourage its growth.  Instead, most Cuban merchants and small businesses cannot accept credit card payments for products/services they wish to sell online or at a point of sale because credit card processing companies will not onboard Cuban customers.

The strong internal focus by the Cuban government on its government-led businesses also means that the foreign capital that does manage to enter Cuba through foreign investment is usually managed by other entities linked to the Cuban government, rather than by the foreign investors bringing the money in. Similarly, Cuban companies who have operations outside of Cuba face the same issue when entering foreign capital into Cuba. For both these types of companies, access to their funds is essentially given to them based on a hierarchical structure decided by Cuban government-affiliated entities. Even remittances, the largest source of income and a lifeline for many Cuban individuals, is first received by Cuban authorities before being distributed to individuals in local currency.

Throughout the years, Cubans have developed a deep mistrust towards their and government institutions and national currency, due to government mismanagement and currency devaluation as a result of many periods of economic uncertainty. Cuba is currently experiencing a drastic devaluation because of difficulties faced by the Cuban government in unifying the Cuban Peso (the official currency) with an alternative currency that has been circulating in parallel since 1994.

All of these issues have largely isolated Cuba from the world overtime, severely affecting its economic development and the financial options of its population. What remains is a chaotic, expensive and highly inefficient way of dealing with day-to-day finances for everyday Cubans and businesses. There is therefore a great need to provide a comprehensive solution that equips Cubans with the financial independence that they need.

OrunPay is developing a payment platform that places autonomy back into the hands of Cuban nationals and companies. Our solution is outside of any government control and allows Cuban individuals and companies to send and receive payments in a variety of different currencies. Additionally, Cuban nationals will have a lower level of exposure to currency devaluations because it will be possible for them to store their money in foreign-denominated stablecoins, outside the control of Cuban government financial institutions. This will all be done in a compliant manner and is what we hope to be the first step in the broader digitalization of the Cuban economy.

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PROBLEM & SOLUTION

OrunPay’s mission to provide financial freedom to all Cubans was borne out of frustration over their lack of autonomy to make financial decisions. Financial independence is particularly relevant today, where a choked Cuban economy, made worse by government mismanagement, stringent US sanctions and a serious decline in tourism brought on by the Covid 19 pandemic, is driving the need for fresh funds to reach the hands of the Cuban people. This is pushing Cubans to find innovative solutions to send and receive payments, as well as to manage their personal finances.

Cubans’ lack of financial autonomy is the result of several factors, including an undeveloped financial infrastructure (i.e. payment services, investment options, borrowing capabilities, etc.), a strong internal focus on Cuban government-led businesses and financial institutions, and US sanctions which stifle the Cuban economy’s access to external markets.

The US Embargo has blocked all US companies from working with Cuba, but this has also had a serious chilling effect on non-US entities as well. While non-US companies are allowed to work in Cuba, many do not out of fear of direct or indirect US reprimand. For example, the vast majority of European banks refuse to deal in any way with Cuban transactions, even when fully compliant with all rules, as a result of heavy fines imposed on several European banks because of their Cuban dealings. Consequently, many fully owned European companies, that are by law authorized to conduct business with Cuba, cannot make payments to their Cuban counterparties because their European banks will not authorize the transactions. The same happens for payment flows exiting Cuba because the receiving banks will not accept the payments. Ironically, this chilling effect has also harshly affected the Cuban private sector despite the intention of the US sanctions legislation to encourage its growth.  Instead, most Cuban merchants and small businesses cannot accept credit card payments for products/services they wish to sell online or at a point of sale because credit card processing companies will not onboard Cuban customers.

The strong internal focus by the Cuban government on its government-led businesses also means that the foreign capital that does manage to enter Cuba through foreign investment is usually managed by other entities linked to the Cuban government, rather than by the foreign investors bringing the money in. Similarly, Cuban companies who have operations outside of Cuba face the same issue when entering foreign capital into Cuba. For both these types of companies, access to their funds is essentially given to them based on a hierarchical structure decided by Cuban government-affiliated entities. Even remittances, the largest source of income and a lifeline for many Cuban individuals, is first received by Cuban authorities before being distributed to individuals in local currency.

Throughout the years, Cubans have developed a deep mistrust towards their and government institutions and national currency, due to government mismanagement and currency devaluation as a result of many periods of economic uncertainty. Cuba is currently experiencing a drastic devaluation because of difficulties faced by the Cuban government in unifying the Cuban Peso (the official currency) with an alternative currency that has been circulating in parallel since 1994.

All of these issues have largely isolated Cuba from the world overtime, severely affecting its economic development and the financial options of its population. What remains is a chaotic, expensive and highly inefficient way of dealing with day-to-day finances for everyday Cubans and businesses. There is therefore a great need to provide a comprehensive solution that equips Cubans with the financial independence that they need.

OrunPay is developing a payment platform that places autonomy back into the hands of Cuban nationals and companies. Our solution is outside of any government control and allows Cuban individuals and companies to send and receive payments in a variety of different currencies. Additionally, Cuban nationals will have a lower level of exposure to currency devaluations because it will be possible for them to store their money in foreign-denominated stablecoins, outside the control of Cuban government financial institutions. This will all be done in a compliant manner and is what we hope to be the first step in the broader digitalization of the Cuban economy.

TARGET MARKET

"OrunPay’s target market will revolve around three groups, Cuban expats, Cuban nationals and Cuban private companies.

Cuban expats
This group is composed of over 1.5 million Cuban individuals living outside of Cuba who may use OrunPay’s wallet to send remittances. Cuban expats are primarily concentrated in the US and Spain, with 80% of the Cuban expat community living in these two countries. The age group of Cuban expats that send money abroad ranges from 20 to 50 years old.

Cuban nationals
This group is generally the recipients of remittances sent by friends and/or family members living abroad. This is a broad group, with recipients primarily aged between 20 and 90 years old. Cuban nationals who could use OrunPay’s services are geographically spread across both rural and urban locations in Cuba. The primary need for using OrunPay’s services in Cuba revolves around daily livelihood, with remittances and wealth safekeeping often being a lifeline for many Cuban households. This group is known to generally have little knowledge of blockchain.

Cuban companies
This group is primarily composed of small, private, or family-run businesses with few employees that are run by Cuban entrepreneurs. Industries that these companies operate in vary considerably and usually revolve around catering to the tourism business or providing basic products and services to the Cuban population. These types of companies include restaurants (“paladares”), small private hotels/B&Bs (""casa particulares""), taxi services, clothes repair shops, catering, mechanics, design agencies and bike repairs. These are located all around Cuba, but are primarily concentrated in urban areas, namely Havana, where there are more opportunities to grow their businesses.

There are, however, numerous more mature and developed businesses that have been operating for many years with larger numbers of employees that could use OrunPay’s services as well, such as hotels or car rentals. These businesses also include Cuban joint venture companies, businesses formed between the Cuban State and foreign investors.

Cuban companies could potentially use the OrunPay Connect application to facilitate payments to foreign and local partners using the EBI token. Similarly, they can also receive cryptocurrency payments if they apply for a merchant account. This is especially practical for people visiting the island (foreign tourists or Cuban expats), as they would no longer need to convert their foreign currency on arrival and carry local currency in cash with them, having instead the ability to pay for local goods and services using OrunPay's digital offerings.

For example, a Cuban restaurant that offers food delivery services could register as an OrunPay merchant. A Cuban expat living in Spain could then easily order food to be delivered to his/her parents' house by paying online via their OrunPay wallet, with the funds deposited into the Cuban restaurant’s OrunPay Connect account. Similarly, a European tourist visiting the island could pay for a variety of services offered by private businesses, such as a meal at a private restaurant or a stay at a private B&B, using the OrunPay wallet.

REVENUE MODEL

OrunPay’s revenue will be derived from three primary sources:

      1. Deposit and withdrawal fees from anchor services: This is expected to be the main source of OrunPay’s revenue as the EBI Token will be the underlying asset supporting remittances and payments to and from Cuba. Our plan is to initially support euro on/off ramping for our products exclusively for a period of 6 to 8 months once we go live. This would allow us to build up more experience around the operational tasks involved before distributing the EBI token to other Stellar applications (SEP-006 and SEP-0024).

      2. Market-making activities: We plan to add a small FOREX spread when creating liquidity for the EBI token on the Stellar DEX.

      3. Commissions from partner anchors based on volume: This is a source of revenue that we would like to explore in more depth with partner anchors once we are live. We strongly believe that our payment solution for companies can significantly contribute to the issuing volume of some fiat anchors. This will primarily involve regions such as Mexico, Canada and South America where local companies need a reliable payment solution for their payment obligations to Cuban counterparties.    

Based on our pricing structure, OrunPay is expected to make approximately €225,000 in revenue for its remittances service in its first year of operation, growing to almost €3 million by Year 3. These projections are taken from a detailed financial model focused on remittances that go in-depth into the profitability of OrunPay based on three different scenarios over a three-year period.  

The main driver behind these revenue figures is the number of users we expect to have each year.  Concerning corporate payments, this was particularly difficult to model due to a lack of online resources (Cuba remianing a niche and closed market, especially for fintech), so we had to rely extensively on first-hand accounts from people working in the finance industry in Cuba. We are hoping to process €20 million worth of payments and earn approximately €800,000 in revenue by the second year of operation once OrunPay Connect goes live. OrunPay is planning to use a similar pricing scheme as the one described for remittances, although we are still evaluating whether to charge a lower fee for companies.

MARKET RESEARCH

Cuba’s isolated nature, due to factors such as the US Embargo, has left many of its industries in a state of stagnation and abandon. While tourism has grown into the powerhouse of the Cuban economy over the years, merchants operating in this industry (particularly in the private sector) still struggle to find efficient ways to process payments to and from overseas, still largely relying on cash. This is a cumbersome and inconvenient experience for many tourists traveling to Cuba, who have no way of converting any left-over cash into another currency when they leave. This payments struggle is the reality faced by most Cuban companies, not only in the tourism sector, with the US Embargo severely limiting Cuban companies’ abilities to send and receive payments from abroad. In effect, the Cuban corporate payments sector hasn’t benefitted from any of the many innovations in the payments sector in decades, with change coming sparsely and slowly, if at all.

The remittances industry has steadily grown over the years into a roughly $6.6 billion market by 2019, with an average of 51% of Cuban livelihoods depending on remittances. A large proportion of these were cash remittances, either in the form of electronic payments via remittance providers such as Western Union or by cash "mules" (individuals who travel to Cuba carrying cash). The onset of COVID-19 in 2020 has had a major impact, however, on the remittances industry in Cuba, due to the near-complete halt of operations of international airlines, making it impossible for cash mules to travel to Cuba. Similarly, the Trump administration’s sanctioning of the largest Cuban remittance processing agent resulted in Western Union, the dominant remittance provider operating in Cuba, ceasing the flow of remittances to Cuba. The remaining remittance providers still in operation are too small and inefficient to make up for the vacuum left by Western Union and cash mules. Some figures indicate a decrease of approximately 54% in remittances in 2020, with similar patterns experienced in 2021, pushing for an alternative solution to bring money into Cuba.

THREATS & OPPORTUNITIES

The lack of tourism and a serious decline in remittances has left Cuban individuals and businesses cash-strangled and in need for a solution that allows for the free flow of funds. Furthermore, the recent efforts by the Cuban government to unify the country’s currencies has created a steep devaluation of the country’s main currency, the Peso Cubano, creating an additional need for Cubans to be able to protect their wealth by holding on to stable and valuable currencies. This has created an important opportunity for OrunPay to bring a real solution to the Cuban people and businesses that does not rely on traditional financial infrastructure.

OrunPay’s primary challenge has been figuring out a compliant way to support the US market. The US is where most of the Cuban expats live, and we want to create a solution that could really make a difference there. However, US regulation surrounding Cuba is complex and requires significant investments of both time and resources.

COMPETITION

Figure 14 illustrates how OrunPay compares to its competitors for selected capabilities and can be found by accessing the following link: https://drive.google.com/drive/folders/1k3m-wkGJr-_acD9YzurNdzpSmzehy-tC

Remittances
•Traditional Remittance Service Providers (RSPs): These include large, global RSPs such as Western Union as well as smaller providers specialised in Cuba, such as Fonmoney (https://www.fonmoney.com)  and TropiPay (https://www.tropipay.com). They are most often used by Cuban expats and charge between 10-18% of the transaction amount. Many rely on the same Cuban remittance processing agent as an intermediary to deposit the money in the recipient’s bank account, taking approximately 2-4 days for the money to arrive. The Trump administration affected the operability of the US-based RSPs (i.e. Western Union), when, in 2020, it added this Cuban remittance processing agent to the OFAC sanctions list. Many of these players have been operating in Cuba for years, acquiring a strong level of expertise on Cuban and American regulations over time.

•Cash Mules: Small companies or individuals who fly cash to Cuba as a form of remittance (primarily for US remittances). They charge similar fees and take a similar amount of time to deliver the remittance as traditional RSPs do. They are normally used to bring in larger amounts of US dollars into the country than what can be sent with RSPs. Due to COVID-19, most flights to Cuba have been suspended for the time being, severely affecting the movement of cash via mules. Additionally, over the past months the Cuban Central Bank issued a new directive to all Cuban Financial Institutions to not accept US dollars anymore. Cash mules are therefore now trying to look for ways to enter other currencies into the country, such as Euros, Canadian dollars or Mexican Pesos, but the volume is expected to be lower compared to the volume of US dollars.

Company Payments
•Traditional Banks: Only a limited number of banks and other financial service providers are able to operate in Cuba due to a high reluctance by most banks to operate in Cuba. It is difficult to open bank accounts with these banks as an individual or company with strong relations to Cuba. Payments between foreign and Cuban counterparties are executed almost exclusively via these players. Often more expensive in dollar terms to send/receive payments to/from Cuba than other places, inefficient and unreliable due to US Embargo regulations.

OrunPay’s primary competitive advantage compared to its competitors is that we are able to leverage the advantages of the blockchain to create a tailored solution unique to Cuba. OrunPay is able to provide an efficient, easy-to-use service that is significantly cheaper than the competition, both for remittances and company payments. Users of OrunPay’s services also have access to our anchor services, allowing them to hold on to wealth, a non-existent feature for OrunPay’s competitors. While OrunPay is able to operate with more flexibility concerning the US Embargo, OrunPay still faces similar regulatory and political hurdles.

MARKETING & SALES

OrunPay is planning to hire a dedicated Marketing Manager to help grow the company.  As a first step, we will work closely with the new manager to create a detailed and comprehensive marketing plan.  This will illustrate the company's optimal marketing, PR, SEO, emailing list, advertising and adtech-related strategy, among others, tailored to OrunPay’s needs for going live and beyond.  If received, part of the grant will be allocated towards paying a competitive salary to the new Marketing Manager and another part to provide resources to help the manager create this plan (ad testing, third-party consultant fees, paid content, etc.) as well as to make minor plan implementations. During the year, OrunPay will have to raise more capital in order to fully deploy the rest of the marketing plan.

Based on preliminary discussions with the new Marketing Manager, OrunPay is evaluating an “Early Adopter” scenario based on acquiring an initial seed audience, where user access to the app is slow and controlled to create a sense of exclusivity as well as to test the app in a live environment.  This can be done by first focusing on users with a minimum understanding of cryptocurrencies, for example, before targeting a wider user base.  If done properly, part of the seed audience can then grow into brand ambassadors and customer support actors that grow the company organically via network effects, increasing CROs on install, register and purchase.

An illustration of the Early Adopter scenario can be seen using the following link: https://drive.google.com/drive/folders/1k3m-wkGJr-_acD9YzurNdzpSmzehy-tC

OrunPay is hoping that the Stellar Community Fund can support us with $236,763.00, which is the budget required to launch our infrastructure around the EBI token and finalize the development of our products during Q4. We are currently evaluating other sources of investment to finance the rest of our costs for next year ($419,254.8).

OUR WORK SO FAR
We have been very busy in 2021. Here are some of the key takeaways on what we’ve worked on during the year.

•Development: As of now, OrunPay has made around 13 API integrations with different parties, including our European banking partner, KYC/KYB provider, Fireblocks and Coinqvest. Our platform is about 80% ready, and we are planning to finalize development around Q4 2021.
•Regulatory: Regulatory advisory services as well as all the documentation around our license application with the Central Bank of Lithuania demanded a considerable amount of time and resources from the founding team. We are currently waiting for the official registration in Q4 to be able to issue the EBI token on the Stellar PublicNet.
•Strategic relations: 2021 has been a productive year for nurturing relations and creating partnerships. One worth mentioning is our relationship with Fincluvise, who’s extensive expertise in the US regulatory environment will allow OrunPay to support the Cuban American market in a compliant manner. We are very excited about this partnership and are looking forward to seeing the impact it will have, giving Cuban nationals the financial independence they rightly deserve.

FINANCIAL SITUATION
The OrunPay founding team has invested approximately 201k USD in the company to date. We haven’t paid any salaries yet and the company has already spent around 95% of that budget. All the investment has been allocated to support the development work of all our products and our license application as an Electronic Money Institution Intermediary Agent with the Central Bank of Lithuania. The investment was spent as follows:
       • Regulatory advisory fees and EMI intermediary license application - $64,900.00
       • Travel costs from Europe to Cuba & Cuban expenses of OrunPay management team - $11,800.00
       • IT Hosting Fees - $9,440.00
       • Blockchain infrastructure service providers set-up and sandbox fees - $20,060.00
       • Platform development work - $94,400.00

A pie chart illustrating our investment into OrunPay up-to-date can be seen in Figure 16 by accessing the following link.

BUDGET ROADMAP DESCRIPTION
For the past 1.5 years, we have been working hard on our product suite and building key partner relationships. We also experienced several disappointments, with many European banks not wanting to support our business because we were dealing with two sensitive topics (cryptocurrencies and Cuba). Today, we are proud of what we have achieved so far and are looking forward to seeing our application live to support compliant payment transactions to Cuba. Below is an overview of our total budget roadmap. Figure 17 on the following folder which displays how we plan to allocate the proceeds from the SCF

Budget request to the SCF (EBI Token infrastructure launch and finalizing product development)

•Issuing the EBI token on the Stellar PublicNet: The issuing of the EBI token requires developing banking and blockchain infrastructures. A description of the estimated costs can be seen below:

     o Banking infrastructure: To support our banking infrastructure, we would need a budget of $103,840 for the first year of operations that will cover:
         -EMI partner fees.
         -Server and compliance IT suite for fiat transaction monitoring.
         -Identity verification provider fees.
     o Blockchain infrastructure: To support our blockchain infrastructure, we would need a budget of $82,923 for the first year of operations that will cover:
         -Fireblocks fees.
         -Coincover fees.
         -Elliptic fees

• Product Development: To finalize the development of the OrunPay wallet and OrunPay connect products respectively we would need a budget of $ 50,000

Budget not requested to the SCF that OrunPay will fund via additional investments:

• Ebioro B.V. incorporation and registration of OrunPay as an EMI intermediary: Regulation requires us to separate the entity issuing the stablecoin on the blockchain from the entity managing the corresponding fiat money, meaning we need to incorporate Ebioro B.V. as a new entity separate from OrunPay.

•Euro fiat reserves: The OrunPay founding team will deposit 80k USD for the first issuing of EBI tokens. We want to do this ourselves to accomplish the following objectives:

  o Execute transactions on the Stellar PublicNet using the Orunpay wallet and Connect products with a closed group of individuals and small-size companies. We need to test the overall time it takes for Euro deposits & withdrawals, customer support processes and compliance processes as well as other internal operations.
  o Test our market-making strategies using for the XLM/EBI pair on the Stellar DEX.

•Salaries: We have estimated a total of $287,785 for a year’s worth of salaries for the employees that will help OrunPay reach the next level. This will cover employees working in the following areas:
       • Regulatory and Compliance.
       • Marketing and Growth.
       • Operations and Finance.
       • Customer Support.
       • DevOps.

•Others
       • Marketing related activities - $36,000
       • IT Hosting Fees - $11,328.00
       • Other Operating Costs (Small office/co-working space) - $4,141.80