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New app Abra turns people into banks, making bank accounts obsolete

Banks are for the privileged. That’s the simple thesis driving the development of Abra, a startup that is taking out the middle man (the bank) when it comes to financial transactions. No more ATMs, no more physical bank locations — instead, Abra promises an all-mobile experience that involves person-to-person transfers, deposits, and withdrawals. In a couple weeks, interested users in the U.S. and the Philippines will be able to try out the novel concept firsthand when it officially launches.

The problem with the current banking system, Abra founder Bill Barhydt and former Goldman Sachs software engineer told CNN Money, is that it only serves the wealthiest 5 to 10 percent of consumers who can conveniently afford a bank. “The reality,” Barhydt said, “is the majority of the planet is a cash-based economy, and banking doesn’t work for those people.” This is particularly true in developing countries where cash is probably the most necessary, and coincidentally, the least accessible.

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So how does it work? The entirely mobile system allows you to make transactions with other registered users, whether they are individuals or businesses. If you need $50, use Abra to find a teller near you (all tellers are vetted in a process similar to the one used by car services like Lyft and Uber to screen their drivers), and set up a convenient meeting point. Both you and the teller would be sent a QR code, which would be scanned to authenticate the transaction.

Tellers are recommended to charge a 1.5 percent fee with each transaction, though they are given the option to set their own rates, and Abra makes money by taking a 0.25 percent cut. And in a decreasingly private world, users will be happy to know that Abra collects no data on its users other than their phone numbers. The caveat to this, however, is if you’re a teller, in which case Abra ensures its users’ legitimacy before allowing them to handle transactions.

Said Barhydt, “In a hyper-connected world, it is astounding to me that you can’t pick up the phone and instantly send money to any other phone number in the world.” But with Abra, we may be taking one step closer to this entrepreneur’s goal.