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Meet Africa’s Blockchain Startups: BitPesa

BitPesa

BitPesa is a bitcoin startup that is transforming how businesses make international payments in Sub-Saharan Africa. The Pan African platform uses blockchain technology to improve efficiencies in regard to remittances and trade between Africa and the rest of the world. The startup was founded in 2013 by Elizabeth Rossiello, a former investment banker with experience in Kenya’s microfinance sector.

Revolutionising remittances through Bitcoin

According to the 2014 World Bank report titled Send Money Africa, the average cost of remitting money to African economies stood at 11.89%, which was above the global average of 8.96%. At the time 70% of remittances to the continent were handled by money transfer services like Western Union and Money Gram, which charged 10-20% fee per transaction. Working in the Kenyan banking space, Rossiello noticed the need for an innovative payment system that could rival legacy systems being used which made money transfers expensive and slow due to the many intermediaries.

Against this backdrop, BitPesa was formed offering a platform that deployed the blockchain’s peer-to-peer network for payments and used bitcoin as a transaction currency. By offering a marketplace for African fiat currencies and bitcoin, the startup lowered transaction fees by 75% and reduced the transaction window from 2 weeks to 2 hours. In addition, the new payment solution was efficient and uncomplicated from an operational viewpoint as Rossiello pointed out in a Forbes podcast,

“The technology had to be easier, it had to be cheaper to set up, it had to be intuitive, and you didn’t need to maintain it yourself. So when you think about Bitcoin, right away when you start a company, if you learn about it and you have a developer that can link into it, you can just start. You don’t have to build the whole thing yourself. … [With BitPesa,] I do not need to invest in a million-dollar Oracle management information system.”

BitPesa makes it easier for people from other parts in the world to send money to say local banks in Kenya, by bypassing correspondent banks that charge a processing fee for transactions. These savings are passed down to the company customers in the form of cheap remittance fees. For people living in areas where traditional money transfer services like Western Union and MoneyGram have a monopoly on pricing through exclusivity agreements with postal corporations, BitPesa is a welcome respite.

Transforming B2B Payments

BitPesaBitPesa is not only using the bitcoin blockchain to enable cheap and fast international remittances but is also lowering the cost of B2B payments and opening new opportunities for African businesses. Through their platform, businesses can now send payments to employees, vendors, distributors and also receive payments from customers. Payments can be made or received from popular mobile money services, as well as transmitted to businesses bank accounts within a day. Many multinational corporations are already relying on their services to navigate the often unreliable and inefficient payment settlement systems that plague the African financial ecosystem.

BitPesa currently operates in Kenya, Uganda, Tanzania, DRC, Senegal, UK and Nigeria. Early this year, the company completed Series A funding to the tune of $2.5 million from a group of new and existing investors led by the US-based Draper VC. This raises the total funding it has received since 2013 to $6 million. Speaking to AppsAfrica , Rossiello asserted the money would be used to continue customer acquisition and growth efforts as well as migrate its headquarters to Luxembourg now that it is licensed as an FCA Authorised Payment Institution in the UK.

Africa provides a unique opportunity for bitcoin startups to thrive due to years of under-investment in infrastructure. Technologies such as bitcoin have the potential to improve financial systems and that’s why BitPesa is a prime example of what innovation can achieve in the continent.

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Wellington Ayugi

The author Wellington Ayugi

Wellington Ayugi is a Nairobi-based freelance writer in the financial space. He has a passion for personal finance, micro-finance & new developments in financial technology.