Vitalik Buterin’s December 12th tweet has echoed in my head ever since the day I first read it. While Bitcoin soared to $19,000, the man behind Ethereum reminded us that we have yet to successfully act on one of crypto’s largest use cases: banking the unbanked. McKinsey estimates that 2.5 billion of the world’s adults don’t use banks or other financial institutions to save or borrow money. Sub-Saharan Africa contributes 326 million to that number, meaning that 4 out of every 5 adults in the region is unbanked. One company, BitPesa, is determined to reduce that number, one bitcoin transaction at a time.
Founding and Evolution
BitPesa, founded in 2013 by Elizabeth Rossiello, is a digital foreign exchange and payment platform that leverages blockchain settlement to significantly reduce the cost and increase the speed of business payments to and from frontier markets. While the company initially targeted the narrow niche of simplifying remittance payments for Kenyan’s in the UK, its customer base has since changed. In 2015, approximately two-thirds of the company’s customers were employing the platform for business-related transactions, with that expected to rise. BitPesa in its first few years of operation has already enabled over 6,000 users in Kenya, Tanzania, Nigeria and Uganda to make payments across borders and run their businesses.
Africa Already Keen on Digital Currency
Despite what you might imagine, Digital currency is not new to Africa. Last March, M-Pesa, the African mobile phone-based money transfer and financing giant, turned ten years old. The company, which is owned by Vodafone (the operator of Kenya and Tanzania’s largest telecom companies), serves over 30 million customers across Kenya, Tanzania and eight other countries in Africa, South Asia, and Eastern Europe. M-Pesa handled 6 billion transactions in 2016, aiding its customers with everything from paying for everyday purchases, to sending remittance payments, to operating small businesses.
While trying to start BitPesa in Kenya was no small task, the Kenyan population was already quite adapted to using a mobile phone for financial transactions, which paved the way for cryptocurrency powered technologies. Michael Kimani, chairman of the Blockchain Association of Kenya, said, “In Kenya, there’s not really a need for a bank account–once you have a mobile phone you already have a bank account. People here are already familiar with value on their mobile phones.” For Rossiello and her BitPesa team, the real challenge was finding the right selling niche.
While M-Pesa has become a standard for domestic transactions, BitPesa enables “global digital transactions” and bridges the gaps between African and global businesses.
When customers use a service like Western Union to send funds across borders, the sender’s local currency is exchanged for US dollars and then is converted into the recipient’s local currency on the other end. A lot of money can be lost through fees and bad rates in the process. Using Bitcoin, BitPesa can cut down on many of these costs. BitPesa is the easiest, quickest, and cheapest way for organizations to manage their cross-border payments to suppliers, distributors and, employees. Using BitPesa, businesses can also accept customer payments in many forms, including other digital currencies like M-Pesa. Deposits to local or international bank accounts can be made on the same day, as opposed to the 2–5 days it can take to make a transfer using Western Union or other competing services. BitPesa keeps their interface and overall design simple, allowing businesses to use the platform without having any knowledge about Bitcoin, cryptocurrency or the blockchain.
The Future of Crypto Africa
Africa has a lot of problems that the adoption of cryptocurrencies like Bitcoin could solve. In past times of financial instability, the Nigerian government has put constraints on access to the US dollar in Nigeria. The hyper-inflated and unstable nature of the recent Zimbabwean economy has left citizens looking for an alternative and more reliable means of storing value. Both of these situations have led thousands of Africans to Bitcoin and other cryptos. Overall, the disorganization of the banking system in many African nations, as well as the difficulty of transferring funds across borders has made cryptocurrency an attractive means of exchange for many young Africans. With countries like Kenya, Nigeria, and Tanzania’s already seeing widespread adoption and use of digital currencies like M-Pesa, the stage seems to be set for cryptocurrencies and companies like BitPesa to thrive in Africa. MIT estimates that M-Pesa has been responsible for lifting approximately 2% of Kenyan households out of poverty, so who’s to say that crypto can’t make even more progress in bringing financial health to unbanked Africans.