Bitpesa is a Nairobi-based start-up that is firmly settling into the remittance industry, a vastly lucrative enterprise for that matter. So, recently they announced they had raised $1.1 million dollars in phase two of their seed round that was led by Pantera Capital, located in the City by the Bay (San-Francisco). And naturally, Dan Morehead, the CEO and founder of Pantera joined the board of directors. Since it launched in the Spring of last year, Bitpesa has come a long way in terms of its service provision, operating initially in the UK-Kenya Corridor (which is proving to be a difficult market in terms of purchasing bitcoin, courtesy of the UK); now it has seen itself expand to Ghana and plans to expand to Uganda and Tanzania, and possibly India (going by the survey they designed with regard to Indian expats). Bitpesa’s CEO and co-founder, Elizabeth Rossiello expresses the fact that they have developed a lot and is surprised at how many people are excited about it. Armed with a full-time staff of nine folk, Bitpesa is poised to take the remittance industry by the carotid. With Other investors included Crypto Currency Partners, Stephens Investment Management, Bitcoin Opportunity Corp., and Future/Perfect Ventures, the company, which recently celebrated its one-year anniversary, has raised a total of $1.7 million. What a quick learning curve it has been for them, I’ll say. Bitpesa realizes that its remittance service is predicated to some level of extent on the ease or difficulty, cheapness or expensiveness of acquiring bitcoins for expats in their host countries.
Superbly, the firm now offers brokerage services in terms of buying and selling of bitcoins on behalf of customers, hurrah; having used their services, I always wondered about it, whether they you could take the burden away from me of having to do that tidbit of work (not that am lazy or anything, but best leave it to the experts). Canada remains a big market for them it terms of bitcoin acquisition AND gives them a clue of where they should move next, well, that’s according to Madame Rossiello! Cryptocurrencies offer much promise to the remittance industry, but in the local setting, where bitcoin still doesn’t have the kind of epistemological traction needed, a lot needs to be had for crypto-evangelism and by extension, bitcoin-evangelism. Bitpesa has taken and will continue to take grab the mantle, racing off into the future in terms of business growth and ideation of the bitcoin process! From the shack to the palace, this new gospel of Crypto, chapter Bitcoin must go far and wide, into the entire world. Before 2104, bitcoin has it made in the shade, unless by some force that lies outside our realm of causality intervenes in the most austere manner, say the world ending; but that’s not happening anytime soon, right!
What are the Facts and Figures?
A remittance is money sent by a person in a foreign land to his or her home country. Due to the huge sums involved, remittances are now being recognized as an important contributor to the country’s growth and development. Only recently (in 2006) were banks requested by the central bank to collect remittance-flow data.
The Central Bank of Kenya conducts a survey on remittance inflows every month through the formal channels that include commercial banks and other authorized international remittances service providers in Kenya.
In 2014, remittance inflows to Kenya increased by USD 137 million or (11 percent) to USD 1,428.5 million compared with USD 1,290.6 million in 2013. The 12 month average flow during the same period sustained an upward trend to USD 119.0 million from USD 107.5 million over the same period (Chart 1). In the month of December 2014, remittance inflows increased by 14.2 percent to USD 130.2 million from USD 114.0 million in November 2014.
Remittance inflows from all regions remained resilient. Inflows from North America accounted for 47.4 per cent of total inflows and increased by 8.5 percent to USD 677.6 million in 2014 compared with USD 624.4 million in 2013. Remittance inflows from Europe and Rest of the World also increased by USD 30.2 million and USD 54.5 million, to USD 389.9 million and USD 361.1 million, respectively in 2014.
Bitpesa wants to reach its target of capturing of 1% market share, a figure that approximately translates to 6,500 transactions per moon/month. A reality which they will achieve because as far as my knowledge takes me, there are no new entrants who are trying to solve the problem of remittance costs. Furthermore, a report published by the World Bank back in January 2013, dubbed Send Money Africa states that sending money to Kenya costs “about 9.2% of the value of the transfer”. This is lower than the 11.89% average for remitting cash to African countries, but higher than the global average of 8.96%. Bitpesa offers a 3% cut-rate fee (no hidden costs apply) for you to make your transaction. In 2012 alone, 30 million African migrants sent close to US$60 billion in remittances to 120 million recipients.
Bringing remittance prices down to 5 percent from the current average cost of 12.4 percent would put US$ 4 billion back in the pockets of Africa’s migrants and their families according to the Africa Institute for Remittances (AIR) Project. South Africa, Tanzania, and Ghana are the most expensive sending countries in Africa, with prices averaging 20.7 percent, 19.7 percent, and 19.0 percent respectively, so it makes so much sense for Bitpesa to move to Tanzania and Ghana. According to data from the Send Money Africa database, funded by AIR Project, Africans pay more to send money home than any other migrant group. Sub-Saharan Africa is the most expensive region to send money to, with average remittance costs reaching 12.4 percent in 2012. The average cost of sending money to Africa as a whole is almost 12 percent, which is higher than global average of 8.96 percent, and almost double the cost of sending money to South Asia, which has the world’s lowest prices (6.54 percent).
Governments should implement policies to open the remittances market up to competition Increased competition, as well as better informed consumers, can help bring down remittance prices. Bitpesa is mounting up the competition; it’s only a matter of time for Kenyans to catch up to this form of remittance. High transaction costs are cutting into remittances, which are a lifeline for millions of Africans. Financial inclusion, which advances universal access to appropriate and affordable financial services, is essential to inclusive growth; Bitpesa is promoting financial inclusion, not only by using crypto-currency as a platform, but setting a fair price for its services. Financial infrastructure underpins financial inclusion, lowering the risks and costs of providing financial services to low income individuals and micro and small enterprises. Payments systems facilitate business transactions, government payments, remittances, and innovative retail (including mobile) payments, and bring safety and efficiency to a financial system. Bitcoin can solve the ‘unnecessary difficulties’ associated with these three key areas of a financial system.
More than half of the world’s poor are unbanked and have limited or no access to financial services such as savings, loans, credit, insurance, or payments. This constrains their ability to cope with unexpected expenditures, take advantage of economic and educational opportunities, participate in business transactions, and send and receive remittances. Poor households and women are especially disadvantaged. No citizen should be excluded from economic opportunity, and financial inclusion is an effective instrument to bridge this gap. Bitpesa, in my humble opinion, supported by fact is doing this bridging.
So, that’s why I think, Bitpesa is and will be a Fortune 500-er (1% is a lot of money), not only in terms of revenue growth, but also the social value of any worthy capitalistic venture. Perhaps an IPO in the offing, hopefully. All I can say is hurrah for Bitpesa!