How Bitcoin Could Revolutionize Remittance in Africa
Monday, April 13, 2015
A host of local companies are looking to disrupt the remittance market in Africa by undercutting traditional money transfer operators while also offering businesses new ways of accepting payments on a continent with low credit card penetration and an over-reliance on cash.
The likes of Igot, Beam, BitPesa and BitX have spotted an opportunity to build Bitcoin businesses in Africa. Though stolen bitcoins, the collapse of the Mt.Gox exchange and drastic digital currency value fluctuations have made Bitcoin a byword for controversy in much of the Western world, they feel it can find a true home in Africa, the land of mobile money.
The problem they are looking to fix is a big one, though the opportunity is also enormous. Remittances to and within Africa are big business. There are more than 30 million Africans living in the diaspora, sending home US$40 billion per year, an amount which is steadily increasing. This amounts to an average per migrant of US$1,200.
Yet the cost of these transaction is hurting those sending and receiving money. Total annual fees amount to US$1.4 billion. Western Union and MoneyGram dominate the field, with 50 percent or more market share across most of Africa, but charge an average of 12.3 percent to send just US$200. Acceptance of payments by merchants is also an issue, with less than three percent of Africans owning credit cards, bank transfers as expensive as remittances and PayPal not yet widespread.
Timothy Stranex, chief executive officer of African Bitcoin exchange BitX, says the digital currency can have a major impact on international remittances, in terms of both speed, efficiency and cost. Most Bitcoin remittance firms charge fees of around three percent on transactions, seriously undercutting the more traditional players.
“International wire transfers take several days to settle because they are processed using legacy batch systems. In contrast, Bitcoin payments are fully settled within minutes. This enables much faster international payments. Existing remittance companies can use this technology to streamline their backend operations and save costs by maintaining less float,” he said.