NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, August 4, 2017

Abra set out in 2014 to make mobile money movement cheap and fast worldwide, using the bitcoin network as rails.

But lately the fees for transferring value on that network have risen, creating a predicament for the startup: charge more for sending funds with its mobile app, or eat the fees.

For a time, Abra absorbed the additional cost. Given that the average transaction size for Abra is $200, and that bitcoin’s scaling problem is relatively new, “we can afford to wait for that technology to scale,” Bill Barhydt, the company’s founder and CEO, said in early July. (The company raised $14 million in Series A financing two years ago.)

But late last week, Abra notified its users that starting Aug. 21, it would charge for withdrawing bitcoin to an external wallet. Barhydt said more people are using Abra’s bitcoin service than predicted, and network transaction fees are adding up. “The mining fee there make sense” to pass on to customers, he said, referring to the fee bitcoin senders pay so-called miners to ensure their transactions are included in the next block added to the public ledger.