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Bitcoin-compatible startup to rival M-Pesa in diaspora remittances

Kenya , 27 May 2014

Bitcoin-compatible startup to rival M-Pesa in diaspora remittances

Kenya’s leading mobile money transfer service, M-Pesa is set to face additional competition in diaspora remittances after BitPesa, a UK startup, launched the beta version of its solution.

BitPesa plans to allow Kenyans living in diaspora to send money back home in form of bitcoins.

The UK startup has also promised to lower transfer charges to a flat rate of 3%, from the current average range of between 6% and 13%, presently being charged by other international money remittance services.

With the use of digital currency, Bitcoin, spreading all over the world BitPesa aims to leverage on the increasing popularity to bring on board Kenyans living abroad.

Kenyans will convert UK pounds into bitcoin before the money is sent, with the recipient receiving the money in Kenyan shillings.

“The system rides on the bitcoin "rails," but it isn't strictly speaking a bitcoin product. We are taking bitcoin, translating it into the local currency, and dispersing it the way people know,” Elizabeth Rossiello, BitPesa’s acting chief executive officer told Wall Street Journal.

In order to launch its operations, the startup has already recruited 15 beta users in Kenya, who will help in the testing of the system before launch. The startup has already raised $700,000 from investors, with the likes of Joe Mucheru, Google’s sub-Saharan Africa ambassador and East Africa lead, also making personal investments in the startup.

According to data from the Central Bank of Kenya, diaspora Kenyans remitted $1.3 billion in 2013 alone.

However, the World Bank reports that remittance costs are highest in sub-Saharan Africa, with the transaction costs averaging 11.7% of the money being sent. This is a high cost, compared to 8.4% average transaction fee charged in other parts of the world.

BitPesa has not announced when it plans to officially launch the service for commercial use between the two countries.

Critics however say that it will prove quite a challenge for the startup to penetrate the almost saturated international remittance services industry in Kenya, with giants like M-Pesa, Western Union and MoneyGram already having established themselves in the grassroots.

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