While the hype around Bitcoin grows stronger everyday, the conference on mobile money at Afrikoin in Nairobi and a discussion with a few startups in the crypto-currency business has helped to debunk what Bitcoin is, and isn’t. In our exploration we’ve listened to and chatted with:
The tenants of Bitcoin as a payment system
- Pelle Braendgaard, who has worked in cryptography related businesses for 9 years and is now heading Kipochi, an e-wallet that helps to converts Bitcoins for remittance services
- Elizabeth Rossiello, whose startup BitPesa allows the Kenyan diaspora to send and receive money in Bitcoins and MPesa, the local Kenyan mobile money
- Gianluca Iazzolino, a researcher from the University of Edinburgh whose PhD project studies the movements of people and money among the Somali diaspora
- Ian Grigg, founder of Dinero, an app which digitizes the chama, a group of women who co-invest in rural and urban Kenya
The trouble with Bitcoin and new technology
The first issue with Bitcoin is the prism of the currency (not even talking of the Silk Road) through which it is seen. All panelists emphasise that it is a payment system more than anything else, and, yes, as any payment system, it is technical, not sexy. Nonetheless, it is part of our digital infrastructure and new services are popping up on top of it.
Bitcoin, says Pelle, “is the Internet of money”, and as such, is roughly at the same stage as internet was back in the 1990s: people who understood how it worked were few and far between, and the uses were still nascent (having a website was not even considered necessary). The same applies here. It is hard to talk about what exactly Bitcoin is without employing words like “pacquets”, “cryptography” and “low-level system”, all mind boggling jargon for the unacquainted. The simplest explanation would be this: Bitcoin is a way to send money from point A to B at no cost, with complete transparency, period, without any exclusivity.
The unbanked: A 2.5bn market
The Benefits and Potential of Bitcoin
What Bitcoin solves is the “complete inefficiency of the banking system”, and that coming from a former financial services specialist. Elizabeth left the industry and set up BitPesa precisely for this reason. The banking infrastructure we use everyday was designed in the early 1980s. As it stands, it is full of gatekeepers and secrecy and is not user-friendly: fees are an automated form of punishment and this is why so many people are left unbanked (2.5bn people as of 2013).
Bitcoin is also a hot topic for Africa in general, and Kenya especially. Because you can create an account without any ID verification or checks (even though the interface is not entirely user-friendly yet), it’s an ideal way to reach the unbanked. Startups in the Bitcoin sphere find Kenya ideal because it’s a regional hub for East Africa and because banks are already challenged by MPesa, a mobile money service offered by the local dominant telco, Safaricom. For them, it’s realistic to talk about Bitcoins reaching a new mass of consumers in Kenya soon, whereas in Europe and the US, there’s no real threat to the banking system yet (Paypal is still tightly linked to your bank account).
Remittances, as we saw in another wrap-up of Afrikoin, should be a huge market for Bitcoin, as it would allow the African diaspora from all over the world to send and receive money into and out of Africa at no costs. (The Western Union takes a 12% fee on transfers with African countries) BitPesa and Kipochi both work primarily on this market of remittances but other market segments will undoubtedly soon emerge.
Where else than in Nairobi’s iHub can you pay a coffee in tangible bitcoins 😉 ?
The challenges facing a nascent technology like Bitcoin revolve around education and user experience. It remains complicated to get your hands on a Bitcoin but startups are here to make it simpler, just as they have simplified our relationships with travel payments, renting and selling/buying. Another hot topic will be the interoperability with other payment systems, including banks. Cash is still king and when it comes to cashing out a Bitcoin, you’re “caught” in the regulators’ nets once gain.
For anyone interested in the Bitcoin, do try to connect locally with the Bitcoin community. They are, in the same way that the early internet maniacs were, an open-source community with a collaborative mindset and a will to change the world of banking. Anyone can agree that this is one industry that needs a wake-up call for all its shortcomings.
Martin Pasquier