Elizabeth Rossiello, founder and chief executive of BitPesa, talks to Joy Macknight about using Bitcoin and its underlying technology, blockchain, to resolve currency exchange issues in African markets. 

Elizabeth Rossiello

BitPesa is a digital foreign exchange (FX) brokerage that uses the cryptocurrency Bitcoin for business-to-business payments to and from African bank accounts and mobile money wallets. With operations in six sub-Saharan countries, it has become a market-maker for African currencies, and it is also licensed as a payment institution in the UK.

Chief executive Elizabeth Rossiello founded the start-up in late 2013 with the aim of improving the ease of doing business across Africa. The risk – and potential losses – associated with turbulent and illiquid emerging market currencies is a challenge for companies operating on the continent.

Myriad problems, few solutions

Ms Rossiello argues that despite microfinance institutions and mobile money operators being heralded as “solutions to everything”, these are siloed answers to multi-variable problems. In addition, neither has solved the problem of a lack of market participants.

“New entrants are important for a competitive environment, which drives down costs, improves service and inspires innovation,” she says. “Many players are put off because of a shortage of market data, but there is a huge opportunity here. We should stop fighting over this one vertical and offer a wider diversity of financial products.”

FX product innovation is much needed in Africa. In many markets, only spot trades are allowed currently; and in countries where forwards are available, they are usually both difficult and expensive. “Without derivatives such as forwards and swaps [to manage FX risk], the cost of doing business and attracting new entrants is just too high,” says Ms Rossiello.

The benefits of Bitcoin

Ms Rossiello decided to accept Bitcoin for international payments because credit cards are not pervasive in Africa (mainly due to cost), and banks are slow and difficult to use for cross-border transfers. Using Bitcoin as a form of payment, as well as communication, dramatically lowers the cost, difficulty and time it takes to complete transactions.

“Our model is radically different from what exists today, whether a traditional FX bureau, which is cash-based and charges excessive fees; a bank, with rates determined by the central bank to protect precious US dollar reserves; or the black market,” she says. Many of BitPesa’s customers, including large corporates, have been forced to use the black market because the global correspondent banking network is underserving these markets.

While the cryptocurrency allows BitPesa to access global customers more cheaply and easily, Bitcoin also connects the start-up to some of the most innovative companies in the blockchain (or distributed ledger technology) space. Recent investors include Plug and Play, a seed and early-stage investor that specialises in matching its portfolio companies with corporates; Draper Associates, one of the first Silicon Valley funds to move into cryptocurrency and seek out African start-ups; blockchain technology company BitFury Group; and venture capital firm Greycroft Partners. To date, BitPesa has raised about $10m in funding rounds.

Blockchain also eases integration with new companies entering this space because it is the same underlying technology, whether the company is in South Korea or Senegal. “Previously, every bank built their own technology platforms and systems, but those days are over,” says Ms Rossiello. “Having interoperable, open systems means that companies can focus on building cool products that add value.”

Despite all the advantages, operating in the cryptocurrency and blockchain arena also presents challenges, particularly on the regulatory side. For example, the Central Bank of Kenya took a conservative stance and issued a warning against cryptocurrencies, including Bitcoin, in 2015.

Nigeria, on the other hand, has taken a more open approach, and Ms Rossiello reports an ongoing dialogue with the Central Bank of Nigeria (CBN). “We have written research papers and sat on CBN-convened committees, which means that today Nigeria has draft legislation. Together, we are leading the way for other markets,” she says.

Future prospects

After four years, BitPesa’s reputation is spreading, according to Ms Rossiello. “There is a community of large corporates that use our services, in logistics, fast-moving consumer goods, import/export and airlines, but they don’t want publicity,” she says. Those that she can name include Be Forward, a Japanese used-car exporter to Africa, and Savanna Sunrise Group, an African online travel and hospitality aggregator. In addition, Jumia, one of Africa’s largest e-commerce platforms, has co-developed a lending product with BitPesa.

BitPesa is currently expanding into north Africa and the Middle East, as well as deepening its roots in Europe. It is also exploring the Caribbean and Latin American markets. And while the start-up has just begun offering credit products, it plans to offer a wider spectrum of FX products in the third quarter of 2018, such as forward swaps in African currencies where they were either not available or too expensive or inconvenient before.

Ms Rossiello firmly believes that blockchain has already fundamentally changed financial services. “It is a wake-up call [to the industry] in so many ways,” she says. “I would never have been able to start a global payments and FX business from my living room in Nairobi without this technology.”


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