Japan money transfer giant SBI Remit is now letting nearly half a million customers send money to Africa using the bitcoin blockchain.
Designed to be a faster more reliable way to send money to Africa’s often overlooked markets, the new treasury management services are being provided by venture-backed BitPesa, which has raised $10 million from Greycroft partners and others to turn the bitcoin blockchain into an enterprise payment rail.
Instead of relying on a number of banks and other middlemen to move yen into U.S. dollars or euros and then out into African currencies such as Nigerian lira or the Ghanaian cedi, the licensed BitPesa uses a combination of the bitcoin blockchain and other services to create new currency pairs.
In addition to settling remittances in as little as one hour thanks to the bitcoin blockchain’s fast settlement times, SBI Remit director Nobuo Ando believes BitPesa’s multiple international licenses will help jump start African commerce with Japan on a larger scale by adding a much-needed layer of trust and transparency.
“Many companies are doing trade with African countries and they are suffering from the high cost and the slow speed and not very precise administration,” says SBI director Nobuo Ando. “So this is the market that we would like to go in, together with Bitpesa.”
The partnership aims to use BitPesa’s custom treasury tools sitting on top of the bitcoin blockchain to provide liquidity for small and medium sized businesses. Specifically, the partnership follows in a path already laid out by BitPesa in targeting cosmetics companies, electronics companies, and the lucrative used car market between Japan and Africa.
Further, the partnership enables direct currency pairs between Japanese yen and the fiat currencies of Ghana, Kenya, Morocco, Nigeria, Senegal, Tanzania, Uganda and the Democratic Republic of Congo.
Historically, individuals and businesses wishing to do business between Japan and the countries BitPesa serves had to move Japanese yen through multiple correspondent banks. Along the way the yen was frequently converted to more liquid intermediary currencies like the U.S. dollar or the euro, accruing fees along each step of the way.
Collectively, the average remittance fees for this process can reach about 7% of the amount moved according to World Bank estimates, but the costcan also be much higher. By removing the correspondent banks and secondary currency exchanges from the process Bitpesa is able to provide similar services for about 3% of the total transaction.
To avoid fluctuations in the price of both fiat currency and bitcoin, BitPesa founder Elizabeth Rossiello says her company’s treasury services are designed to insulate SBI's customers from risk on either side, “If it makes sense for us to settle using cryptocurrency or fiat currencies then we do,” she said. “And in this case, we’re happy that SBI feels the same way, so we’re open to using digital or fiat currencies to settle between us.”
While this partnership marks the first time SBI has used bitcoin to serve its customers in Africa, this is not its first push into the continent, nor its first partnership with a blockchain company.
Founded in 2010 as part of a spin-off from fintech giant Softbank, SBI Remit now has 450,000 customers, 90% of which are foreigners sending money outside of Japan’s borders. In total, the SBI Holdings subsidiary has sent 500 billion yen abroad as of September 2018, much of which went to Africa using traditional payment rails.
But in May 2016 SBI Holdings began to explore using alternative methods of payment. The company partnered with San Francisco-based Ripple to launch SBI Ripple Asia, a subsidiary that targets banks in the region looking for faster, cheaper ways to move money. SBI Ripple Asia is now exploring how both non-blockchain solutions and the XRP cryptocurrency might bring near-real-time remittances to Thailand.
Then, in January 2018 SBI Investing launched a blockchain and artificial intelligence fund with 50 billion yen (about $444 million at today’s exchange rate) to invest in startups over the next ten years. According to documents provided to Forbes, parent company SBI Group has invested in 20 digital asset companies including Veem, bitFlyer, Templum, R3, coolBitX and its own cryptocurrency exchange SBI Virtual Currencies, with more plans in the works..
“We are planning to expand some blockchain solutions for international remittance,” said Ando.
In Africa alone the room to expand is significant, according to Rossiello, who is among the earliest founders to launch a bitcoin company, having established BitPesa in 2013 when bitcoin was trading between around $100 and $1,000. Bitcoin currently trades for about $6,400.
While the remittances market in sub-Saharan Africa is expected to grow 7% this year to $41 billion the continent represents just 6.4% of the total $642 billion global remittance market, according to World Bank numbers. But with relatively little competition for African business Rossiello is confident her company can use the lower costs of the bitcoin blockchain to help catalyze commerce between Africa and the rest of the world.
In addition to serving eight African nations, the firm also has a license from the U.K.’s Financial Conduct Authority (FCA) and the European Union, to help create the unusual currency pairs that previously required costly transitional currency exchanges.
While BitPesa already employs 70 people and last month conducted $35 million in transactions it is poised to penetrate even deeper into the African markets with four pending license applications. Also helping with that process, Rossiello is currently working with the Japanese government’s Japan External Trade Organization (JETRO) to deepen the ties between the yen and African fiat currencies.
“Unlike a bank," said Rossiello, "which might not be incentivized to become a magnet for liquidity in specific currency pairs, they might make a lot more money just trading their one currency against the dollar or euro, we are incentivized, it’s our core business and our core focus.”