Advancement in technology has greatly transformed how remittances are made around the world. Africans abroad have for long relied on traditional means of money transfer such as Western Union and MoneyGram, but Bitcoin looks set to give these more popular channels stiff competition in Africa with the benefits it brings to the table.
Bitcoin is a digital currency which was designed and created by a person or group of persons working under the pseudonym, Satoshi Nakamoto. The main idea behind the cryptocurrency was to create an electronic payment system that is not under the direct control of a central authority. The decentralized nature of Bitcoin – to many people – is a good thing in that no single institution can influence what happens to their money. The cryptocurrency cannot be printed and can be used for electronic transactions at very low costs.
Fees on money transferred through banks or money transfer operators (MTOs) such as MoneyGram and Western Union can be quite sizeable. The average fee on a remittance of $200 to people in Africa via these conventional channels is estimated at 12 per cent by the Overseas Development Institute (ODI). Calculate that and you will realize how much is lost in fees on total remittances to Africa in a year – the ODI estimated this at $1.8 billion per year.
The privacy or anonymity that Bitcoin users enjoy is another reason why many people may be attracted to using it for remittances. You do not need to share personally identifiable information to carry out a transaction. This can help greatly in ensuring that people are protected.
Gradual rise in Bitcoin use
Many people are without bank accounts on the continent – perhaps, because of fee consideration and other obstacles – with the figure of such in sub-Saharan Africa estimated at 75 percent. Some experts believe that Bitcoin could serve as means for these unbanked people to pay their bills easily.
A Nigerian e-currency exchange head, Sunday Ejezie, told Nigerian Tribune that importers, exporters, Forex traders and other online investors are some of those who use Bitcoin in the country. He also said that the cryptocurrency is used for making remittances to loved ones and paying school fees, amongst other uses.
Bitcoin remittance services have also started to spring up in few places across the African continent. These include Beam and Kitiwa (both in Ghana) and Kenya’s BitPesa. These services convert Bitcoin sent by loved ones abroad into local currencies. There are also online stores, especially in South Africa, where the cryptocurrency is accepted. A Bitcoin ATM, the first of its kind in Africa, was also unveiled in Johannesburg last August.
Bitcoin will take some time to become a force to reckon with when remittances to Africa are concerned. This is because traditional means of money transfer such as Western Union and MoneyGram already have wide network of locations across the continent.
Another issue is Bitcoin volatility. The price of the digital currency fluctuates from time to time, with this capable of scaring off a good number of people. The value of Bitcoin went from less than $14 to almost $1,150 and then down to around $220, all within a two-year span. In essence, the value of money sent from abroad to Africa could be worth more or less by the time it is exchanged into an African currency.