Next time you hear about the phenomenal growth of the bitcoin ecosystem in Kenya, digest it with a pinch of salt. The real growth of bitcoin in the East African nation is far from what was expected when the cryptocurrency was touted to be a promising alternative to the traditional, expensive remittance options present.
The Kenyans receive money from their members who travel international boundaries for work and send money home. Leading money transmitting companies such as MoneyGram and Western Union levy hefty transaction fees of 5-12% on cross-border payments. Bitcoin was seen as a low-cost option for this expensive money transmitting scheme, leaving more money in the hands of people. The ability of the bitcoin blockchain to quickly process the payments in a reliable manner also added to the hype around the payments innovation.
But, all of this has failed to push bitcoin into mainstream adoption in Kenya. The “poverty-ridden” appeal of the African nation compelled many investors to set up money businesses in the anticipation of easy profits as consumers were expected to flock to a cheaper option. But reality struck them hard. Many have diverted course from being a solely bitcoin business or shut down their shops. In August 2015, it was reported that a Ghana-based bitcoin startup Beam had shut down its international bitcoin remittance services and shifted to gift and bill payment segment.
At that time, Beam co-founder Falk Benke said, “Using an international debit or credit card, you can pay utility bills, top up airtime, send gifts or even get errands done back home in Ghana. So no direct cash payouts anymore and we no longer accept bitcoin as means of payment.”
“I think a lot of people got excited by the whole, ‘by God it’s going to save everything. You still need a strong business that then delivers that product.”
After starting Bitpesa in 2013, Rossiello now believes that remittances alone cannot sustain an entire business.
Nairobi-based digital currency wallet Bitsoko, who received $100,000 in Phase 1 of the Global Challenges Exploration organized by the Bill Melinda Gates Foundation, is now pivoting from merchant payments to creating a microtransaction app for the Gates Foundation. Allen Juma told MOTHERBOARD:
“I do not think bitcoin is going to change everything. I don’t think it is enough. I think there is more to improve. I think it’s great that we do have bitcoin, but I think Africa needs to develop its own solutions.”
Bitcoin needs a ‘killer app’ to gather the confidence and appreciation of the masses. Several factors, most prominently the price volatility, are keeping the users at a distance from the cryptocurrency. With governments maintaining a cautious stance on bitcoin, consumers feel safer in using cash, credit cards, and debit cards for daily payments. This has limited the growth of the bitcoin ecosystem in several nations, including Kenya.
Having stated this, it would be unfair to miss out on the massive investments that bitcoin’s blockchain technology has received. And with big players researching the blockchain infrastructure, more businesses will be open to adopting and understanding the innovative set-up that blockchain provides. This will ease the concerns of the users who are expected to increase their involvement in digital payments in the future.