Using blockchain to improve access to financial instruments in the developing world
Most online banking apps and crypto trading platforms require a smartphone, access to the internet, a bank account, and some base knowledge of the technology. However, what if individuals don’t have access to a smartphone or the internet, or don’t have a bank account? Traditionally, these individuals have been unable to access the mobile banking services that many rely on every day to transact, putting them at a disadvantage, and closing them off from the benefits of easy to access financial services.
Kotani Pay, a start up based out of Kenya, hopes to resolve this issue by allowing unbanked populations in developing countries to send and receive money via blockchain technology without the need for internet connectivity, a smart phone, or a bank account.
The inspiration
In their mission to educate communities in Africa about blockchain and cryptocurrencies, the developers of Kotani Pay came to the realization that many of these communities were unable to access financial instruments as the technology for these instruments was built for smartphone users, and simply wasn’t designed to support them. As a result, these communities were missing out on the benefits that came with this technology. This is the inspiration that drove the development of Kotani Pay.
According to the Kotani Pay team:
How does it work?
Whereas most mobile financial apps require a smartphone with access to data or Wi-Fi, Kotani Pay makes use of Unstructured Supplementary Service Data (USSD), the primary mobile interface in the developing world, to provide users access to their blockchain-based platform. USSD can be used with basic feature phones and does not require access to the internet. Furthermore, as this technology is already widely used in the developing world, it is very easy for users to learn how to use the Kotani Pay platform, where as other more complex platforms may require greater training and education efforts.
Essentially, by dialing a short code in their phone, users will be given access to a menu through which they can easily convert crypto to fiat, and vice-versa. Users can use this to move funds between their blockchain and mobile wallet, without the need for public or private keys, simplifying the process for transacting with cryptocurrency.
Kotani Pay makes use of Celo dollars (cUSD), a stablecoin pegged to the U.S. dollar, which is located on the Celo Platform, to protect users against the volatility of traditionally cryptocurrencies. Users can change their cUSD for mobile money in local currencies using Kotani Pay’s digital wallet.
Due to the nature of the blockchain technology behind this platform, the fees to use this platform are low, and users can avoid typical challenges such as long processing times for transactions. One area that has particularly high fees is cross-border transactions, which Kotani Pay also helps address. This is especially useful for individuals in the region who need to transfer funds across borders to family, or for displaced individuals who may be crossing borders while fleeing for safety. The typically benefits of blockchain such as transparency, security, and auditability, also come with this exciting platform.
Potential scalability
If this project proves to be successful, the opportunity for scaling is huge, as there are currently 2.4 billion people around the world still using basic phones, and two billion unbanked people. As the world is in the midst of a refugee crisis, this technology could also be applied to support refugees in accessing financial services and retaining access to their funds while seeking refuge. Kotani Pay has plans to scale to additional continents, so it will be exciting to keep an eye on this project.
To support the growth of this solution, Kotani Pay received funding of nearly 20 ETH from the UNICEF Crypto Fund. A list of some of the exciting projects funded through the UNICEF Crypto Fund can be found here. I recently highlighted another start-up funded by the Crypto fund, Leaf Global FinTech, which also provides blockchain-based banking solution to users that is available without a smartphone or internet access.
It is exciting to see new start-ups making use of blockchain technology to provider services to marginalized populations, and it clearly demonstrates the versatility of blockchain and crypto and how it can be applied to technologies both new and old.
What do you think about the potential of this technology to increase access to financial instruments in the developing world? What are some other applications? Tweet us at @Crypto_Altruism to let us know what you think, we’d love to hear from you!
