Controversial and unjust though it often was, the British Empire left a legacy of political and cultural ties, not to mention a large and vibrant expat community in the UK, that exist to this day.
As many of these expats regularly send money to family and friends back home in their countries of origin, a vast flow of cash ($3.2bn in 2011) makes its way from the UK around the world. creating a lucrative market currently dominated by banks and money transmitting services like Western Union and MoneyGram.
This is a market ripe for disruption from bitcoin, which excels at making international transfers of value speedily and cheaply.
Ghana alone has almost 100,000 people living in Britain – more than a tenth of the global expat total for that country – many of whom support relatives at home by sending regular money remittances.
Compelling use case
Sending all that money comes at a cost for consumers. On average, a £200 transfer from the UK to Ghana will encounter a 7.4% fee when the unfavourable exchange rates often given against the local currency, the Ghana cedi (GHS), are taken into account.
Furthermore, for developing countries, remittances are an important source of income, as well as of foreign exchange. Some countries have remittance revenues of over 20% of GDP, according to a report citing the World Bank.
All this provides a compelling use case for bitcoin-based services that have the potential to significantly undercut that figure, allowing millions more dollars annually to go to the people that really need it, rather than global corporations.
To this end, an Accra-based startup called Beam – which is currently preparing for its launch into private beta next Monday – plans to disrupt that market by offering bitcoin's speed and cost savings to the UK–Ghana remittance stream.
Invading the remittance space
"The remittance industry in Africa is highly inefficient," Beam's CEO Nikunj Handa explained. As well as the costs, which can be up to three times those in Asia, delays are also commonplace. "It can take up to two to three days for remittances to be finally delivered in someone’s bank account or in cash," he said.
Beam aims to outdo its entrenched rivals by fixing these problems with a faster, more affordable and more convenient solution: bitcoin.
"By using bitcoin to accept payments from remittance senders," he said, "we are able to receive payments instantly and with almost no fees. This keeps our costs very low, and allows us to pass on those savings to our customers."
Senders using the service are charged a flat-fee of £1 ($1.60) on each transaction, regardless of the amount. In addition, the firm levies a 3% markup on its exchange rate.
"We validated the idea for Beam with a manual process: people in the UK would send bitcoin to someone in Ghana, who would in turn sell the bitcoin to us, in exchange for Ghana cedis," Handa explained. "We started building Beam only after validating the need to automate this process."
Beam is heavily localised for the Ghanaian and Nigerian markets. The startup partners with mobile money vendors and banks to enable "instant deposits into recipients’ accounts in Ghana and Nigeria".
This, said Handa, avoids customers the wait they would encounter with international bank wires, or having to queue and fill in paperwork at agent locations.
Beam was co-founded by Handa along with Falk Benke, the startup's CTO.
Before starting the company, both taught software development at the Meltwater Entrepreneurial School of Technology (MEST) – a nonprofit set up to provide training and mentoring to young African entrepreneurs aspiring to launch new, Ghana-based software companies.
During this time, Handa and Benke say they sold bitcoin to the local market and taught how bitcoin can be used to solve problems faced in online payments and money transfers.
Beam later graduated from the MEST incubator programme, which, Handa said, provided some pre-seed investment in the startup. Backed by the Meltwater Foundation, the company also has the support of a team advisors at MEST, including venture capitalist Neal Hansch and Meltwater founder and CEO Jorn Lyseggen, along with legal, marketing, banking and regulatory advisors.
Winning over customers
Alongside the speed, convenience and low cost of bitcoin-based transactions, Beam plans to win over new users by providing a wide variety of payout solutions that its competitors don’t.
Beam has also been raising awareness amongst its target market on how bitcoin can be used as a cheap way to buy items online when credit cards fail to work.
Justifying his claim, Handa said:
Additionally, the company aims to promote bitcoin to young entrepreneurs in the country in the hopes of building a local ecosystem there. Currently, Beam says it is the only bitcoin company in Ghana, but the team hopes that, in time, that will change.
Ready for regulation
Currently, Beam is primarily focused on the UK senders' market due to its high concentration of Ghanaian and Nigerian expats.
Handa indicated, though, that the startup can accept bitcoins from people in all other parts of the world with the exception of the US. This restriction he said, is "due to the high level of licensing requirements in each US state".
Regulatory obligations do exist in the UK and Ghana, he said, although they are "rather ambiguous". Until more clarity is forthcoming, Handa said:
In Ghana and Nigeria, Beam is partnering with banks which already have remittance licenses in order to ensure compliance. In the UK, Handa said, the firm will follow the regulatory evolution of the national tax authority, Her Majesty's Revenue and Customs, and the Financial Conduct Authority going forward.
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