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Home Business StartUPs

Kotani Pay Raises $2 Million Pre-seed Funding to Simply Remittance through Blockchain

by Joel Nwankwo
September 5, 2023
in StartUPs
0
Kotani Pay
Felix Macharia, Co-founder of Kotani Pay

Felix Macharia, Co-founder of Kotani Pay

UBA
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Nairobi-based crypto payments startup, Kotani Pay, has announced a $2 million pre-seed funding round to drive its vision of making cross-border remittances easier for the large underbanked populations in Africa.

The pre-seed funding round was led by P1 Ventures, with participation from a  number of investors including DCG/Luno and Flori Ventures, with plans to further expand to Rwanda, Senegal, Ivory Coast, Tanzania, and Nigeria.

Remittances face an intractable obstacle in hefty transfer costs, despite playing a crucial role in the African economy. An underdeveloped financial infrastructure, information asymmetry, and currency fluctuations are only a few of the causes that have contributed to the excessive expenses. Families at home may lack the necessary identifying documents or even bank accounts.

Kotani suggests using blockchain to make remittances to Africa possible after recognizing these difficulties with the current system of sending money there. To transfer money worldwide at a fraction of the cost of the traditional method, it specifically uses stablecoins, which are cryptocurrencies backed by fiat currencies like the USD.

Kotani has developed a middleware connecting blockchains to local payment networks, many of which allow users to send money on feature phones without the internet using a communication protocol called Unstructured Supplementary Service Data (USSD). This allows users to actually cash out the stablecoins they hold in their mobile wallets and pay for things in local currencies.

In addition, Kotani customers can “on-ramp,” or change their local currencies into US dollars. This feature is now targeted more at enterprises but, according to the founder, it might be made available to retail consumers in the future with the right licensing. The co-founder claims that a “network of liquidity providers through partnerships with local forex services and money transmitter operators, from whom we source local USD,” makes the process possible.

Felix Macharia, speaking on the service process, noted that the central banks in the countries where the firm operates already “monitor these transactions as they oversee all termination points to banking and mobile money services. 

After purchasing Nigerian firm Fuhlstack, the startup plans to launch further products, such as Reconset, a Reconciliation-as-a-Service offering, and Money Ledger, a Ledger-as-a-Service solution.

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Author

  • Joel Nwankwo
    Joel Nwankwo

    Joel Nwankwo is a tech journalist. He is passionate about telling stories as it relates to Africa's social and financial tech advancements. You can reach him at joel.nwankwo@techeconomy.ng

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Joel Nwankwo

Joel Nwankwo

Joel Nwankwo is a tech journalist. He is passionate about telling stories as it relates to Africa's social and financial tech advancements. You can reach him at joel.nwankwo@techeconomy.ng

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