November 6, 2023 in Fintech, Financial health

Financially Fragmented but Not Unlockable: The Blockchain Startup Story

You might not expect a medical graduate to launch a Fintech. But with a Bachelor of Medicine in Surgery from the University of Nairobi as well as a Bachelor of Science in Medical Physiology in his lab coat pocket, Felix Macharia began his startup story with Samuel Kariuki, Brian Kimotho, and Jonathan Morgan. Their journey began to build the best Blockchain off-ramp service in Africa and achieve entrepreneurial success.

Democratizing access to financial services, the startup founders have built software that facilitates the gig economy, lending, and overseas payments. Their company is contributing  tangibly to Africa’s growing economy.

Blog_Kotani Pay_Financially Fragmented but Not Unlockable

Mind the gap: En route to entrepreneur success 

Felix and his team noted a gaping chasm in access to Blockchain. When this, therefore, means no access to local payment rails, banking, cash agency network, or cryptocurrencies, building Blockchain access is a social venture. And in Africa, it could impact more than half the population.

When 57% of mobile phone users in Africa depend on SMS phones — also known as feature phones — with no access to the internet, most people on the continent are locked out of Blockchain technology. Why is this the case? Blockchain is designed for use on smartphones only.

Not only was there a tools gap, Felix and his co.-founders saw a knowledge gap. The average potential user of Blockchain could be completely disconnected from payment channel and therefore knowledge of how to use them, such that explaining Blockchain technology to prospects was going to be a challenge.

Fragmented and underserved 

To understand the opportunity that access to payment channels presents to Felix’s community, we must understand the complexities of doing business, buying goods, and expanding companies across borders. These seemingly easy tasks can be daunting, especially when payment methods across the 54 countries in Africa are fragmented by channel, regulations, and preferences.

One example of how this impacts people is in locking people into unemployment. Young people, who would otherwise access work on international platforms, face too many hurdles cashing out what they earn without a bank account or access to PayPal wallets. This means that everything from working on microtask platforms to earning digital assets is at more than arm’s length to those keen to work.

No single solution exists to cover the financial services’ needs in Africa. Traditional systems exclude marginalized communities through requirements such as bank account access and internet connectivity. Moreover, access to stablecoins was not democratically available.

This was true until Kotani Pay was born. Accessible from second-generation mobile phones with limited internet connectivity, without the need for a bank account, Kotani Pay democratized access to loans, services, remittances, payments, and financial stability like no other company. First in Kenya, Ghana, then Zambia, and soon in eight more African markets, the technology service is expanding rapidly.

Philanthropic work that boosts business

Today, 5,000 direct beneficiaries with over 15,000 indirect beneficiaries are aided by Kotani Pay’s invention. “Refugees in Dadaab and Kakuma UNHCR camps are receiving an unconditional income from crypto philanthropists and non-governmental organizations, allowing those families to meet their daily basic needs,” beams Felix, explaining how charitable donations can be sent without risk to those who most need it.

Going beyond charitable work, Kotani Pay is stimulating the economy:

  • Young people are entering the Gig economy, utilizing Kotani Pay to earn their dues directly to their mobile money wallets.
  •  Kotani Pay has run a DeFi program in the past that enabled farmers and landowners to access low-interest loans and perform transparent and real-time transactions with a straightforward repayment schedule and process. Previously, these farmers could never securely multiply their output and earnings.
  • Local businesses that receive or make payments in digital assets can do so efficiently and affordably with Kotani Pay’s APIs.

Felix, Samuel, Brian and Jonathan are doing more than facilitating work and business. They are improving people’s livelihoods and affording them financial stability. Kotani Pay took on this challenge, so it is appropriate that the company name means to accomplish in Tswana! 

“Over the last two years, we have served and impacted the lives of users like Akinyi through partnerships with Blockchains and Payment Service Providers (PSP) in different jurisdictions,” says the startup founder and CEO, Felix. A self-employed vegetable seller, Akinyi has been able to build a digital identity and reputation tied to her transactions. Moreover, with her micro-credit history, Akinyi can now take loans from a micro-enterprise company.

Delving into the details

Kotani Pay leverages Blockchain networks in an innovative way that specifically seeks to create aggregation and offer a united on-ramp and off-ramp API and Unstructured Supplementary Service Data (USSD) solution for individuals and businesses. USSD is a communications protocol used by GSM mobile phones to communicate with mobile network operator's computers. 

“We enable easy access for blockchain network users to stablecoins, using local payment channels they are already familiar with,” beams Felix.

Getting technical, his platform is a multichain EVM-compatible stack that connects USSD frontend to Blockchain at the backend. This enables seamless connection to local payment rails such as Mobile Money, as well as banking and cash agency networks, by integrating with different PSPs across the whole African continent. Individuals, businesses, Fintechs, and Decentralized Applications (DApp) can therefore bridge financial divides.

Community and tech stickiness

“We are supporting our community by connecting users to SMS-based interfaces like USSD to the Blockchain: no internet or bank account is needed to use our service and our processing times are much shorter than other providers in the industry.”

Stickiness is something all startups hope to achieve, and Kotani Pay may have unlocked this level, as well as the Blockchain. The fact that the technology can be used on both feature phones and smartphones ensures customers stick with Kotani Pay, even if they switch from a feature phone to a smartphone.

Since Kotani Pay provides full crypto wallet functionality on interfaces that are familiar to the African audience, there is no learning curve like with DApps. The platform is therefore seen as “friendly” by people of all levels of tech-savviness.

Finances to fund the Fintech

Through IBM HyperProtect and now Village Capital’s alternative financing program, called Financial Solutions for Migrants, Felix has refined the company’s internal processes for various departments. For example, the company has restructured its technical team into a Development and Engineering team, and divided marketing into Digital Marketing and Sales and Marketing. Continuing in the spirit of unlocking, Felix has unlocked the potential of individual collaborators, maximizing their greatest strengths.

Part of the funds have been set aside for product development. “Our current technology team needs to staff DevOps and Front-End roles rapidly.” Through this team expansion, Felix can improve the platform’s API and integrate to various payment aggregators across the African continent. 

Next, Felix intends to secure licenses such as the SOC2/PCI and PSP Licenses for each jurisdiction in which Kotani Pay currently operates. “By ensuring regulatory compliance we can secure more partnerships – crucial to our expansion. Moreover, we never want our growth to be hampered by legal setbacks.”

The final allocation of the alternative financing will be to Kotani Pay’s liquidity pool. This would enable the platform to serve clients with larger liquidity needs, and therefore reach even more users across Africa.

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