Nairobi-based crypto payments startup Kotani Pay (1) has closed a $2 million pre-seed funding round led by P1 Ventures, with participation from DCG/Luno and Flori Ventures. The two-year-old startup aims to facilitate cross-border remittances for underserved populations in Africa, addressing the challenge of high transfer fees and limited banking access.
Financial Inclusion and Remittances
Kotani Pay aims to provide financial inclusion to underserved African populations, particularly in countries like Kenya, Ghana, Zambia, and South Africa. Remittances play a vital role in the African economy, accounting for up to 20% of GDP in some countries, according to the stats (2) from the United Nations.
Leveraging Blockchain and Stablecoins
Kotani proposes using blockchain technology, particularly stablecoins pegged to fiat currencies, to facilitate cost-effective international remittances. The traditional money transfer method faces challenges due to high transfer fees, underdeveloped banking systems, and lack of access to banking services.
Middleware for Local Payment Networks
Kotani has developed middleware that connects blockchains to local payment networks, enabling users to convert stablecoins held in their mobile wallets into local currencies for payments. This connection is facilitated by a communication protocol called Unstructured Supplementary Service Data (USSD), which allows transactions on feature phones without internet access.
USSD (Unstructured Supplementary Service Data) continues to play a vital role in driving digital inclusion in Africa. But did you know USSD is one of the three Man-Machine Interfaces (MMI) codes? Thread 🧵 pic.twitter.com/wb8kCeQjOZ
— Kotani Pay (@kotanipay) May 6, 2022
B2B Solution and Expansion Plans
Kotani offers its technology as a B2B solution, connecting crypto platforms' smart contracts with mobile money APIs. The startup plans to expand to more African countries, including Rwanda, Senegal, Ivory Coast, Tanzania, and Nigeria.
Future Products and Growth
Kotani aims to introduce additional products, including Reconset (Reconciliation-as-a-Service) and Money Ledger (Ledger-as-a-Service), following its acquisition of Nigerian startup Fuhlstack. The startup focuses on inbound payments, with an average transaction size of $150,000, and monetizes through an interchange fee.
