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Elizabeth Rossiello Describes How BitPesa Slashes International Payment Fees

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After living in Zurich and London working as an investment banker for Credit Suisse, Elizabeth Rossiello, currently chief executive and founder of BitPesa, a sub-Saharan African B2B and foreign exchange company, paid off her student loans and decided she was up for a new adventure. She ended up in Nairobi, working on microfinance, which she says, "at the time was the fintech-iest thing there was."

“I began my training in Paris … and they sent me to Bosnia, Georgia and Azerbaijan, and I thought, 'The Banks here really are horrible. I can’t believe the operations and the governance and the systems,' and they said, 'Elizabeth, these are A-rated banks. Wait till you get down to East Africa.'”

When she arrived, she was in charge of all of sub-Saharan Africa, from Kenya to Botswana and talked to chief executives, branch managers and customers, looking at million-dollar management information systems, which, for small banks, would tell them how many customers they had, whether they had loans, how much they’ve paid, which branches were performing better than others, etc. She saw that no matter how good their products were, for efficient systems that integrated with mobile money, operating expense ratios would drop from 70% to 10%. She realized just how important back office operations were. “To make a bank or financial institution or product work in a region where there’s very little infrastructure, you have to invest in technology,” she says in one of the inaugural episodes (Google PlayiTunes, StitcherTuneIn Radio) of my new Forbes podcast, "Unchained: Big Ideas From The Worlds Of Blockchain And Fintech" (web; Google PlayiTunes; StitcherTuneIn Radio). (We recorded on Sir Richard Branson's Necker Island, where we participated in the 2016 Blockchain Summit, a small gathering of blockchain-interested professionals from a variety of industries, including tech, government, non-governmental organizations, finance, music, and others.)

Impressed by some banks that were mobile money-only, she met the founder of one who promised to give her seed money if she found a way to use Bitcoin as a solution. She became interested in how the digital currency could help the urban customers importing from Dubai and China, exporting to Europe, trading with each other and doing digital advertising in poor East African markets.

“So how do you make a payment to your supplier? The way most of these people made payments was, they would carry cash on an airplane.  One friend would be representative to go to Guangzhou, China with a bag full of cash,” she says. “The other way would be to send a wire to an unknown fixer or partner in China ahead of your trip. That would take a few weeks, and when you get off the plane, you hope that guy has sent the wire to your hotel. The hotel gives you cash again, in U.S. dollars, and then they have the hotel FX broker come with his backpack to the hotel and change the cash into RMB. Those are just some of the tamer ways people used to move money around.”

Having once herself been asked to return a key to a safari house by putting it in an envelope and giving it to a bus driver driving along the route swinging by the house, she says, “Something like 75% of regional remittances in Africa travel by bus in envelopes.”

How different countries sent money internationally fascinated her because she’d been living abroad for 10 years. In Germany, she’d been told to send online wires, and they didn’t know what checks were. Meanwhile, in the U.S., people were surprised she was sending online wires.

In Africa, she saw that even when expensive technology was given to a bank, the company couldn’t always absorb it. “They didn’t know how to use it, there was no customer support that was local, it was super-complicated, they had to do migration from their old system to the new system, they might have used one functionality out of a hundred,” she says. “So the technology had to be easier, it had to be cheaper to set up, it had to be intuitive, and you didn’t need to maintain it yourself. So when you think about Bitcoin, right away when you start a company, if you learn about it and you have a developer that can link into into it, you can just start. You don’t have to build the whole thing yourself. … [With BitPesa,] I do not need to invest in a million-dollar Oracle management information system.”

BitPesa allows people who bank with small regional banks in, say, Asia to send money to a local bank in Kenya, without having to go through the correspondent banks, which take a cut, and which can route a payment from Asia to North America before it arrives in Kenya. The company can do this without charging the exorbitant fees often found in the less competitive corridors such as Rwanda to India, or in places where a large money transfer company such as Western Union or Moneygram has exclusivity agreements with the postal services that gives them a near-monopoly on pricing, such as described in this World Bank report.

Find out how BitPesa uses the Bitcoin blockchain to make fast and cheap international payments happen and how the ability to make low-cost B2B payments in Africa is opening up new business opportunities in this fascinating podcast (web; Google PlayiTunes; StitcherTuneIn Radio).

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