Bitcoin in Africa is brewing with potential. From Ghana to Kenya there are interesting startups trying to tackle the issue of remittances, while in South Africa popular payment gateway PayFast recently introduced bitcoin integration to more than 30 000 of its ecommerce clients. But although this is very exciting, the adoption rate of the cryptocurrency is still very slow due to an abundance of misconceptions and a lack of infrastructure.
South African startup Xoin (pronounced with the Xhosa click) is hoping to drive bitcoin adoption in order to give the country’s underbanked and untapped markets a voice. It’s planning to do so by introducing bitcoin prepaid vouchers or gift cards that allow people to easily buy the digital currency with cash.
“The unbanked markets, especially teenagers with mobile phones in Africa, are entirely excluded from ecommerce,” notes Co-Founder of Xoin, Helghardt Avenant. “Bitcoin makes ecommerce more accessible to these markets, especially when it comes to virtual goods.”
The self-funded startup was launched by two students from the University of Stellenbosch with the vision of solving what they argue to be one of bitcoin’s biggest problems — its accessibility.
With Xoin, sending money is now as easy as sending an email, and it’s great for people new to bitcoin. The service automatically sets you up with its digital wallet pre-loaded with the face value of your voucher.
If not mining or relying on the kindness of the internet, the most common way for individuals to get their hands on digital currency is using their bank accounts — transferring government currency to an exchange which then pays you back in bitcoin. The process is tedious and limits accessibility.
So how does Xoin’s prepaid bitcoin work?
Xoin’s physical vouchers can be purchased with cash from merchants. Customers can then use their smartphones to scan the code and redeem bitcoin calculated using South Africa based BitX’s real-time exchange rate.
From the merchant’s perspective, Xoin works exactly the same as the airtime model, explains Avenant. The setup is free and merchants buy credits by either doing an EFT or cash deposit to a unique reference number. Xoin then tops up their credit and include a 5% commission. For example, if a merchant wants to stock R1000 worth of Xoin vouchers, it will cost the merchant R950. The merchant can then make a R50 profit.
Moreover, Xoin’s technology also enables vendors to become bitcoin ATMs — a method that’s way cheaper than shipping a US$6 500 worth (about R65 000) machine from overseas.
Avenant and fellow founder Michail Brynard are both doing their Masters at the MIH Media Lab at Stellenbosch University. With the pair sharing a passion for new and interesting technologies like bitcoin, they decided to create a tool that could make money transfer, mobile payments and ecommerce more accessible to the unbanked and underbanked.
“We believe in the potential of bitcoin as a digital currency. We decided to spend our time dreaming up ideas in this space,” says Avenant. “As a result, we’re trying to solve the next obvious problem for bitcoin — accessibility to the everyday person without a bank account.”
Xoin’s concept isn’t entirely new. Internationally, there are somewhat similar startups such as the US-based GogoCoin and The Phillipines’ PrepaidBitcoin. Not all of them, however, share Xoin’s unique vision of serving untapped markets.
Even among affluent students in Stellenbosch, South Africa, only a select few have access to online banking and even fewer have credit cards, notes Hugo Minnaar, founder of online study portal StudentSummaries — an ecommerce website selling various study notes via EFT, credit card and more recently bitcoin.
“We get a lot of queries from students, asking if they can pay cash as they do not have a credit card or online banking”, says Hugo. The few students who do have credit cards are put off by fraud stories and still prefer cash.
But bitcoin’s not limited to buying things online. As we’ve recently seen, the digital currency can be used to cut costs when it comes to remittances, pay back friends small loans, invest, and so forth.
Xoin hopes to use StudentSummaries’ acceptance of bitcoin as a case study going forward. So far vouchers are being distributed through a local canteen and Pulp Cinema. Over the next few weeks Xoin is signing up three more merchants in and around local campuses as a trial period.
“We like the idea of focusing on our local campuses such as Stellenbosch University and University Cape Town where we understand the market,” Avenant tells Ventureburn. “Students come from all over the country. We hope that they do the work to spread the word of Xoin when they return to their homes.”
“In the meantime we will be meeting with chain stores to potentially stock Xoin prepaid bitcoin across the country,” says Avenant.
To achieve its grand vision, Xoin first needs to earn people’s trust in bitcoin. It’s hoping to do so by cutting down on a lot of costs: “Up until now we have given away more Xoin prepaid bitcoin than what we have actually sold. It is likely that we will have to continue to do so in order to get the word out,” he adds.
The company is also currently not charging any fees until it can stand tall, and is hoping for donations from the bitcoin community. “The purpose is to drive user adoption. In the future we will charge a fixed fee that is capped. This will allow us to drive the fees down,” says Avenant.