Kotani Pay, a crypto payments startup based in Nairobi, has just closed a $2 million pre-seed funding round.
DCG/Luno, Flori Ventures, and P1 Ventures were among the investors who took part in the investment round, which was led by P1 Ventures.
Kotani Pay is a cryptocurrency payments firm that was founded in 2020 by Brian Kimotho, Daniel Kimotho, Felix Macharia, Samuel Kariuki, and Stephen Kiarie with the goal of facilitating cross-border remittances for Africa’s underbanked population.
The Unstructured Supplementary Service Data (USSD) communication protocol enables users to send money using feature phones and local payment networks, many of which Kotani developed as a middleware linking to blockchains.
By bridging the smart contracts on cryptocurrency platforms and the mobile money APIs, Kotani is providing its technology as a B2B solution.
Yellowcard, DCG, Fonbank, Celo’s Valora, Mercy Corps, UNICEF Crypto Innovation Fund, and Stellar are a few of its major cryptocurrency partners.
Kotani also allows users to “on-ramp,” or convert their local currencies into USD, a solution that’s tailored more to businesses at the moment but could open to retail users in the future with the required licenses, the founder said. The process is enabled by a “network of liquidity providers through partnerships with local forex services and money transmitter operators from whom we source local USD,” according to the company.
The majority of transfers made on Kotani—$23 million in total—are inward payments.
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The platform’s average transaction size is $150,000 due to its enterprise focus. According to Macharia, Kotani, like other suppliers of payment infrastructure, makes money through an interchange fee, which amounts to about 1% of gross transaction volumes on average.
After acquiring Nigerian startup 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.