Nairobi-Based Kotani Secures $2 Million Pre-Seed Fund to Facilitate Cross-border Remittances For Underserved Populations in Africa

Kotani, a Nairobi-based crypto payment startup, has secured $2 million in pre-seed funding to facilitate cross-border remittances for underserved populations in Africa.

The seed round was led by P1 Ventures, with participation from other investors which include DCG/Luno and Flori ventures.

With the seed raised, Kotani aims to expand its product offerings to other African countries which include Senegal, Ivory Coast, Tanzania, and Nigeria, to provide financial inclusion to underserved populations.

Recognizing the challenges involved in the traditional money transfer method, Kotani will leverage blockchain and stablecoins to facilitate international remittances to Africa, and also address the high transfer fees and limited banking access.

Kotani has developed a system 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.

Also, the startup 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 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’s co-founder.

Notably, Kotani Pay CEO Felix Macharia acknowledged that its operations are closely monitored by the central banks of the countries it is available in. 

He said, “We either work directly with the local mobile money operators or ride on the charter of regulated partners to ensure that our operations are compliant. The central banks are actually getting excited about some of these use cases and are getting involved as they develop Central Bank Digital Currencies”.

The payment platform offers its technology as a B2B solution, connecting crypto platforms’ smart contracts with mobile money APIs. It  provides a seamless onboarding process and stablecoin conversion to local currencies on any blockchain platform. 

Kotani also offers a business-facing solution that lets users convert local currencies into USD. Although this is targeted at businesses, the offering could be extended to individuals soon. Beyond market expansion, Kotani Pay is expected to launch new products. They include Reconset and Money Ledger. 

The company is set to introduce other products including Reconset, a Reconciliation-as/a-service offering, and Money Ledger, a ledger-as-a-service solution after acquiring Fuhlstack, a Nigerian startup.

With its developer integration toolkit, app developers can easily integrate payment solutions into their applications, websites, or web plugins. The platform supports multiple stablecoins and charges a transaction fee for its on-ramp and off-ramp services.