Bitcoin breaks new boundaries by slashing cost of remittances

Bitcoin continues to break new boundaries as Kenyan start-up BitPesa, announced it will be going head-to-head with money transfer services such as Western Union by using the virtual currency Bitcoin to cut transaction costs for remittances.

Established providers such as Western Union deduct between $10 (£6) to $17 (£10) from a wire transfer of $200 (£122) from the US to Kenya, and the money can take as long as five days to clear.

BitPesa, by contrast is planning to charge three percent on overseas transfers and claims the money will arrive the same day. A wire transfer of $200 using BitPesa would cost just six dollars.

Chief executive officer, Elizabeth Rossiello, said in an interview:

There are no other market entrants trying to solve the problem of the very high cost of remittances in Africa.

Kenyans working abroad send around $1.2bn (£736m) worth of remittances back to Kenya, providing an invaluable source of revenue to friends and relatives while boosting the wider economy.

The new service plans to begin on a trial basis in March after gaining regulatory approval. The company hopes to gain one per cent market share within a year, handling 6,500 transactions a month.

Yesterday Bitcoin broke through the $1000 barrier for the first time as the popularity of the virtual currency appears to show no sign of waning.