Cryptocurrency Payments Key to Lowering Cross-Border Remittance Charges and Boosting Microwork Uptake in Africa, Study Shows

Cryptocurrency Payments Key to Lowering Cross-Border Remittance Charges and Boosting Microwork Uptake in Africa, Study Shows

Microwork, a $1 billion employment market based on technology that divides processes into piecemeal tasks to be completed by many people over the internet, largely utilizing mobile devices, has evolved in the last decade. According to a study conducted in Kenya by Mercy Corps Ventures (MCV), the impact investing arm of global development agency Mercy Corps, the allure of microwork opportunities has grown to capture the interest of Africa’s youth, who stand to earn up to $7 per day, compared to a daily urban income rate of $4.35 for low-income groups.

According to the African Development Bank, microwork has the ability to provide opportunities for gig workers of all skill levels and enhance employment for Africa’s burgeoning youth population, with 10 million to 12 million young people entering the workforce each year. However, according to the MCV study, payment collection fees, as well as other impediments, have hampered microwork adoption in Africa, where a turnaround may be achieved utilizing crypto-payment options. According to a study conducted in Nairobi, Kenya to evaluate if digital stablecoins and mobile wallets may alleviate frictions and lower costs in cross-border payments, cryptocurrency payment reduces transaction fees by 93 percent regardless of payment size.

Cryptocurrency Payments Key to Lowering Cross-Border Remittance Charges and Boosting Microwork Uptake in Africa, Study Shows

Celo, a mobile-first Defi platform; Kotani Pay, a technological stack that supports blockchain protocols; Appen, a publicly-traded data firm; and NairoBits, a Kenyan non-profit that uses ICT to empower underprivileged kids, were among the other participants in the study. “We taught 200 Kenyan kids how to use a mobile app and incorporated Valora digital wallet, which is built on Celo, to obtain digital microwork from global platforms.” Over the course of three months, we evaluated how a stablecoin may lower the costs and obstacles of sending and receiving cross-border micropayments,” Mercy Corps Ventures Senior Managing Director Scott Onder said.

According to Celo partner Will Le, the study’s findings indicated that “by lowering financial frictions, we developed a new paradigm for harnessing talent across borders that were previously not achievable with existing financial infrastructure.” Stablecoins, in particular, have the potential to drastically cut the cost of remittances and stimulate cross-border business.” Participants in the study were compensated a few seconds after completing the task using Celo dollars (cUSD), a Celo-native stablecoin that tracks the value of the US dollar, with fees of around $0.01. The payments were temporarily saved in Celo’s digital wallet, Valora, and could be cashed out at any moment to Kenya’s mobile money platform, M-Pesa, thanks to Kotani Pay’s off-ramp technologies, which permitted the conversion.

Remittances, which include payments for online jobs, accounted for about 3.5 percent of Kenya’s GDP in 2021, totaling $3.7 billion. Kenyans receiving remittances are possibly losing approximately $100 million per year due to global weighted average remittance charges of 4.71 percent. “Because the average cost of remittances to the value of $200 in Sub-Saharan Africa is much higher than the global average (8.72 percent versus 6.30 percent globally), the savings might be even greater.” “If all of those transactions cost only the 2.02 percent allowed during the pilot, the total potential impact on Kenya’s economy may be over $200 million, or 0.22 percent of the country’s entire GDP,” MCV stated in a statement.

Overall, Kenya’s online employment market is growing steadily, thanks to rising internet penetration — about 90% of the country’s urban population has access to mobile internet. According to this survey, at least 1.2 million Kenyans work online, earning an average of $182 per month in a country where 36% of the 2.6 million salaried workers (about 1 million people) earn between $176 and $274 per month. PayPal, Skrill, and Payoneer are some of the most popular options for foreign online employment, however, some of them have practiced for withholding payments without explanation and charging greater fees for fewer payouts. “High transaction fees, especially for lower payouts, mean that micro workers often lose a significant portion of their earnings (with a global weighted average cost of 4.71 percent but as high as 30 percent of gross earnings in some cases),” MCV said, adding that these barriers can be overcome using cryptocurrency.