Kotani Pay generates $2 million pre-seed funding to facilitate offline crypto payments.

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Kotani Pay, a Kenyan-based fintech startup, has raised a $2 million pre-seed funding round to expand into Rwanda, Senegal, Ivory Coast, Tanzania, and Nigeria.

P1 Ventures led the round, with participation from DCG/Luno and Flori Ventures.

Founded in 2020 by Brian Kimotho, Daniel Kimotho, Felix Macharia, Samuel Kariuki, and Stephen Kiarie, Kotani Pay is a crypto payments startup that aims to make cross-border remittances easier for Africa’s underbanked population.

The use case it focuses on affects the daily lives of hundreds of millions of people, including those in Kenya, Ghana, Zambia, and South Africa.

Kotani suggests using blockchain to make remittances to Africa easier. It uses stablecoins — cryptocurrencies linked to fiat money like the USD — to send money abroad for a fraction of the cost of more conventional methods.

With the help of the Unstructured Supplementary Service Data (USSD) communication protocol, Kotani has created a middleware that links blockchains to regional payment networks. Many of these networks enable users to send money using feature phones without an internet connection.

Kotani is offering its technologies as a B2B solution, connecting crypto platforms’ smart contracts on the one side and mobile money APIs on the other. Some of its major crypto partners include Yellowcard, DCG, Fonbank, Celo’s Valora, Mercy Corps, UNICEF Crypto Innovation Fund and Stellar.

Additionally, Kotani users can “on-ramp” or convert their home currencies into US dollars; this feature is currently more geared towards businesses but could be available to retail users if they obtain the required licences.

Kotani makes money by charging an interchange fee, which amounts to about 1% of the gross transaction volumes.

Inbound payments account for $23 million of all transfers made on Kotani to date. The platform’s average transaction size is $150,000 because it focuses on businesses.

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