Cryptocurrency: Global giant Paxful focuses on Africa
The rise of the Paxful brand has been as meteoric as the expansion in the popularity of the blockchain technology and cryptocurrency market. Since its inception in 2015, Paxful has built a solid track record based on its proven capacity to make Bitcoin trading easier by removing the middleman and creating a peer-to-peer market for direct trading. Cofounded by Egyptian entrepreneur Ray Youseff, the USA-based firm has grown its number of transactions in Africa to 6.5million as at January 2019.
The numbers tell the story better. Within a short period, Paxful’s popularity has grown globally to 2.5 million users. More interesting is the fact that a majority of its users are young Africans below the age of 35 who are finding more areas for cryptocurrency application.
“The people of Africa have been the most ingenious and resourceful of our users – they are redefining our understanding of the uses of bitcoin. The world has much to learn from Africa about the future of the crypto-economy”, said Benjamin Onuoha, Paxful’s Africa Regional Consultant at a recent event in Johannesburg, South Africa.
Trade in Bitcoin is defined by the excitement of new value, new wealth, new possibilities and new frontiers. But there’s a flip side: dishonesty and fraud by people who want to get rich fast by cutting corners. In this regard, Paxful is playing a key role in making blockchain more attractive for newcomers by cutting out the middlemen, broadening the scope of transactions and reducing the opportunities for fraud. In this sense Paxful is giving the market exactly what it wants – variety and security. The bottom line is that Paxful is giving customers and prospects access to bitcoin safely, securely, and at a fair price.
Small wonder Paxful describes itself as the “PayPal + Uber’. The site makes it possible for users to buy bitcoin instantly with debit, credit, cash, PayPal, or just about any currency, as well as with a wide selection of gift cards and other digital currencies. Users do not require a bank account to transact on Paxful. For a new technology competing against older, established technologies and currencies, this is a masterstroke in financial inclusion, a market redefining strategy that sets Paxful apart from traditional bitcoin exchanges. Paxful looks set to lead the drive for financial inclusion to the over 2.5billion people worldwide without access to conventional means of banking, using Africa as its launching pad.
With over 100 employees around the world and offices in New York City USA, Hong Kong, Tallinn Estonia and Manila Philippines, the global brand’s focus on Africa may not be unconnected to the critical figures of financial inclusion and unemployment, as well as the size of the continental market.
In Africa, a whopping 370 million people still remain unbanked and unserved out of the total population of 590 million. With banks coming up with new ridiculous reasons to force customers to part with their hard-earned cash, Paxful completely unbundles the market for users, making it possible for them to exchange a host of items as listed above for Bitcoin. Nigerian users will certainly find the features on Paxful very useful and the numbers show an increasing number, especially in the youth demographic, are embracing the platform.
Artur Schaback, chief operating officer of Paxful, said African consumers tend to use cryptocurrency to buy goods, mostly from overseas, as well as investments in promising blockchain startups.
“As a company, we’ve learned a lot from African consumers. For instance, we’ve improved our mobile capabilities to cater to the widespread use of smartphones on the continent. Our experience in Africa has strengthened our capability to serve consumers regardless of geographical location or origin,” he explained.
With an estimated value of $64.5m traded monthly in Africa Alone, Paxful is now targeting university students in some African countries, luring them with information on crypto-trading and free wallets with free Bitcoin.
In South Africa and Kenya, Paxful has spent the better part of 2019 touring the countries, stopping at universities to educate students about Bitcoin.
The firm has been hosting workshops throughout 2019 and it believes that by educating students about the Bitcoin economy, it will encourage entrepreneurship in the sector.
“As a values-driven company, we want to make the bitcoin economy accessible for everyone, especially the youth. To this end, we would like to reach as many young people as possible to help them understand the digital currency market and transact safely and with confidence,” explains Youssef.
The workshops are not stopping in South Africa and Kenya. Welcoming both Bitcoin novices and experts, Paxful aims to increase access to the crypto-economy in Africa, especially the youths.
Paxful’s deepening Africa strategy is anchored on solid numbers. According to Forbes, the platform saw its transaction volume increase by 130% in 2018, driven by a growth of activity among African users. The surge in figures was due to Paxful’s user base tripling in Ghana, with the opening of 41,243 accounts, and Nigeria’s accounts more than doubling to 321,476.
It’s amazing to see how they have been utilizing the website,” said Youssef regarding Paxful’s users in Africa. “They use it to send money to their family for e-commerce, importing and exporting. They conducted more than six million trades last year compared to North America with 3.9 million. This only shows that people will embrace changes if you provide them with a platform that can support that.”
Paxful’s user-friendly features are driving this increase. For instance, users can access Paxful’s website via a “virtual kiosk link” that any person or website owner can use. The kiosk is basically Paxful’s affiliate program, allowing people to spread the word about Paxful while generating a 2% revenue from any amount bought.
The process is simple and straightforward. To buy Bitcoin on the platform, simply choose the amount of Bitcoin you want to buy, choose the currency you want the exchange rate to be in, select a payment method (there are dozens), choose a seller and click “Trade”. Follow the instructions for payment and click “Mark as paid”. Wait for the seller to release the Bitcoin.
Paxful’s processes are very proactive in identifying and dealing with users with dodgy intentions and is totally committed to ensuring that anyone found guilty of malpractice on the platform is dealt with. Youseff in a recent chat said “Paxful is doing and always will do what is in the best interest of our responsible customers and will continue to implement best-in-class procedures despite any blowback from specific users and groups. We take these allegations very seriously and have a zero-tolerance policy for fraud and illicit activity of any kind on our platform.”
One of the measures deployed by Paxful to secure transactions is an escrow service. Once a buyer finds a seller and the offer is accepted by the seller, the Bitcoin are automatically moved from the vendor’s wallet to escrow. At this point, the seller can’t cancel the trade. However, the buyer has a limited time frame to deliver the money to the seller and mark the payment as ‘complete. If the buyer fails to do that in the given time frame, the deal will be automatically cancelled and the Bitcoin will be returned to the seller’s wallet.
When both the buyer and the seller have verified that the transaction has been confirmed and all the terms have been met, the money will be released to the buyer’s wallet and the deal will be concluded. If at any point there will be a disagreement between the two parties, the process will move along to dispute. Paxful moderators will then investigate all the info, consider all the available details and finally make a decision to whom the bitcoins will be awarded. Having said that, in most cases transactions go through smoothly thanks to Paxful’s intense moderation that clamps down on potential scammers.
As effective as these processes have generally proved, Paxful is still not satisfied. It continues to seek new ways to make them better. In April it announced that it has teamed up with Jumio, a digital identity and address verification company in order to improve Anti-Money Laundering (AML) procedures and implement Know Your Customer (KYC) requirements in the marketplace. Jumio’s AI-powered Trusted Identity Service and verification process, Paxful believes, will help minimize risk and ensure all users have submitted proper documentation.
“We take compliance and security very seriously here at Paxful. We’re hoping that these and other upcoming changes will help our customers understand the importance of regulation and compliance when it comes to operating on a peer-to-peer finance marketplace,” said Lana Schwartzman, Chief Compliance Officer at Paxful
Beyond profit making, Paxful is also focused on giving back.
In 2018, Paxful launched the #BuiltwithBitcoin charitable initiative to demonstrate bitcoin’s ability to help people around the world. Paxful set a goal to build 100 schools, water wells, and community gardens for sustainable agriculture all across the continent of Africa and funded entirely by bitcoin donations. On July 18 2019 and in honor of the Nelson Mandela International Day, Paxful donated over 13,000 South African rands worth of bitcoin to the GROW with Educare Centre project as their first charitable contribution to South Africa.
Projects like these demonstrate the usefulness of bitcoin as not only a currency but a successful vehicle for the development of remote regions around the world.
Oche is an Abuja-based policy analyst