Paxful is using cryptocurrencies to slash the cost of money transfers

And it’s about time – traditional transfer costs via banks can swallow more than 20% for small amounts.
Sending funds to another Paxful customer is free for the first five transactions per month, and 1% of the amount transferred thereafter. Image: Shutterstock

The World Bank runs a useful web page showing the cost of money transfers between African countries.

Sending R1 370 between South Africa and Kenya, for example, will cost an average of 11.68%, and as high as 29.67% if you’re using Absa.

Africa-destined remittances totalled $40 billion in 2019, with nearly 12% of that going in fees.

If ever there was a market begging for disruption, this is it.

That disruptor is Paxful, a company founded in 2015 targeting the four billion people worldwide who are unbanked or underbanked. In five years, Paxful has accumulated more than 4.5 million customers and slashed the cost of money transfers.

Sending bitcoin to another Paxful customer is free of charge for the first five transactions per month.

After that, it costs $1 or 1% of the sending amount, whichever is the greater. This type of peer-to-peer transaction, bypassing the banks, will do more than slash the costs of money transfers, it will speed up the development of some of the poorest areas of the world by inducting them into the world of digital assets, says Paxful CEO and co-founder Ray Youssef.

A recent report by the blockchain research group Chainalysis shows that monthly crypto transfers under $10 000 to and from Africa jumped more than 55% to $316 million for the year to June. The number of monthly transfers nearly doubled – surpassing 600 000 transactions, with most of the activity taking place in Nigeria, South Africa, and Kenya.

Practical, cost-effective, global

“Many Africans living abroad face difficulties when it comes to remittances or payments, as modern money transfer operators are often expensive and time-consuming. We are now providing our users with a practical and cost-effective process offering them a global financial passport.

“For true financial inclusion to happen, a free market for money transfers is required,” says Youssef, who was born in Egypt but grew up in New York.

Using cryptocurrencies like bitcoin and tether (backed by the US dollar), Paxful is starting to eat into the traditional money transfer business.

Youssef met fellow co-founder Artur Schaback at a bitcoin conference in 2014 and the pair started to come up with solutions for some of the most pressing problems facing the world’s poor – such as how to untangle themselves from increasingly worthless local currencies and send remittances at low cost to families back home.

Read: Why emerging markets love crypto

“We have people in South Africa who are using the Paxful network to build their own versions of Western Union, so they can send money to family and business associates elsewhere in the continent for a fraction of the usual cost,” says Youssef.

“The other benefit we provide is that the remittance is instant.”

Paxful allows customers to use local fiat currencies (like the rand or Zambian kwacha) to purchase cryptos such as bitcoin and tether, and then convert these back to fiat currency again.


It currently offers more than 300 different payment options, and recently added the Zimbabwean-developed Uhuru Wallet to the network. Uhuru was developed on the Stellar blockchain, and provides escrow services to buyers and sellers of goods and services. It is accessible via WhatsApp, catering to the growing number of people in Africa with smartphones.

In practical terms, this means you can buy bitcoin with local cash and use it to pay a bill on Alibaba, or purchase air time, electricity vouchers, lottery tickets and other services without having to go through the banking system.

Read: The future of money and payments

One of the problems slowing wider crypto adoption in countries such as Nigeria is the variety of Know Your Customer (KYC) regulations. Paxful is planning to solve that by introducing a localised KYC platform to speed the onboarding of millions more customers.

Youssef believes Africa is ripe for the type of payments solution Paxful is offering. “If you consider that some debit cards in Nigeria only allow the users to spend $100 a month, while many merchants are unable to get registered for Visa and Mastercard, we can bypass all of that and provide a payments mechanism for everyone.”

All Paxful’s growth has been achieved organically, without any venture capital funding. This alleviates any pressure from funders to see quick returns, and allows profits to be funnelled back into growing the network.

Bigger picture

One feature that sets Paxful apart from many others in the crypto space is its investment back into communities. So far it has built two schools in Rwanda with a total of about 400 students, and one school in each of Kenya and Nigeria. All schools come with modern equipment and water wells, and are located in some of the poorest parts of these countries.

Says Youssef: “I am putting the challenge out to other companies operating in the crypto space to give back to the community, either by joining us in our quest to build 100 schools in Africa over the next decade, or to build a school of their own.”

The company launched an education drive starting with universities in east and southern Africa to provide practical insights into the true-use cases of bitcoin, how to avoid falling prey to bad actors in the crypto-space, and tempering the overemphasis on bitcoin speculation.

Peer-to-peer networks are sometimes seen as convenient avenues for money laundering, and less than 1% of Paxful’s transactions fall into dispute. The attention over the next year is to get this down to as close to zero as possible, while reducing the time it takes to handle support queries from the current eight minutes.

The crypto becomes largely invisible

The fact that Paxful uses bitcoin and tether as payment mechanisms is a sign of the changing financial order, but these will become largely invisible to users who are able to switch between a variety of different currencies, from fiat to crypto and back again, without having to pay attention to the mechanics behind it.

“Most of the volume traded on crypto exchanges is speculative,” says Youssef. “Ours is a real-use case, especially in emerging markets.”

He adds: “The network we are building gives millions of people access to an army of friends and colleagues around the world. Our aim is to break the system of financial apartheid, and we’re solving a problem of financial exclusion that has existed for the last 100 years.”

The company has seven offices around the world, one of them in SA.

“And we’re always hiring – especially if you’re super-talented,” adds Youssef.



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Banks either need to either evolve or die.

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