A Comparison Between PayPal-MPESA vs. Crypto Payments

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A Comparison between MPESA and Cryptocurrencies like Bitcoin

After the news broke out that PayPal and MPESA are collaborating to offer a more seamless way of accepting funds between the two platforms, it was clearly evident that this was a long time coming.

The feedback we got from this post and on social media was proof that the Kenyan entrepreneur and freelancer is looking for faster, cheaper, and more efficient ways of receiving and sending out funds. An easier way of getting paid and paying out was missing. Until now.

Many however, are still not aware, or not willing to accept, that crypto payments offer all of the above but in a faster, cheaper, and more efficient way. I know it sounds like repetition, but it’s actually too good not to be repeated.

Faster than MPESA

The Lightning Network makes Bitcoin payments lightning fast

According to the PayPal FAQ section on the recent collaboration with MPESA, transfer of funds from PayPal to MPESA will take anywhere between two hours up to three days depending on the amount to be transacted. So far, this is the fastest way of receiving funds from PayPal in Kenya. Equity transactions took three days to effect.

When it comes to crypto payments however, the time difference is remakable. A simple bitcoin transaction takes a few seconds to effect and funds are immediately ready for use.

Cheaper than MPESA

PayPal to MPESA charges are 3% of the amount

The FAQ section also states that a PayPal to MPESA transaction will attract a 3% conversion of the amount withdrawn. An MPESA to PayPal transfer will cost 4% conversion fee.

That means that if you were sending $100 from PayPal to MPESA, you would be charged $3 to effect the transaction. Converting the same amount back to USD into your PayPal would cost you $4.

Compare that with crypto payments. With the recent deployment of the Lightning Network, sending out $100 will cost you a few cents to a dollar. By opening up a transfer or transaction window, it is possible to keep this channel open indefinitely and only pay the opening and closing fees of such a channel. 100,000 transactions would probably cost you a mere $20 over a period of months or even years.

Efficient than MPESA

One of the concerns for many freelancers in Kenya is the need for more efficient transactions. Most of us want a more efficient way of paying for services online. We don’t want to struggle with exchange fees, amount limits, and the fear of your account getting shutdown by a regulator.

Unfortunately, both MPESA and PayPal have all of the above pain points. PayPal does not accept Kenya Shillings and MPESA does not accept dollars or Euros. A conversion from one currency to another wastes time and costs you a little bit more than if you were using a single currency across the board.

What is more, there are limits to what you can transact on both platforms. PayPal transaction limits are $10,000 per transaction and $60,000 per day. For unverified accounts, the limits are even less. MPESA on the other hand is much worse. You cannot receive more than KES 70,000 per transaction and not more than KES 140, 000 per day. The above limits apply to the recent collaboration as well.

Now compare that with crypto payments like bitcoin. There is no transaction or daily limit to what you can send or receive into your crypto wallet. Businesses that need to move large unlimited sums of money are thus forced to use alternatives in the market.

Looking Ahead

Whether you’re accepting micropayments or moving large sums, it is clear that crypto payments offer a much faster, cheaper, and more efficient way of getting it done.

How long will it take before these crypto payments become mainstream? Only time will tell, however, the recent PayPal-MPESA collaboration is a sign that we’re accepting digital payments and becoming more receptive to these new forms of payment.

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