American Express Invests in Bitcoin Remittance App Abra

     Today, bank transfers take two to three days, and even seemingly instant payments apps like Venmo aren’t. But Bitcoin technology enables secure, instant money transfers between people. It’s spurred startups to make instant transactions every day. And many of those startups aren’t marketing themselves as Bitcoin companies.

     Abra recently announced that all registered users in the United States and the Philippines will soon be able to use the instant money transfer app , and that it will now also provide services that enable merchants to accept digital currency payments from consumers using its app . In addition , since it announced its $ 12 million Series A funding in September , it has received strategic investments from American Express and Ratan Tata , chairman emeritus of India's Tata Group . We know that financial institutions that have invested in Bitcoin startups include Nasdaq, Visa , Goldman Sachs , and the New York Stock Exchange, and this time American Express's investment in Abra also makes it join this list.

     “As individuals and businesses trade more globally, people need a more convenient and cheaper way to transfer money,” said Hashur Sanghi, managing partner of American Express Ventures, in a statement, using a shorthand term “blockchain” to describe the technology that powers Bitcoin. “We believe Bitcoin’s blockchain can play an important role in money transfer and commerce, especially in the development of emerging markets.”

     The basic premise of Abra is that anyone should be able to send money from their phone to anyone else’s phone. “Simply sending money from any phone number anywhere in the world to another phone anywhere else in the world is impossible today,” Bill Basit , Abra ’s CEO and founder, told me in May . “And it doesn’t make any practical sense in the hyperconnected world we live in.”

     The app lets users store digital currency on their phones and then send money to any phone number in the world, which can then be converted into cash through Abra ’s network of tellers or through a traditional bank. Because all money is stored directly on the phone ( as fiat currency , not Bitcoin ) , Abra never touches the user’s money.

     If a user wants to send $ 5 to a friend , she only needs to provide the recipient’s phone number. Abra creates an index structure on the back end that maps phone numbers as public addresses on Bitcoin’s blockchain, a ledger of financial transactions made on computers around the world that is updated about every 10 minutes. ( Every 10 minutes, a new block of transactions is added to the ledger, forming a chain of blocks, hence the name. ) If the recipient doesn’t have Abra on her phone , she will receive a message to install the app. Behind the scenes, blockchain records the transfer of the $ 5 from sender to recipient, and both apps are updated to show that the sender has $ 5 less and the recipient has $ 5 more . ( The software also takes care of currency conversions to ensure that the value of the currencies is not affected by Bitcoin ’s price fluctuations. )

     If the recipient wants to convert the digital currency into cash, Abra has a network of tellers, including individuals who work as ATMs and large retailers, who have signed up with Abra to convert digital currency on the Abra app into cash. And Basit said that in countries like the United States, consumers prefer to use banks to withdraw money from their apps.

     However , in developing countries , many individuals and small convenience stores are also likely to become tellers. In countries where mobile phone minutes are purchased, sellers of airtime are also likely to become tellers. They raise cash by selling airtime, then sell the cash to Abra users who want to exchange digital currency for cash, and make a profit on the difference. Usually tellers set their own fees, and Abra will charge an additional 0.25% transaction fee.

     Abra’s new merchant services feature will allow any merchant that has added the Abra merchant API to its website or mobile app to accept payments by simply entering a phone number at checkout. This payment function works just like a cash payment . Abra does not provide fraud protection like credit cards in the case of counterfeit products, so victims will need to communicate directly with the merchant.

     The company has begun signing up merchants and will demonstrate the service this week at the Money2020 conference in Las Vegas. The company expects to launch an API service for merchants later this quarter .

     Other investors in its Series A round include Arbor Ventures , First Round Capital and RRE Ventures .