Coinbase’s US$75 Million Series C Funding from Banks – Developing World Unbanked are Potential E-Commerce Customers

Despite the bad News of the US$5 million worth of Bitcoins stolen from Slovenia-based Bitstamp Exchange, faith in the Cryptocurrency is at an all time high.

They showed this in a big way on Tuesday January 20^th 2015 when they invested some US$75 million during a Series C funding round in Payments processor and wallet startup Coinbase as reported in the article “Coinbase Raises $75 Million in Funding Round”, published Jan. 20, 2015 9:00 a.m. ET By PAUL VIGNA And MICHAEL J. CASEY, The Wall Street Journal.

The News of the investment in this Bitcoin Wallet was announced on their blog article “Coinbase Raises $75M from DFJ Growth, USAA, NYSE, and More”, published JAN 20TH, 2015, Coinbase.

VC (Venture Capitalists) seems to think there is a future in Bitcoin.

Especially as Microsoft and some other Tech giants are now accepting Bitcoins as legal tender for the purchase of their products and using Bitcoin Exchanges as their intermediaries as noted in my blog article entitled “Microsoft accepts Bitcoins for Purchases - Napster of Cryptocurrency set to explode in Jamaica in 2015 Year of the Sheep”.

This is the largest VC investment in any Bitcoin startup since the inception of the crypto-currency some seven (7) years ago as noted in the article “Coinbase raises $75M in largest Bitcoin funding round to date”, published Jan. 20, 2015 - 10:33 AM PST by Biz Carson, Gigaom.

But what’s more significant is that it’s the first time that financial institutions, including Brokerage firm are numbered among the institutions as noted in the article “Bitcoin Receives Nod From Financial Sector In Coinbase Funding Round”, published 20.01.2015 by Lauren Orsin, ReadWrite. To be specific, those financial institutions, whose names are numbered among the other VC’s are as follows:

1.      Andreessen Horowitz

2.      BBVA (Banco Bilbao Vizcaya Argentaria), a Spanish Bank 

3.      DFJ Growth

4.      Former Citigroup CEO Vikram Pandit

5.      Former Thomson Reuters CEO Tom Glocer 

6.      NYSE (New York Stock Exchange)

7.      Ribbit Capital

8.      Union Square Ventures

9.      USAA (United Services Automobile Association), a financial services firm

Their names stand out quite quickly, even if you’re not an investment banker or just a former Telecoms Technician like myself, as clearly, they SHOULDN’T be investing in a currency that’s extremely volatile.

So why are they throwing their money into the Bitcoin Ring? Simple answer: The Global Unbanked!

Coinbase’s Financial Investors in Series C Funding – The Global Unbanked in the Developing World

They’ve apparently taken an attitude that says, “well, if this is the future, let’s at least take a ride to see where it’ll take us”. The reason for this outlook has to do with the Unbanked in Developing World Countries.

In countries like Jamaica, the Unbanked, meaning those without fairly easy access to a Bank account and banking Services is a large enough number that they’d be of interest to Mobile Money Ventures.

Already JCCUL’s CONEC Mobile Wallet, now with Paymaster support, is now able to tap into the US$2 billion Remittances Market here in Jamaica since September 2014 as noted in my blog article entitled “JCUES now CONEC Mobile Wallet - Why CONEC Mobile Wallet still inconvenient despite Paymaster and Remittances in the JCCUL-Mozido Jamaica mix”.

This is based on research done by University of the West Indies as mentioned in the article “BOJ Developing Agent Banking System To Reach The Unbanked”, published Friday October 11, 2013 by Avia Collinder, Business Reporter, The Jamaica Gleaner. 

The UWI Research into the Unbanked was conducted by Associate professor, Department of Economics at Texas Christian University Dr Dawn Elliott and a team of statisticians from UWI as mentioned in the article “Jamaica Counting On its Unbanked”, published Friday, September 30, 2011, the Jamaica Observer.

The figures are as follows:

1. 34% of persons above 18 years old in Jamaica do not own Bank accounts i.e. Unbanked 
2. 66% of persons above 18 years old in Jamaica own Bank accounts i.e. Banked
3. 12% of Banked have transactional accounts that they use to conduct business i.e. Highly Banked
4. 80% of persons above 18 years old in Jamaica have limited access to a low-cost, efficient and easily accessible payment channels

This study is so important, it was cited twice by State Minister in the Ministry of Science, Technology, Energy and Mining Julian Robinson in a Tuesday May 28^th, 2013 Sectoral Debate and later in a Wednesday June 11^th, 2014  Sectoral Debate.

Unbanked in Jamaica and the Developing World – Bitcoin opportunity that Banks are ignoring

Most likely these Banks have seen such figures and those for other Third World Developing countries and realize that canny of them have no Bank accounts to do business online, be it making money online or E-Commerce using a VPN (Virtual Private Network) or Proxy to mask your location as described in my blog article entitled “Surfing the Internet Anonymously using VPN - How to use Streaming Set Top Boxes over VPN”.

Local Banks in Jamaica are barely taking an interest in making E-Commerce options such as Prepaid Credit Cards available to the general population for the purpose of shopping online as noted in my blog article entitled “How to purchase items and subscribe to Magazines online and ship them to Jamaica”.

Most Local Banks in Jamaica also do not explain to customers how to do e-commerce such as buying and selling on Ebay as explained in my blog article entitled “How to make money as an EBay Seller online - Everything in Jamaica from Rare Coins to Unique Craft Items”.

These Unbanked and worse the Banked who do not use their Bank accounts for online transactions creates an opportunity for International Banks to offer Banking Services that can be accessed over the Internet. Bitcoin Wallet companies like Coinbase make this possible and hence the reason for Banks to invest.

Banks and Bitcoins – Potential customers in Developing World Countries E-Commerce

The Banks in the Coinbase VC round are taking an interest in Bitcoin because they realize that not only do Bitcoins have a low transactional charges, which make them attractive to the unbanked, but they're accounts are already accessible online and usable via Bluetooth and NFC (Near Field Communication) enabled smartphones and NFC Stickers.

This makes Bitcoin Wallet like Coinbase attractive to invest in, as they’d allow International banking instructions to have customer outside of their boundaries access their various services as well as buy and sell online.

In short, the low transactional charges, online accessibility on a Smartphone, built in e-commerce capability and anonymity in terms of your identity in making transactions online means that Bitcoins may be a solution to getting the Globally Unbanked to become a part of the Global Banking System.

The fact that Microsoft can see that accepting Bitcoins as noted in my blog article entitled “Microsoft accepts Bitcoins for Purchases - Napster of Cryptocurrency set to explode in Jamaica in 2015 Year of the Sheep” is good for business and augers well for a future.

Jamaican Banks and Bitcoins – Local Bitcoin Exchange to convert Bitcoins needed

In most Developing World Countries like Jamaica, where personal income disqualifies many for Credit and Debit Cards, Bitcoin Wallets and transaction in Bitcoins may be the gateway to many making money online with minimum setup costs.

Ironically, this is a part of Coinbase's mandate and is the main reason they've been granted so much VC money from Financial Instructions as noted in the article “Coinbase Confirms $75M Raise From DFJ, NYSE, Strategic Banking Partners”, published 20.01.2015 by Kim-Mai Cutler, Techcrunch.

Now all that's left is for local Banks in the Developing World to be approached by Coinbase to do conversions of Bitcoins to Jamaican Dollars spendable either via Mobile Money Wallet or Debit Cards.......that is, it the Unbanked need such facilities.

Personally, I’m expecting the JCCUL to announce quite soon that they accept Bitcoins, being as their CONEC Mobile Wallet can now do Remittances and Paymaster is their Retail Payment Service Providers as noted in my blog article entitled “JCUES now CONEC Mobile Wallet - Why CONEC Mobile Wallet still inconvenient despite Paymaster and Remittances in the JCCUL-Mozido Jamaica mix”.

If more merchants in Jamaica start to accept Bitcoins, the Banks may wake up one day and discover that their POS (Point of Sale) Terminal are being returned by businesses as they switch to NFC Readers to process Mobile Money Wallets filled with Bitcoins and from smartphone toting Millennials!