The Abra Pay solution will allow merchants to accept online payments minus the friction created by other online networks. The solution reduces payment acceptance costs and settlement times.
Abra uses bitcoins to provide instantaneous and secure money transactions. The company will provide an app to enable merchants to accept digital cash and will first be available to users in the U.S. and the Philippines.
Abra’s newly-announced investments from American Express and Ratan Tata, chairman emeritus at Tata Sons, holding company for the Indian Tata conglomerate, add to its previously-announced $14 million Series A round, according to Forbes.com.
Online merchants typically face high costs for many payment schemes, especially in emerging markets. The average merchant discount rate for a credit card in emerging markets is two to three times higher than what the merchant would pay in Europe of the U.S., according to Abra.
Abra allows anyone to send money from one phone to another, said Bill Barhydt, the company’s CEO and founder, according to Forbes.com. He said this is not always possible today.
A user can store money digitally on the phone, send it to another phone anywhere in the world, then exchange the money for cash using the Abra network of tellers or traditional bank notes. The money stores on the phone as fiat currency, not bitcoin.
Should a user wish to send money to someone, all they need is the recipient’s phone number. Abra then makes an index that maps phone numbers on the bitcoin block chain, which updates every 10 minutes. Should the recipient not have Abra, he or she receives a text message to install the app. The block chain records the transfer and both apps update accordingly.
To turn the digital cash to paper cash, a network of Abra tellers can exchange money on the Abra app. Users can withdraw cash from the app via an Abra teller.
Barhydt said U.S. consumers will be more likely to cash out in their app through their bank.
In developing countries where people buy mobile minutes, sellers of air time can become tellers, Barhydt said. They can sell air time, and then make more money by selling the air time to Abra users who want paper cash in exchange for digital money. The tellers set their own fees. Abra charges 0.25% for the transaction.
Any merchant who adds the Abra merchant API to their web or mobile app can accept payments from users who type in their number when they check out. In this scenario, the payment functions the same as cash.
In cases of fraud, the victim would have to work directly with the merchant since there is no fraud protection as there is for credit cards.
The company will demonstrate the system at the Money 2020 conference in Las Vegas this week. Abra expects to introduce the Merchant API service later in the current quarter.
The American Express announcement marks yet another financial institution to invest in bitcoin startups.
Harshul Sanghi, American Express Ventures managing partner, said the block chain is playing an important role in the evolution of global transactions, especially in emerging markets.
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