Today, Visa V +1.4% announced a new partnership with Tala, a digital financial services provider in emerging markets, the goal of which is to provide easier access to cryptocurrencies for underbanked consumers, beginning with USD Coin (USDC), a stablecoin backed by the U.S. dollar and governed by the Centre Consortium. USDC is supported on Ethereum, Algorand, Solana and Stellar blockchains. The collaboration will also involve Circle, one of Centre’s founding members, and the Stellar Development Foundation that oversees the XLM cryptocurrency.
Through the integration with Circle and Stellar, Tala’s customers will gain access to USDC in Tala’s digital wallet, supporting asset storage, cross-border transfer, and crypto-fiat exchange functionalities. The partnership with Visa will provide Tala with the ability to issue Visa cards linked to the wallet, enabling Tala’s customers to spend against their USDC balance at any of the 70 million merchants worldwide that accept Visa.
Following the growth of stablecoins like USDC, “we’ve been really interested to see how they could have the potential to help consumers in markets where they don’t have great access to financial services,” says Cuy Sheffield, head of crypto at Visa. In December, the credit card giant partnered with Circle to drive USDC integration into Visa’s growing network of digital wallets.
Tala is a suitable partner for the cause. The seven-year-old Santa-Monica-based startup has given over $2 billion in credit to more than 6 million customers across Mexico, the Philippines, Kenya and India. Clients can get microloans, ranging from $10 to $500, through a smartphone app, regardless of their formal credit history. The company has raised more than $200 million from PayPal Ventures, RPS Ventures and GGV Capital, among others.
The primary use case that Tala is hoping to drive with the crypto offering is lowering the cost of remittances for its customers, says Tala’s CEO Shivani Siroya, who founded Tala after studying the impact of microcredit in sub-Saharan and West Africa for the U.N. In recent years, cryptocurrency remittances have become a popular way for migrant workers to send money across borders, often being faster and cheaper options than traditional financial services like Western Union WU +0.6%and MoneyGram MGI +1.4%.
The World Bank estimates the average percentage transaction fee for cross-border remittances to be around 6.51% as of the fourth quarter of 2020. In contrast, Bitso, a leading cryptocurrency platform in Latin America, which handles approximately 2.5-3% of remittances between the U.S. and Mexico (according to the company), charges only a currency conversion rate, with the upper limit of 0.65%, and no deposit or withdrawal fees. Bitso today announced it raised a $250 million Series C at a $2.5 billion valuation.
The partnership marks the first major crypto initiative for Tala, which recently began expanding its product suite to provide a fuller scope of financial services to consumers in developing economies. During the pandemic, the company launched the Tala Rebuild Fund to provide 0% interest, 6-month loans to small businesses with essential services. Additionally, Tala made COVID-19 medical insurance available to all of its customers in Kenya at a subsidized rate.