Blockchain’s Effect on the International Remittance Industry
Guest post by Jon Dela Cruz from iCompareFX
Jon is the Researcher of iCompareFX.
The international remittance industry is big. In 2016, migrants living in different parts of the world sent more than $570 billion to their home countries. However, a number of FinTech companies in this realm have survived stiff competition, including TransferWise, InstaReM and OFX.
The field, though, remains dominated by the top three (Western Union, MoneyGram and Ria), which account for around 25 percent of the market share. Moving forward, will companies that rely on blockchain manage to make inroads?
Without blockchain, cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Peercoin and Golem would never have existed. The fact that they are decentralized and completely digital makes them ideal for cross-border transfers. For example, if you transfer money from one country to another using blockchain technology, you don’t have to use the services of a bank at either end, which is the case with conventional transfers. Eliminating banks from the picture gives you means to save on currency conversion and transfer fees.
The World Bank estimated that around $429 billion in remittances made its way to developing countries in 2016. Unfortunately, a significant number of people who need to send or receive money remain without bank accounts. Cryptocurrency mobile wallets, however, provide scores of people in South America, Africa and Asia easy means to send and receive money, given that mobile phone usage is fairly high even in unbanked populations.
Some experts believe that the overseas money transfer market is set to witness a sea of change in the next 10 to 15 years when blockchain will make sending money internationally as simple as sending emails in today’s world.
Banks and other financial institutions that deal in overseas money transfers operate in a centralized way, which makes them vulnerable to attacks from hackers.
The decentralized blockchain technology, on the other hand, keeps track of every transaction using a digital ledger, where entries cannot be fudged. Blockchain has seen some glitches, mainly user-generated, and all have been addressed effectively. Using blockchain, the KYC process can also be made quicker and simpler.
Who’s Already Using Blockchain?
None of the older, well-established overseas money transfer companies have used blockchain, and it’s primarily startups that are giving it a go. Besides, the new entrants are depending only on the blockchain; they are not trying to integrate this technology into existing offerings. Here are some of the new players:
- Abra. Abra is a U.S.-based startup that has attracted the attention of some high-profile investors. Its customers can use its digital wallet app for sending and receiving money. Transfers come with no fees and take place almost immediately.
- BitPesa. Capitalizing on the success of M-Pesa in different African countries, BitPesa has started on firm footing. Available features are not very different compared to those of Abra.
- Coins.ph. Coins.ph is headquartered in the Philippines and offers a bitcoin wallet app that consumers may use for buying or selling the cryptocurrency. It lets you send money to India and Europe through its alliance with Stellar. Consumers may also use its services to send money to and from Ghana, Nigeria and Kenya.
Despite the turbulence that cryptocurrencies have faced, it is safe to say that the good ones are here to stay. With blockchain offering multiple benefits, it is only a matter of time before it disrupts the already volatile international remittance industry.
Cover Photo by Ernest Karchmit on Unsplash
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