Bitcoin: The Next Evolution in Remittances
Traditionally, sending money to friends and family abroad is done through money transfer services such as Western Union or WorldRemit. Yet, a small handful of companies are exerting power over the global remittance industry by charging high fees on money sent abroad. By doing so, they are cutting off a lifeline for countries that are tackling economic problems.
In 2016, official recorded remittances to developing countries amounted to $429 billion. This was a 2.4 percent drop compared to the $440 billion generated in 2015, according to the World Bank. Contributing factors to the decline were low oil prices, weak economic growth in the Gulf Cooperation Council (GCC) countries in addition to a slow growth in Europe.
As a consequence, major remittance-receiving countries such as India saw a sharp decline in flows. India, which is the biggest remittance receiver, saw inflows amounting to $62.7 billion in 2016. That’s a decrease of 8.9 percent from the $68.9 billion received in 2015. Sub-Saharan Africa witnessed a decline of 6.1 percent to $33 billion in 2016, whereas Europe was affected for the third year in a row. Remittance flows contracted by an estimated 4.6 percent to $38 billion.
The average transfer fee is nearly 20 percent from South Africa among the G20 countries [PDF]. From the group of G8 rich countries, it’s at 14 percent. Japan is reportedly the most expensive to send money from, whereas Russia is the cheapest. Yet, there is a solution: sending remittance payments through bitcoin.
Speaking to Coin Journal, Josh Gordon-Blake, vice president of Global Partnerships at Pangea, a mobile-centric remittance platform, said that remittance senders don’t care about cryptocurrencies or the technology behind their transactions. The key factors for them are knowing how fast, safe and affordable it is to put money in the hands of their loved ones.
“Bitcoin can improve the customer’s remittance experience by increasing the speed and reducing the cost of remittances,” Gordon-Blake said.
Established in 2014, Pangea, a Chicago-based mobile remittance service and app, was set up with the aim of making money transfers secure, simple and fair. With receivers in 15 active countries within Asia and Latin America, and the most volume sent from the U.S. to Mexico, Gordon-Blake states that the company is always looking for any edge that will improve the user experience.
“We’re keeping our eye on bitcoin and have taken an interest in it because of the wide range of benefits it could provide,” he said. “We take pride in the fact that we offer instant transfers for a low, flat fee, and when bitcoin is ready to help Pangea’s customers, we will be ready to adopt the technology.”
By 2030, research indicates that bitcoin will become the sixth largest global reserve currency. Earlier this month, the digital currency surpassed $4,300 achieving yet another all-time high. With a market cap just under $72 billion and having quadrupled its value since the beginning of the year, it’s hard to ignore bitcoin’s dominance.
It is because of the digital currency’s increased popularity and adoption that Gordon-Blake believes that bitcoin will improve the customer’s remittance experience.
In addition to offering a faster and cheaper service, the underlying infrastructure of bitcoin would allow a remittance company to focus on other elements of the user experience. These include better tracking tools, culturally relevant user interfaces and other financial products, states Gordon-Blake.
“The end result should be that instant low-cost transfers will be table stakes and that the millions of migrant workers around the world that send remittance will begin to enjoy a first class user experience,” he said.
Challenges, though, remain. Gordon-Blake states that until consumers trust bitcoin as a currency in the same manner that they trust fiat currencies, there won’t be much demand for bitcoin remittance.
“However, even if bitcoin remittances are unlikely to be a consumer success in the near term, remittance companies that can harness bitcoin as a technology will have a material customer benefit to bring to the market,” he concluded.
Pangea have now launched across nine new termination countries across Asia as the company continues to roll out new products and features to new customers.