Global remittance figures to low- and middle-income countries are continuing to rise year-on-year, facilitated by the extensive (and growing) number of methods currently available for sending money across borders. You only have to watch a Cricket World Cup match on television, and the bombardment of commercials advertising low rates on money transfers, to realise the intense competition between remittance companies when trying to lure customers towards using their services. Moving forward, remittance companies have got to be asking themselves what they can do to get their noses ahead of the fierce competition they face on all sides. Blockchain technology may provide the answer.
The uptake of cryptocurrencies in remittance markets has been initially slow, given the lack infrastructure within low- and middle-income economies to turn cryptocurrencies into tangible monetary value. But as the ubiquity and liquidity of cryptocurrencies increase, people who transfer money globally will have to decide whether to use currencies such as Bitcoin and Litecoin to transfer funds, or stick to the more traditional methods and companies, such as Western Union.
Here are some of the benefits of crypto above and beyond traditional money transfers:
1. Decentralised currency
Peer-to-peer cryptocurrency transfers allow transaction value to be sent without the need for a centralised authority. This massively reduces the bureaucratic legwork needed to send, receive and spend money from one territory to another. All that users need are wallets to receive funds, which take only a few minutes to set up. In states where government entities control banks and financial institutions, the freedom and independence provided by cryptocurrencies can be crucial for both businesses and individuals.
2. Lower fees
Global remittance is most commonly between workers and their families, from higher to lower income countries. Naturally, therefore, both the sending and receiving parties want to save every penny in the transaction, and send the money as cheaply as possible. Transferring money as cryptocurrency rather than through traditional bank transfers can be much cheaper, because trading crypto assets from user to user charges a low, flat fee. At the end of 2018, one (very wealthy) user transferred $194 Million in Bitcoin for the transfer fee of 10 cents. The same transfer through a bank would be in the hundreds of thousands. In the remittance market, the same fee structures apply, albeit on a much smaller scale.
3. Increased security
One of the principal reasons that cryptocurrencies are used in any walk of life is that they are encrypted payments that are virtually impenetrable to the advances of fraudsters and cyber criminals. The blockchain technology on which crypto payments are based creates ledgers which are impossible for hackers to forge, making crypto a safe bet for people wanting to securely send funds across state lines.
4. Faster transactions
As crypto uses decentralised, digitally distributed ledger technology, it can log payments without the need for an intermediary. This means that, where banks and traditional money transfer institutions will spend a long time reviewing and authorising payments, using cryptocurrencies to transfer money globally is almost instantaneous. Sending money using traditional methods may take up to five days, and this could be a major problem in remittance markets where money is needed fast. Cryptocurrency can alleviate this issue.
5. Ease of accessibility
Facebook recently announced plans to roll out its own cryptocurrency in 2020, which is a clear indication of the increasing accessibility of cryptocurrencies to a ubiquitous consumer base. It’s estimated that around three billion people around the world have smartphones, and can therefore access the multitude of cryptocurrency trading apps that make it so easy to send money at the tap of a button. This ease and accessibility will facilitate the growth of cryptocurrencies, particularly in markets where traditional banking methods aren’t commonplace, for example in many African countries.
The overriding positive that cryptocurrencies have going for them is the efficiency they have over traditional payment methods. Whether this is in terms of speed, price or ease of access, users can find a simple and reliable transfer method by choosing cryptocurrencies for their remittance needs.
Trust Payments work with a diverse range of companies in touch with the world of cryptocurrency. Whether you are a cryptocurrency exchange platform or wallet, or a remittance company looking to diversify into cryptocurrency transactions, we have the solutions to help.
Get in touch with our vertical-specific Crypto team today on 0203 691 2697.