Crypto: Remittance Renaissance

Remittance: a sum of money sent, especially by mail, in payment for goods or services or as a gift.

Current remittance industry

There is a $700 billion global industry to help individuals send money to their families in their home countries. The top 4 companies that provide remittance services are:

1. Western Union
2. MoneyGram
3. TransferWise

These companies facilitate the transfer of currency around the world, often to countries with limited banking infrastructure. Many of them support physical currency exchange and they can serve very remote locations. Regulated remittance companies can be very safe, but the service comes at a price. The total fees on average exceed 5% of the funds transferred. The average cost of sending remittances has been declining.

https://www.statista.com/statistics/962747/average-cost-of-sending-remittances-from-usa/

Problems with current remittance industry

1. Regulations?—?a double-edged sword where transfers may be more secure if the solution is registered and audited. Regulations also limit services to particular countries or customers.
2. Fees?—?while fees have declined over the last decade, a 5% fee is high for families in the developing world.
3. Convenience?—?in some cases, like TransferWise, the money transfer can be done through mobile app. However, for other companies, the customer must visit a branch office to submit the transfer.

Future cryptocurrency remittance

One obvious use case for cryptocurrency is to disrupt and enhance the global remittance industry. The technology enables instant and low fee transfer of any amount of currency to any recipient on earth. In fact, many people in developing countries are already using cryptocurrency to access this important financial application. However, getting global adoption for cryptocurrency as the new remittance standard is not without its own problems and difficulties.

Regular People in Developing Countries Are Actively Trading Cryptocurrency

Problems with future cryptocurrency remittance

1. User Adoption
2. Lack of Fiat Ramps
3. Regulatory uncertainty

Solutions to problems

1. Solving user adoption is a function of time and educational resources. As users learn that cryptocurrency can be used to send money cheaper and faster over borders, the word of mouth will help the technology spread. Educational resources need to be drafted in native languages and they need to be helpful and objective. Not predatory.
2. Fiat ramps are only an issue if the recipients are paying for services in their native currency. For P2P use, fiat ramps are less necessary. In fact, I could see a society in which cryptocurrency supplants fiat currencies.
3. Governments will move to protect their currencies as cryptocurrency becomes more widely adopted. On the other hand, governments may choose to accept cryptocurrency as legal tender, which may be a net benefit in developing economies.

Examples of real world crypto-remittance solutions

For as much as I was let down by Axie Infinity, their Ronin wallet is still very good for high speed and affordable transactions. I know several people in the Philippines who almost exclusively use the Ronin wallet as their form of payment. The Philippines is special because they have venders who accept different Axie Infinity tokens or can convert those tokens to fiat.

Bridging and transaction costs are at times costly. New Layer-2 solutions should alleviate that and make this a far better solution than existing remittance.

Crypto for those who need it

For those in the developed world, we technically do not need cryptocurrency in our lives. We have centralized banking infrastructure, advanced data infrastructure, and relative government stability. These are benefits we often take for granted. In other parts of the world, cryptocurrency is an important part of their growth. This technology has a chance to make a real difference in peoples’ lives.

References:

Top 10 International Money Transfer Companies You Need to Know - Wealth and Finance International

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