Money transfer business is a multi-billion dollar industry. Migrants sending money to their families and loved ones back home have to rely on intermediaries. Often, the cost is a significant amount of the total cash sent. To make matters worse, the recipients have to wait for some time before the cash reaches them. If only more of these people got into Cryptocurrencies, the story would only be different and better.
Money Transfer Is A Large Industry
Money transfer is part of the life of many migrants as it is the only way of sending money back to their home countries. Most families with people working abroad rely on them for their education, food, health, and even development. Such migrants have no other way of sending financial assistance back home except through money transfer.
Last year, migrants in the United States sent $55bn to China, India, and Mexico alone. In 2015, remittances worldwide reached around $582bn. According to the World Bank, that amount has surpassed $613bn this year. This amount is higher than the one the developed countries send to developing countries through international development aid.
The Pain Of Sending Abroad
Despite the importance of money transfer in improving the lives of the recipients, the senders always incur huge costs. Instead of the traditional banking service providers assisting the flow of resources, they only make it harder and even more expensive for the senders. Unfortunately, the senders and the recipients do not understand how they could use Cryptocurrencies to change the current status.
According to the World Bank, Nigeria, Mexico, the Philippines, China, and India are the top five remittance destinations. A recent study involving people on Amazon’s Mechanical Turk was done to investigate their use of money transfer. The study revealed that over 50 percent of the respondents send their money through PayPal, Western Union, or other money transfer services. Western Union, for instance, charges the senders 6 percent of the amount sent. If you are sending $500, you have to part with $30.
In the survey that involved 700 respondents of which 60 percent were men and 40 percent women, the average remittance sender sends about $650 abroad about 5 times. Given that about 6 percent is spent on fees, it shows that migrants are spending a significant amount of money through intermediaries. This is the money that would have reached the recipients if there were other cheaper alternatives.
Is The Use Of Cryptocurrencies The Solution?
When asked if they would prefer using Cryptocurrencies instead of the existing options, 80 percent of the respondents said yes. However, only 16 percent admitted to having used the virtual currencies. About half of the female respondents said they were slightly or not familiar with the altcoins.
One major benefit of using Cryptocurrencies in money transfer is the low cost. Sending $99 million to any country in the form of virtual currencies is possible with a fee as low as $0.40. Furthermore, the transactions can take a much shorter time than through the traditional banking system. If only more people were familiar with Cryptocurrencies and the money transfer sector would never be the same again.
Various Crypto products have been developed around the world to address the plight of migrants. In the Philippines, Coins.ph is already helping the migrants to send millions of dollars back home at a reduced fee. While speaking with Coindesk in 2014, the blockchain-based company’s CEO and founder Ron Hose said that Cryptocurrencies such as Bitcoin are serving a real-life problem in most developing countries.