Bitcoin cannot disrupt traditional remittance methods

About halfway through the Money20/20 conversation, the conversation turned to Kodak.

Speaking of Kodak, it is not off topic. This photography giant once boasted more than 145,000 employees and $16 billion in global revenue, but its empire collapsed due to the rise of digital photography. Cryptocurrency supporters often use this as an example to argue that when traditional industries stagnate and fail to successfully innovate and transform, then innovative behaviors led by new technologies will replace them.

Bitcoin technology enables low-cost fund transfers, so industry supporters believe that the remittance field will be the first to be challenged by Bitcoin technology, and industry giants such as MoneyGram and Western Union will be the first to be affected.

Of course, many people disagree with this, but it is undeniable that Bitcoin technology does have this potential. However,彼得•奥赛尔, executive vice president of business development at global remittance giant MoneyGram, disagrees even more. Peter Osser has heard such arguments before, but he has always believed that digital currencies neither pose any threat (to the remittance industry) nor can they solve some urgent problems.

He said:

“If you can really deliver the services people want through Bitcoin, then we won’t sit there and wait for it to happen.”

At the end of the day, he made the point that consumers want actual cash, and that's what MoneyGram provides, with its strong network of partners in 200 countries.

To this end, I brought out the traditional picture to show why what happened to Kodak could also happen to cash. However, Orcel objected to my statement.

He said the cameras were expensive, bulky, error-prone and inconvenient, making consumers really uncomfortable.

Interestingly, Orcel does not see a similar problem with remittances, telling CoinDesk that existing payment behaviors are already entrenched and that Bitcoin is unlikely to provide enough tools to replace them:

“Payments are already digital and real-time. I can send cash using existing channels. It exists and it’s real. Digital currencies don’t solve the problem… There’s also the element of trust. People trust paper money more than data, and that behavior is not going to change.”

However, Orsell also admitted that his reasons may be inconsistent with the actual situation in the future. If Bitcoin can solve key problems such as market recognition and scale, MoneyGram may be inclined to use Bitcoin.

The last mile challenge

It’s clear that Orsell has been following the industry closely. For example, he’s quick to bring up what he calls the “last mile challenge,” the theory that no matter how fast money can be moved, getting the actual money to consumers quickly is the greatest and most expensive challenge.

In particular, Orcel cited a recent article written by a founder of Philippine bitcoin remittance company Rebit, who felt that his company’s business model could not overcome this challenge and chose to leave the company.

He said:

“We’re always watching everything that’s going on in the industry and we take everything very seriously.”

However, Orcel still overlooks some of the potential of Bitcoin and digital currencies. One of them is that in his view, Bitcoin must become a widely accepted currency in order to complete the last mile challenge, which he believes is unlikely to happen.

He added:

“We don’t see Bitcoin as a solution that will disrupt us or provide a better or new service.”

Orcel acknowledges that open source distributed ledger technology, or blockchain, has more advantages, but he feels that blockchain still does not solve the basic problem that ordinary users care about - money can be used to directly purchase goods or services.

You can send money to a phone, but we need cash to buy their food and pay for medical expenses. People spend a lot of money in less than 24 hours. They all live a "spend as much as you earn" life.

Regulatory hurdles

Throughout the conversation, Orcel changed his thesis from time to time, sometimes pointing to the problem of digital currencies as one aspect of technology, and other times blaming regulation as the main problem.

But he also praised the technology and seemed to want to leave some room for what he said, for the possibility of change, however unlikely.

“Bitcoin is still not a clean ecosystem, so banks won’t touch it.”

Clearly, the social stigma surrounding the technology bothers Orcel, who argues that it’s pointless to compare Bitcoin to email because the regulations never applied to email.

He also believes that the reason why Bitcoin cannot succeed is because it lacks the power of the financial industry and is not allowed to succeed by the industry.

He said: "There is a condition that needs to be met. One is that you have to have the approval of the regulators, and the other is that you have to have the cooperation of the central bank, and neither of them will ever give up their currency. Do you think Bitcoin will become an international currency? Countries will never let this happen."

To prove this point, Orcel cited the development of Bitcoin in Russia, where the Deputy Finance Minister has announced a ban on Bitcoin-for-fiat exchange and is seeking ways to ban Bitcoin under the law on currency substitutes, while some time ago, Australian banks also seemed to have closed the corporate accounts of (Bitcoin) related companies.

Bringing data and money together

At the beginning of our conversation, Orsell brought up how MoneyGram “moves data and money separately,” to which I asked if he believed Bitcoin and blockchain-based systems had the potential to combine the two.

Osser explains:

“If you send money, I need to collect that money. That’s the model, we’re moving money, we have to move money through traditional banks, and those data flows are separate.”

Here, Orcel acknowledged the costs and inconvenience of managing two accounting units with one system, in which money and data move daily between its accounts, 65,000 partners and 300,000 locations.

However, he thinks it will take a long time for people to realize this, so it is not a problem yet.

"When consumers transfer money, they think actual money is being sent. That's not the case. You're just being authorized to pay the fee. If you can move money and data at the same time, that's where the value is."

Orcel quickly raised another question, though, arguing that since Bitcoin must be converted into fiat currency, the Bitcoin network charges fees, which could be higher than today's payment methods, because MoneyGram transfers "large amounts of money" and therefore gets discounts, making costs very low.

Finally, he noted that systems like Ripple, which aims to disrupt messaging banks, are interesting but will not change MoneyGram’s cost structure.

“Unless Bitcoin can become an international currency, it will not solve most of our problems. The banking system is flawed in how it works. Everyone in this room agrees on that. But there is a benefit to fixing the flaws and total collapse. Incremental improvements will benefit everyone and slow down the pace of a true collapse.”

Osel's persistence

Orsell's talk would have been more compelling if he had been more restrained about his views at the beginning of the conversation, saving his most candid statements for the end.

He believes that MoneyGram has “won through innovation” compared to FinTech startups.

“Bitcoin is not going to be a significant competitor in the remittance industry,” he said flatly.

“It’s not going to happen, it’s not about the technology, it’s about the customer and the behavior, how they believe in money, why they use cash.”

Orsell went on to criticize efforts like Abra, which he said was a mistake in its attempt to circumvent traditional legal regulation by taking an Uber-like approach to money transfers.

“We do criminal background checks on anyone who touches the funds. It’s a huge expense. The regulators don’t allow just anyone to be a money transmitter.”

At the end of the conversation, Orsell told me that not only would I see him and MoneyGram at Money20/20 this year, but he would also be at the next and every subsequent Money20/20 conference with MoneyGram, no matter what the developments in Bitcoin are.

Finally, he made me a bet, which I accepted, and he said:

“We can have conversations like this every year.”

Original article: http://www.coindesk.com/moneygram-bitcoin-fail-disrupt-remittances/
Translator: Peterhon
Reward address: 16V6PW9wu1pFVb1R3LiGJKEwZAFHu9MMtA
Editor: printemps
Source (translation): Babbitt Information