Bitcoin may change the global remittance market

A recent Forbes report shows that frontline media have accepted the fact that Bitcoin can not only reduce the cost of the remittance market, but also change the transaction speed of the remittance market.

The article says:

“Remittances generated an estimated $44 billion in costs globally last year. Remittances (transfers between countries) often go to low-income households and can reduce overall poverty in certain countries. However, remittances are also associated with high transaction fees and long delays, which hinder low-income households from escaping poverty and becoming more prosperous.

Bitcoin technology seems to be a perfect solution to the high fees in traditional payment systems. The author of the article wrote that some existing financial infrastructure is outdated (it existed before the Internet was born) which hinders the effective circulation of money. The author believes that digital currency protocols have a significant role in global remittances. He specifically mentioned that Bitcoin can help some technology startups reduce remittance fees. Bitcoin is a P2P currency that circulates freely on the Internet. It can help people reduce remittance fees, which are lower than the fees charged by traditional banks.

How big is the remittance market?

Massive unemployment has created a huge income gap between developed and developing or underdeveloped countries, and people have different employment opportunities. Today, workers' remittances have become an important part of international capital flows, especially in labor-exporting countries.

In 2015, the global remittance market slowed down due to weakness in the European and Russian markets (expected to grow next year). In 2014, remittances totaled $583 billion, more than double the world's total official development assistance (DOA). India received $70 billion, Cuba $64 billion, and the Philippines $28 billion. In anticipation of a global economic recovery next year, global remittance growth is expected to accelerate to 4.1% in 2016, reaching $610 billion, and to $636 billion in 2017. Remittances to developing countries are expected to rebound to $459 billion in 2016 and to $479 billion in 2017.

Bitcoin is the new blood in the remittance market

Bitcoin payment processing companies such as Igot, Beam, BitPesa and BitX have all set their sights on the commercial market for Bitcoin in Africa and other regions and have established their own companies in these regions. Forbes magazine pointed out:

One of the core reasons why remittances are expensive is because of trade barriers - sending money from one country to another is very slow and inefficient. Fund transfer fees are high because the connections between financial institutions and the financial system are very limited and incomplete. Currently, we do not have a neutral network that can connect independent institutions together so that money can flow seamlessly.

Bitcoin can eliminate the 10% of the total remittance fee for people. This is exploitative, especially for those who only earn $2-3 a day.

Several ways to trade Bitcoin

Even through digital processing, the remittance market is still deeply dependent on the third-party system of banks. Banks still need to verify from the remitter to the operator and then to the recipient. Bitcoin can provide users with multiple operation modes. For example, from Bitcoin to Bitcoin, from Bitcoin to legal currency, and from legal currency to legal currency. These three different operation modes are available for users to choose:

Bitcoin to Bitcoin transactions

This method is only suitable for people living in technologically advanced developed countries, where people who have Bitcoin can send it to recipients who also use Bitcoin. Like Coinbase in the United States, people can access electronic wallets and trading platforms.

Bitcoin to Fiat Transactions

This is a huge prospect for the remittance market model. The remitter can easily obtain Bitcoin, he will send Bitcoin to the operator, and the operator will send the fiat currency to the recipient. The premise of this model is that people in developing countries can easily obtain Bitcoin wallets, but Bitcoin is restricted in many countries, especially developing countries. The author of this article is one of them.

Fiat-to-fiat transactions

The remitter pays the operator in local currency, and the operator then remits the fiat currency to the recipient. Bitcoin can be used as a medium of exchange in the middle.

Bitcoin can really change the existing remittance market.