Paying a few dollars for a money transfer may soon be too expensive? Old-fashioned remittance companies may face a big problem.
Sending Money Globally
In today’s highly digitized ages, people conduct hundreds of thousands money transfers each day. We buy stuff online, we run businesses online, we hire people and order services online – and we don’t limit ourselves only to one country. You can easily buy your favourite shirt in an ecommerce store in Australia, order a custom-made painting from French artist and then hire a native German translator to work remotely for you from his home country. In all of these cases, there are lots of international transactions to make.
A majority of mainstream banks still charge their customers up to $40 for simply ordering an international money transfer. Because of that, many people turned to cheaper independent alternatives. Companies such as Western Union have branches in almost every country, which lets them transfer money internationally almost instantly and much cheaper. With the development of the Internet and online payment platforms like PayPal for example, we got used to paying sums like $5 for our transfers. But what if these fees can be lowered to only a few cents?
Current Transfer Fees
While global adoption of cryptocurrencies is a topic for a whole separate article, let’s focus on the technical side and some numbers.
Ethereum is currently the 2nd largest cryptocurrency after Bitcoin. It costs barely $0.1 to send ETH to any place in the world. Moreover, the recipient gets the transfer delivered directly to his personal wallet after less than a minute. This is all thanks to the blockchain technology, which stands behind all of the cryptocurrencies.
Regular bank wires go through a special network called SWIFT, which operates in an old-fashioned way and has been created to make communication between financial institutions easier. It usually takes 3 business days and costs $10+ for such transfer.
Independent remittance platforms have often their own connections and partnerships, which allows them to offer money transfer services cheaper. As Western Union has branches all over the world, they don’t even need to move the money physically between borders.
Impact of the Blockchain Technology
However, as more and more companies notice the hidden power and possibilities of cryptocurrencies, we see an increase in corporate adoption of blockchain. Project’s like RippleNet may soon be a direct competitor to SWIFT network. There are already some cases of banks or other financial institutions positively introducing Ripple’s technology to their businesses. In all cases they report that it has positively affected the operations. For example, remittance platforms are now able to provide money transfer services in more remote countries and cut the costs even by half. And it is just the beginning.
We have recently seen the annoucement of newests Facebook’s project called Libra. The social media giant will soon introduce it’s 2.4 billion userbase with a blockchain-based stablecoin integrated with the platform. If you want to learn more about Libra read this summary from Wirly.com, which researches various ways people send money today. Nowadays, almost everyone has a social media page. So, if you can send money to anyone who is in your friends list, what will be the point of using old-fashioned remittance services?