Remittance refers to a sum of money sent across a distance in payment for goods or services, or as a gift, typically through a third party like a bank or money-transfer company. Typically, thanks to the internet and its online markets, the remittance industry largely operates with digital payment systems.
Besides banks, dominating the traditional remittance market are Western Union and MoneyGram. They’ve been around for decades and are typically seen as the go-to places for physical money transfers. The big players in the digital community are PayPal, Skrill, and Authorize.net, all of which have become trusted and credible in their own right.
The newcomer to the world of remittance and money transfers is bitcoin. Over the past few years, the use of bitcoin for remittances has grown steadily; indeed, many think that bitcoin will soon dominate the remittance and money transfer industry. Here are some reasons why.
The time it takes to send funds through most services is almost always the same: from 24 hours to a couple of business days.
Bitcoin, on the other hand, takes on average less than 10 minutes. Once the transaction is verified on the blockchain, funds appear in the recipient’s wallet instantly.
Traditional means of remittance can be very expensive. With multiple transactions, those fees can really pile up. For example, MoneyGram charges a flat fee of $4.50 fee to send any amount under $50, or $11.50 for amounts between $50 and $900. For larger amounts they charge 2% of the transaction.
Similarly, Western Union charges $4.99 for transfers made online that are less than $1000, but their fee structure varies greatly depending on a number of factors. That doesn’t seem bad too bad, but if you want to send any number of low-amount transfers, you’re in trouble. For many foreign workers the typical fees consume a large portion of their money, since the transfers are usually frequent and for small amounts.
On the other end of the spectrum of all of these fees is Bitcoin’s typical 0.0001 BTC per transaction. At today’s exchange rate, that is about $0.02. That’s two pennies for any transaction of any size.
One of the best things about Bitcoin is that it is so versatile. Bitcoin can easily be exchanged peer-to-peer, without involving a bank or any financial institution, and it can also be quickly and simply exchanged into almost any currency internationally, as well as any other cryptocurrency. Because of this, many in the Silicon Valley industry, as well as small retail businesses across the world, are embracing Bitcoin with open arms. A few notable entities accepting bitcoin are social gaming behemoth Zynga, e-commerce platform Shopify, domain registrar namecheap and Adyen.
Why It Matters
Bitcoin is going to change, and already changing, the remittance, money transfer, and P2P payment markets. It’s quick, it’s inexpensive, and it’s one of the most flexible currencies that exists.
Because bitcoin is a digital currency that can be transmitted by SMS or on the internet, it is accessible even in remote areas that are underserved by the banking industry, making it easier than ever for people to send funds to each other no matter where they are in the world. This has huge social implications as more and more people who have been hitherto disenfranchised or exploited by the the legacy banking and remittance systems can now enter the financial world.