Where Does Blockchain Stand in the International Remittance Market?
Data shows that the international remittance market is huge. In 2016, migrants living in different parts of the world transferred more than $570 billion USD to their home countries. Even though several FinTech overseas money transfer companies have made their presence felt in recent times, the field is still dominated by three of the original players – MoneyGram, Western Union, and Ria. Between them, they account for around 25 percent of the total market share.
Unlike the scenario a couple of decades ago, individuals no longer have to rely on banks or a limited number of high street forex brokers to send money overseas. This is because of the arrival of a number of FinTech companies such as OFX, TorFX, HiFX, Currencies Direct, WorldRemit, and TransferWise. Their growth is apparent too. For instance, TransferWise became the first FinTech unicorn – valued at over $1 billion USD – from this realm to achieve profitability. It achieved this within five years of beginning operations.
So far, FinTech companies have multiple factors working in their favor. While they have managed to reduce the cost of cross-border fund transfers, they have made the process quicker too. In addition, some of the FinTech companies give their customers different transfer and payment methods from which to choose.
Blockchain technology appears to be making slow but steady inroads into the international remittance market. In early 2018, MoneyGram became the first overseas money transfer company to announce the use of Ripple’s blockchain technology on a trial basis. Western Union followed suit soon after.
In mid-20188, Singapore-based InstaReM teamed up with Brazil-based BeeTech with the aim of making fund transfers between South America and Asia-Pacific faster and more affordable. This collaboration was made possible after both companies adopted the use the Ripple’s blockchain technology.
Banks from different parts of the world are waking up to what blockchain has to offer as well. Examples include French bank Crédit Agricol, India’s IndusInd Bank, and Itau Unibanco Holding SA from Brazil.
Although still in its nascent stages, blockchain holds the potential to change the way people send and receive money to and from foreign countries.
Being exposed to currency conversion twice is a disadvantage that currently exists with cryptocurrency-based international transfers. For example, consider sending money from the U.S. to Canada. You will first need to purchase a cryptocurrency using U.S. dollars. The recipient will then need to sell the cryptocurrency to buy Canadian dollars.
While most of the older well-established players appear to be biding their time to see where blockchain technology goes, some startups have taken the bull by the horn. Some of the companies that rely on blockchain technology to carry out cross-border fund transfers include:
With blockchain making its presence felt in various fields, from banking, to ecommerce, to even elections, it looks like it is all set to revolutionize the way people carry out overseas money transfers. Its growth, though, appears to depend on how quickly people start using cryptocurrencies in their everyday lives.