In 2019, global remittances reached a record high of US$554 billion. Many people were sending money home to loved ones, incurring high costs and lengthy processing times. As an easier, cheaper and faster alternative, today we’re exploring the pros and cons of using Bitcoin for international payments, especially for those participating in global remittance.
What Is Remittance?
Remittance refers to money being sent from one party to another, often to do with immigrant workers sending money home. Money is typically sent via bank transfer, however checks in the mail are also used. According to the World Bank, the countries receiving the highest remittance in 2019 were India, China, Mexico, the Philippines, and Egypt.
For relatives sending money to these countries, the sender would need to go to a Money Transfer Operator (MTO) and fill in various forms on where the money is going and personal information about the recipient. The MTO will then take the money, transfer it to the necessary currency and ensure that the money makes it to the intended destination.
Where Do The Issues Lie?
The remittance process sounds relatively simple, and it is, however there are two factors that hold it down. That’s speed and cost. The money will often take several days, if not longer, to reach its destination, and costs are incurred along each step of the way. From converting the currencies to transferring the money to using different middlemen, each step takes a small cut of the money. The amount of money sent will also affect the fees.
Sending the funds electronically through your bank incur the same cost and time grievances. The bank can also set limits on what you can send and receive, as well as more information about the transaction.
How Bitcoin Can Solve These Problems
Bitcoin offers a fast, cheap and effective alternative to traditional remittance processes. For one, the cryptocurrency is a peer to peer payment system meaning that it never goes through a middleman, bank, or financial institution. Secondly, the process takes a couple of minutes to a couple of hours to complete (depending on how busy the network is at the time). Saving on costs and speed, what is the catch? The only catch is that the recipient needs to have access to the internet.
To make things simpler, the sender can create a Bitcoin wallet for both themselves and their relative, and then send the relative the wallet keys and necessary steps. The sender would buy BTC with a credit or debit card, and transfer the BTC amount to the receiver. The receiver can then sell the BTC and have the money transferred directly into their local bank account, or withdraw it from a Bitcoin ATM.
The Pros And Cons Of Using Bitcoin For International Payments
Weighing up the options Bitcoin offers a much more attractive way to conduct remittance. Still, we’re going to address both the pros and cons of using Bitcoin for international payments.
- Fast and cheap payments. The system is designed to facilitate payments quickly, and for a small fee. As there are no costs incurred due to exchanging foreign currencies and various banks, it is a much cheaper option than sending fiat across borders. The fee for Bitcoin transactions is paid directly to the miner who verifies the transaction.
- Freedom. As Bitcoin is decentralized it offers a private payment system that is outside of the control of governments and financial institutions. This means that you can send however much money you want, to wherever you want, to whomever you want, without an authority watching over.
- No days off. The Bitcoin network does not close for public holidays, office hours or festivities. Unlike traditional financial services, the network operates 24/7 365 days a year by an international collection of miners meaning that there will never be delays due to “office closed”.
- Transparency. When you send money through an MTO you hand the money over and hope it reaches the desired destination. With Bitcoin, you can see exactly where the funds are at all times due to the nature of blockchain. Once your transaction has been processed, you will be able to see the confirmations in real time and follow the money in the ledger.
- Learning curve. Until Bitcoin, and cryptocurrencies in general, become more mainstream, more people will need to learn how to open a wallet and send the funds. While it is not a complex process, it still requires a level of understanding. With Oobit, the intuitive interface and built-in assistance makes it as simple as possible, as well as secure.
- Volatility. As with any new market, Bitcoin is still susceptible to volatile price movements. If you understand the market, you can make money out of this, however if you don’t you could end up losing some money in the selling process.
It’s Only A Matter Of Time
As the world moves into a more digital way of being, it’s only a matter of time before money becomes digital too. When it comes to the pros and cons of using Bitcoin for international payments, while the grass might be greener on the pros side it will still take time and education before everyone adopts this convenient cross-border option.
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