Since its creation in 2009, there has been a lot of hype of bitcoin. Over time, other cryptocurrencies such as Ethereum, Ripple, Litecoin, Peercoin, and Golem, have also gained popularity. While there is no certainty surrounding the future of cryptocurrencies, it is plain to see that the blockchain model offers an array of possibilities.
Unlike fiat money, currencies declared legal tender by governments, blockchain-based cryptocurrencies are digital in nature. The possibilities they offer the overseas money transfer market are varied. For instance, while sending $50,000 overseas through a bank might not be particularly easy or quick, sending the equivalent in a cryptocurrency such as bitcoin takes no more than a few minutes.
How Can the Industry Benefit?
The international remittance industry can do well to look at the benefits that blockchain technology has to offer:
- Reduced costs. By eliminating banks from the picture, savings may come in the form of little to no transfer fees.
- Increased outreach. Other than serving the world’s general population at large, cryptocurrency transfers can be particularly useful in areas where access to traditional forms of banking remains a challenge. This can be made possible because of the widespread use of mobile phones.
- Increased security. The decentralized manner in which blockchain operates eliminates the possibility of hacking attacks, which remain a possibility with banks and other financial institutions that facilitate overseas money transfers. Besides, every blockchain transaction is accounted for in a digital ledger, entries in which cannot be modified.
- Simplified registration. Using blockchain technology, companies can simplify their Know Your Customer (KYC) process.
Some aspects that might serve as roadblocks include:
- A learning curve. For a newbie, cash and cash-based transactions are way simpler to understand than transactions made using cryptocurrencies. For instance, while a money transfer company may offer to convert one fiat currency to another using a cryptocurrency, it will be more complicated, but cost-efficient, if you carry out the transfer on your own.
- Exposure to currency conversion twice. This is a problem if the sender and the recipient don’t use cryptocurrencies regularly. Consider this – you wish to pay for your transfer in Hong Kong dollars and want the recipient to receive British pounds. In a typical scenario, the currency conversion would happen only once. However, with a cryptocurrency transfer, the currency exchange happens twice (HKD/crypto and crypto/GBP).
- Turnaround time. A typical cryptocurrency cross-border transfer can take place almost immediately, depending on the service provider you select. However, if you plan to make a cryptocurrency transfer that involves a fiat currency at any stage, there’s a good chance that a bank transfer will enter the picture. This, without doubt, will add to the turnaround time.
Where Things Stand
The last couple of decades have experienced a considerable shift in this industry, mainly because of FinTech players such as WorldFirst, TransferWise, CurrencyFair, and OFX entering the picture. The blockchain effect in this field is already visible, with companies such as Abra, Circle, BitPesa, Coins.ph, and MOIN making their presence felt. With the payment app Circle, users don’t have to handle cryptocurrency at all, and they still benefit through no fees for sending or receiving money.
Several leading banks the world over are looking at adopting blockchain technology for different purposes. Crédit Agricole, a bank in France, has already started using Ripple’s blockchain technology for making cross-border transfers on a trial basis.
It is only a matter of time before blockchain technology makes cross-border money transfers even more cost effective. The technology will have a positive effect on processing times, with crypto transfers going through in near real time. What will also work in the technology’s favour is the security it has to offer.
About the Author
Jon works as a researcher with iCompareFX, a website that lets its users compare the world's leading overseas money transfer companies. Outside of work, he likes exploring music from genres such as the blues, alternatives rock, and reggae.