Blockchain and Remittance


Remittance is the transference of money from a migratory worker to someone back in their home country. People have always moved in search of better work forecasts in high-income (or high currency value as compared to home) countries. Based on the World Migration Report 2018, there are presently a projected 244 million international migrants living in other countries. This number has either unswervingly or indirectly contributed to the global remittance’s $689 billion-dollar industry with India being top of the pile, contributing $80 Billion or 11.6% of its entirety. The global remittance industry is expected to grow by more than 3% in 2019.


Blockchain can be the future for remittance
The most prevalent Cryptocurrency is Bitcoin. It has been labelled as the future of the global financial industry. Bitcoin positively has great potential to be the digital currency of the world but before that, one of two things needs to happen:
·       Bitcoin becomes less volatile
·       Products and Services everywhere become priced in Bitcoin rather than fiat

We are still a long way from that and therefore, let us focus our attention on not Bitcoin but on its underlying technology: the Blockchain Technology.

The key proponents of blockchain technology suggest that it can reduce the costs for remittance services. Interesting things are happening behind the scenes where blockchain technology is attempting to replace the current financial services industry’s centralized business model. Financial institutions and banks are exploring ways to implement blockchain to reduce transaction costs, increase transaction speed, reduce fraud and eliminate third-parties.

By cutting out the traditional middlemen, blockchain technology can speed up and simplify cross-border payments, making remittances more affordable. Currency fluctuations can result in a loss when transactions are being made cross borders and blockchain can provide an almost guaranteed, real-time transaction. Distributed Ledger Technology or DLT can serve as the backbone for a new cross-border payment infrastructure that can potentially solve inefficiencies and provide a faster, secure and more affordable service.

The average transaction cost of remitting money currently is more or less 4–5% per transfer. This cost includes exchange rate margins, charges from both the sender and recipient intermediaries, agents, overheads etc in remitting USD500, USD20–25 will go into transaction fees. Online Money Transfer Platforms like TransferWise was able to reduce the cost to 1%. Blockchain can reduce the cost from 5% to a fraction of a percentage. This will drastically reduce the USD30 billion dollars in the cost of sending remittances to an absurd amount in the thousands and thus, be an effective cost-saving method.

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