Submitted by the community - Author: Igor Davidov

Simply put, send money It can be defined as transferring funds to other distant places, and cross-border remittance is a common method of remittance. For example, expatriate workers remit their funds to their home countries.

Today, transfers and remittances have replaced overseas direct investment and official government development funds to become the world's largest capital flow. According to the World Bank Group, remittance volumes have grown significantly over the past few years, growing by 8.8% in 2017 and 9.6% in 2018.

Some developing economies rely heavily on funds from abroad, and transfers and remittances have become an important part of their economies. Therefore, the inflow of funds from migrant workers is a major source of income for many countries. For example, Haiti received approximately 29% of its gross domestic product in international remittances in 2017. This proportion increased to 30.7% in 2018.

Existing problems

The World Bank estimates that the current fee for remittance is US$200 About 7% (global average). In 2018, global remittance volume will reach US$689 billion, of which 7% is the operating cost of transfers, worth approximately US$48 billion.

In addition to high fees, most remittances rely on third-party services and financial institutions. The involvement of multiple intermediaries makes the current transfer system very inefficient. Not only are transfer fees high, they also take a long time, often taking days or even weeks.

Blockchain technology can provide a viable and more efficient alternative to the remittance industry. This article will cite some cases of company operations to introduce its feasibility and existing solutions.

Will blockchain be an effective solution?

The main goal of blockchain remittance institutions is to simplify the entire transfer process and eliminate unnecessary middlemen. At its core, it is a solution that provides hassle-free and near-instant remittances. Traditional services often require review by multiple approvers and involve a large workload. The blockchain network eliminates this drawback and there is no longer a slow transaction approval process.

The blockchain system is based on a distributed computer network and can perform financial transactions on a global scale. This means that the transaction process can be carried out securely in a decentralized manner, which only requires a few computers to participate in verifying and confirming the transaction. Blockchain technology can provide faster and more reliable payment solutions at lower operating costs compared to traditional banking systems.

In other words, blockchain technology can solve some of the major problems facing the industry, such as high fees and long transaction times. Simply by reducing the number of intermediaries, operating costs will drop significantly.

Case

Mobile application

Many companies are trying to use blockchain technology to provide new payment solutions. The mobile version of some digital currency wallets allows users to send and receive digital assets globally and quickly convert between digital currencies and fiat currencies.

Take “Coins.ph” as an example, it is a multifunctional mobile wallet application. Users can use it to send money internationally, pay bills, buy game credits, or simply trade Bitcoin and other digital currencies. And, some of its financial services don’t require creating a bank account.

Digital platforms

Some companies are trying to operate the infrastructure associated with the traditional financial system. For example, "BitPesa", an online blockchain technology platform in Africa, was established in 2013. The platform provides customers with payment solutions and currency exchange services with low handling rates and high timeliness.

“Stellar”The blockchain platform is also an example of providing remittance services in this field. Stellar was founded in 2014 with the goal of promoting the development of financial services and closely connecting financial institutions and individuals.

The Stellar network uses its own independent currency and distributed computing, the token is called Stellar lumens (XLM). Their native token can be used as a bridge currency, facilitating global transactions between fiat currencies and digital currency assets. Similar to BitPesa, users and financial institutions can use the Stellar platform to transact at lower transaction costs.

ATM

As with mobile apps and online platforms, the popularity of ATMs has also Offers another interesting solution for global transactions. This program plays a prominent role in areas with poor Internet penetration and underdeveloped banking systems.

Companies like Bit2Me and MoneyFi are developing new remittance systems and are committed to combining blockchain technology with ATMs. Their goal is to issue credit cards with multiple features.

The combination of blockchain's distributed ledger and ATM can greatly reduce users' need for intermediaries. Users do not need a bank account, and the ATM operating company may charge a small fee on the transaction.

Current challenges and limitations

Although blockchain technology can bring Many significant advantages, but there is still a long way to go. Below are the potential barriers and major limitations that currently exist, along with possible solutions.

• Conversion between digital currency and fiat currency. The global economy is still based on fiat currencies, and the conversion between digital currencies and fiat currencies is not easy. In many cases, a bank account is required. Peer-to-peer (P2P) transactions can eliminate the need for banks, but users still need to convert from fiat currency to digital currency to use the funds.

• Millions of people living in some less developed countries still do not have access to the Internet, and many do not own smartphones. Nowadays, mobile and Internet facilities have become a necessity. As mentioned above, ATMs based on blockchain technology may be part of the solution.

• Legal supervision. Digital currency regulation is still in its infancy. In some countries, legal regulation is either unclear or non-existent, particularly in countries that rely on overseas capital inflows. However, with the further promotion of blockchain technology, legal supervision will continue to be pushed forward.

• Complexity. Using digital currency and blockchain technology requires certain technical knowledge. Most users still rely on third-party service providers because running and using blockchain autonomously is not easy. Additionally, many digital currency wallets and exchanges still lack instructional instructions and intuitive interfaces.

• Volatility. The digital currency market is still immature and susceptible to volatility. Therefore, they are not always suitable for day-to-day trading and their market value can change drastically over a short period of time. In addition, highly volatile currencies are not suitable for the basic needs of transfers. Of course, there is no need to worry too much about this problem, stablecoins can provide a feasible solution.

Summary

The transfer and remittance industry in the past There has been significant growth over the past decade, and the scale of development will continue to grow in the coming years. Rising immigration rates among people seeking jobs and educational opportunities may be one of the main reasons. According to the "World Migration Report 2018", there were approximately 244 million international migrants in 2015, an increase of 57% from the estimated 155 million in 2000.

However, the industry is still plagued by inefficiencies and limitations. As a result, more and more companies are leveraging blockchain technology to provide more efficient alternatives, and we are likely to see massive use of this technology by foreign workers in the near future.