Bitcoin remittance companies are restructuring the Asian money transfer market by offering a time-saving and cost-effective alternative to the traditional model.
There are startups like Rebit, Bitspark, Satoshi Citadel Industries, Payphil, Bloom and coins.ph among others offering bitcoin-based overseas money transfer facilities. According to their executives, the maturity of the cryptocurrency industry could mean a huge disruption for this industry.
George Harrap, Bitspark chief executive explains,
Bitspark is one of many bitcoin remittance companies that perform the service for shops in Indonesia, Philippines, Hong Kong, Pakistan, Vietnam, Ghana and Nigeria. Most of the startups in this industry offer back-end services for remitters as opposed to dealing directly with the customers.
Managing Bitcoin Fluctuation Risks
In order to limit the risks associated with speculation and volatility in bitcoin value they buy sufficient bitcoin to cover their projected capital requirements for the day and sell it immediately in exchange for currency in the country receiving remittances.
Miguel Cuneta from Satoshi Citadel Industries says, “We are merely using it as a transfer mechanism. We convert it as soon as possible.”
This not only protects them from the wild fluctuations in the cryptocurrency market, but also makes it possible to carry out transfers in minutes instead of days.
Kate Corporal, a 28-year old Filipina working in South Korea says that compared to traditional remittance models, using bitcoin has resulted in “huge” savings for her.
“One thing I can guarantee is that the money I intended to send and the money that my family received was exactly the same. Using bitcoin is really helpful for many Filipinos…as every single cent we send can be significant,” she explained.
The essence of this is in the fact that bitcoin prices in a smaller economy are lower than in larger economies. Therefore money remitted from a large economy to a small economy gets to the destination at an equivalent value or sometimes higher.
The absence of bank fees means that bitcoin remittance companies can afford to charge much lower fees ranging between 25% and 75% less than the usual. This is what makes it an appealing choice for migrant workers sending small remittances.
“Where bitcoin has an impact is on smaller remittances, that is, in the migrant worker space, where the remittance amounts are just a couple of hundreds of dollars per transaction,” says Dominik Well, Bitcoin Vietnam co-founder.
The main stumbling block that these bitcoin remittance companies encounter is the limited liquidity of the bitcoin market. All of the bitcoin available globally totals to about $160 billion, a value that equates to a third of the world’s remittance market and two-thirds of the Asian one according to estimates by the World Bank.
“As soon as you’re doing $10-15 million a day, liquidity becomes an issue and you’re wondering ‘how am I going to do this,” says Prajit Nanu, InstaReM co-founder and chief executive.
Meanwhile, money remittance giants like Moneygram and Western Union, have been working on the integration of Ripple currency XRP. But details on the implementation are yet to be released.