Every year, billions of dollars in remittances are sent around the world by people working abroad. But in recent years, cryptocurrencies as a way to send money internationally has risen in popularity in the remittance industry.
According to a recent survey, cryptocurrency takes up 15.8% of the current money-sending methods and is the 4th most popular overall (falling behind traditional wire transfers, money transfer services, and online services—3rd, 2nd, and 1st place, respectively). To get a better understanding of how to use Bitcoin for remittance, let’s first take a look at how traditional remittances work.
How do remittances work?
Let’s say you’re working in Singapore and you’re trying to send money to your family in the Philippines. The first thing you’ll need to do is go to your nearest Money Transfer Operator (MTO), where you’ll then hand the cash at the available exchange rate. Like any other service, the MTO will charge you a fee for their services. The big problem here is that in most cases, MTOs are just front ends. They usually use software and systems of bigger Remittance Service Providers (RSPs) like Western Union and Moneygram.
If this is the case, the MTO will only receive a small portion of the fee that they charge you. The rest of it goes to the RSP for the installation, subscription, and maintenance of the system. This could mean even higher fees for you, which might take a huge chunk out of the money you were supposed to send.
With that being said, it’s understandable why people prefer the option of sending money via cryptocurrency. Bitcoin remittances have MTOs as well, but they are usually cloud-hosted to serve those in emerging markets. These MTOs are easy to use, especially for the underbanked, as they can send and receive money with a stable Internet connection. Unlike the standard remittance method, there are usually no fees charged for the installation, subscription, or maintenance. This makes Bitcoin remittances cheaper, faster, and more transparent than the traditional method of sending money.
Problems with the current remittance model
As you can see from the example mentioned above, the two major problems of traditional remittances are speed and price—arguably the most important factors when sending money abroad.
Current models incur a lot of fees. If you want to withdraw, deposit, or transfer money, you can believe that there are charges for that. When it comes to remittance, they’ll also charge more depending on their exchange rate—so there’s also that to think about. Basically, how much you’re charged will depend on how fast you want your money transferred and how much you’re sending.
Want your transfer to be processed faster? You can pay a little extra for that. The problem is that if you aren’t willing to pay that extra fee, the charges can eventually accumulate and your transfer is going to take a little bit longer.
Even when you’re transferring money online, you can suffer from the same tedious processes and slow transfer speeds. You’ll also need to give up more personal information such as your name, account number, SWIFT code, etc.
How to use Bitcoin for remittances
Because Bitcoin is a purely digital asset and is decentralized, their counterparts on the MTO side of things are incredibly easy to use. This is especially true for those with limited or no access to a bank account—the underbanked and unbanked population of the world. For them, sending money abroad is instant and can be done on a smartphone with an Internet connection.
But what does a Bitcoin MTO look like? Well, in the context of cryptocurrency, “MTO” can mean many things: exchanges, peer-to-peer marketplaces, or even your crypto wallet. Essentially, if you have a BTC wallet, you can transfer money to anyone in the world and at any time you want. Simply get your recipient’s QR code or wallet address, input how much money you want to send, then send it. It may take a few minutes, but essentially, that’s it. If you know how a Bitcoin transaction works, you know how to do BTC remittances.
Take a minute for it to settle in
Not everyone knows about this remittance method, but it’s an idea that’s definitely growing. As Bitcoin matures as a currency, we should expect to see it disrupt other sectors of the financial system, just like it’s doing with remittances.
People are slowly starting to see the benefits that Bitcoin can bring to their daily lives and coming up with new ways to extend its real-use opportunities. That being said, the mind can sometimes just race thinking about what’s next.