Cryptocurrencies have been tipped to revolutionalize remittances to developing countries as they promise lower service fees than cash transfers.
Experts at Trust Payments hold that apart from lower fees, cryptocurrencies, as a means of money transfers across borders, has other advantages over cash.
The advantages include the fact that cryptocurrencies are decentralize money, provide better security, ensure faster transaction and are easier to access.
Indeed, remittance to developing economies continue to grow yearly, and that is facilitated by the extensive and growing number of methods currently available for sending money across borders.
Various remittance service providers continue to offer low rates on money transfers as the competition gets tougher between them. It has become a matter of survival for remittance companies to now find strategic ways to get ahead of the fierce competition. Blockchain technology, particularly cryptocurrencies seem to be the way forward for them.
The challenge currently is that, the adoption of cryptocurrencies in developing countries has been quite slow due to lack infrastructure in those economies to convert cryptocurrencies into tangible monetary value, and regulations to effective manage their operations. But that is gradually changing and fast presenting the opportunity for individuals to decide whether to use currencies such as Bitcoin, Litecoin and others to transfer funds to developing countries, or stick to the more traditional methods and companies, such as Western Union, MoneyGram, Worldremit, Vigo, Small World and Ria and others.
Indeed, recently in the West African country of Nigeria, individuals are reported to be increasingly turning to cryptocurrency for remittances, to the extent that the central bank in that country started actually paying people to return to using the Naira for transfers.
So what are the key advantages that cryptocurrencies have over and above traditional money transfers?
Here are some a list of advantages from Trust Payments.
1. Decentralized currency
Peer-to-peer cryptocurrency transfers allow transaction value to be sent without the need for a centralised authority. This massively reduces the bureaucratic legwork needed to send, receive and spend money from one territory to another. All that users need are wallets to receive funds, which take only a few minutes to set up. In states where government entities control banks and financial institutions, the freedom and independence provided by cryptocurrencies can be crucial for both businesses and individuals.
2. Lower fees
Global remittance is most commonly between workers and their families, from higher to lower income countries. Naturally, therefore, both the sending and receiving parties want to save every penny in the transaction, and send the money as cheaply as possible. Transferring money as cryptocurrency rather than through traditional bank transfers can be much cheaper, because trading crypto assets from user to user charges a low, flat fee. At the end of 2018, one (very wealthy) user transferred US$194 million in Bitcoins for the transfer fee of 10 cents. The same transfer through a bank would be in the hundreds of thousands. In the remittance market, the same fee structures apply, albeit on a much smaller scale.
3. Increased security
One of the principal reasons that cryptocurrencies are used in any walk of life is that they are encrypted payments that are virtually impenetrable to the advances of fraudsters and cyber criminals. The blockchain technology on which crypto payments are based creates ledgers which are impossible for hackers to forge, making crypto a safe bet for people wanting to securely send funds across state lines.
4. Faster transactions
As crypto uses decentralised, digitally distributed ledger technology, it can log payments without the need for an intermediary. This means that, where banks and traditional money transfer institutions will spend a long time reviewing and authorising payments, using cryptocurrencies to transfer money globally is almost instantaneous. Sending money using traditional methods may take up to five days, and this could be a major problem in remittance markets where money is needed fast. Cryptocurrency can alleviate this issue.
5. Ease of accessibility
Facebook recently announced plans to roll out its own cryptocurrency 2020, which is a clear indication of the increasing accessibility of cryptocurrencies to a ubiquitous consumer base. It’s estimated that around three billion people around the world have smartphones, and can therefore access the multitude of cryptocurrency trading apps that make it so easy to send money at the tap of a button. This ease and accessibility will facilitate the growth of cryptocurrencies, particularly in markets where traditional banking methods aren’t commonplace, for example in many African countries.
The overriding positive that cryptocurrencies have going for them is the efficiency they have over traditional payment methods. Whether this is in terms of speed, price or ease of access, users can find a simple and reliable transfer method by choosing cryptocurrencies for their remittance needs.
Trust Payments work with a diverse range of companies in touch with the world of cryptocurrency. Whether you are a cryptocurrency exchange platform or wallet, or a remittance company looking to diversify into cryptocurrency transactions, we have the solutions to help.