Remittance is the act of sending money in the form of payment. Often times, these payments are sent by foreign workers to their home countries for the purpose of providing funds to their family members. The problem, however, is that sending money the traditional way often takes too long and gets pricey. Enter bitcoin remittances.
The emergence of peer-to-peer platforms has created many opportunities for people to use bitcoin and other cryptocurrencies for more than just investment purposes. And believe it or not, remittance is one of the biggest real-use cases of bitcoin. The processes of traditional remittance are somewhat similar to that of bitcoin remittances, but the latter cuts through a lot of the time-consuming and expensive aspects.
How remittances work
To understand how bitcoin remittances work, it’s good to understand the full process of a traditional remittance. Let’s say you’re sending money from the United States to a relative in Asia. Your first step would be to go to your nearest Money Transfer Operator (MTO). These MTOs are the ones that convert and transfer the funds at the available exchange rate. Like any other service, MTOs will charge you a small fee for their services.
In most cases, MTOs are customer-facing and usually require the services—mainly the software—of a bigger Remittance Service Provider (RSP) like Western Union or Moneygram. If this is the case, it means that the MTO is only receiving a small portion of the fee that they’re charging. The remaining (and bigger) portion of the fee will usually go to the RSP for the installation, subscription, and maintenance of the software. This could mean even higher fees for you as the MTO might compensate. Higher fees make it difficult for places like Africa—countries with communities that heavily depend on remittances. And as of July 2019, Africa is still experiencing high remittance charges.
Another problem is that traditional remittances often take a while, which means it can be a few days before your relative receives the money—depending on where you’re sending money from and where you’re sending it to. Bank transfers and interbank routing often takes time, and that’s assuming that you’re in an area with intermediary bank options. Even if you have those options, each bank would take their own cut—making it more expensive than it has to be. Let’s say you’re in Europe. Even Single Euro Payments Area (SEPA), which is probably the most efficient banking network, can take over a day, not to forget the weekends when the banks do not work at all. Along with those problems, money limits are also sometimes set by the banks—limiting the amount of money you can send/receive.
Despite these problems, there is still a high influx of money coming from worldwide remittances. According to a report by The World Bank, remittances to low and middle-income countries reached $529 billion in 2018—almost a 10% increase from the record high of $483 billion in 2017. The countries that receive the most remittances, in order, include India ($79 billion), China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion).
On the other hand, there are bitcoin remittances. Just like the traditional method, bitcoin remittances make use of MTOs. Unlike the traditional method, these MTOs are cloud-hosted, making it easier to serve those in developing nations. This makes MTOs incredibly easy to use, especially for those who do not have access to a bank account as they are able to send and receive money through a stable Internet connection.
Sending your remittances on Paxful is simple. If you wish to do so, the first step would be to buy bitcoin from the source country that you are remitting from. If you’re remitting from a more developed country like the United States or most countries in Europe, bitcoin is usually available at market price. Once the bitcoin is in your wallet, you can sell it to the destination country that you’re remitting to at a premium or market price.
If you know how to transfer bitcoin, then you know how to do bitcoin remittance. Learning how to send money with bitcoin is beneficial in many ways. For example, using Paxful as a medium for remittance would cut the price, making it a cheaper alternative to traditional remittances. It would also be much faster, taking only a couple of minutes as compared to the days (or even weeks) it could take using traditional means. Lastly, it would also give you an opportunity to make a profit by buying bitcoin at market price, then selling it at a premium price.
The pros and cons of bitcoin remittance
- Compared to traditional remittance methods, bitcoin remittances have more versatility when it comes to payment methods.
For example, M-Pesa is popular in Africa, PayTM is popular in India, and Alipay is popular in China. Each country has a tailor-made payment option, you just have to find yours. And if you head onto Paxful, you’ll see that there are over 350 payment methods available, giving you a wide array of options to choose from.
- Bitcoin remittances are also flexible in amount. You can send as much as you’d like when you’d like. And as mentioned earlier, the speed of transactions on bitcoin remittances are immensely better than those of traditional means.
- Unlike traditional banks and other money remitters, Bitcoin remittances are 24/7.
Cons: Although it adds an extra step to the process, the speed of transactions, the fees (lack thereof), and its overall efficiency balance it out. Also, not many people are aware of this method of remittance—giving it a steeper learning curve compared to traditional remittances. If more people are educated on the pros of bitcoin remittance, it might be a totally different story.
Bitcoin and its real-life uses
International money transfers are not an easy task. The process includes several steps—most of them inefficient and expensive. Luckily, bitcoin transfer fees aren’t as high and the process is much faster. Bitcoin money transfers, compared to their predecessors, are lightyears ahead of their time because sending bitcoin is extremely easy. In addition to remittance made easy, bitcoin has created tons of other opportunities for people all over the world—investment opportunities, the ability to make payments abroad, wealth preservation—and we only expect more and more doors to open in the coming years.