Allow us to paint a picture: imagine you moved from Argentina to Canada five years ago to start a new and promising career. The rest of your family is still in Argentina and you decide to help them out by sending some simoleons their way. After a couple of tries, you realize that there are two main challenges: sending money internationally is expensive and it takes forever. You think to yourself: “there must be a better way.”
What if we said you were right?
How traditional remittances work
Remittance refers to the money sent or transferred to another party. Typically, the sender is an immigrant and the recipient is a relative back home. People can send money overseas via wire transfer, electronic payment system, mail, draft, or check.
To give you a better understanding of how Bitcoin is changing the money-sending systems in place, let’s first go over how traditional remittances work.
Let’s say you’re looking to send money internationally from the US to a relative in Asia. What would be the first step? The first thing you’d do is walk to your nearest Money Transfer Operator (MTO). Then, you fill them in on who you’re sending money to, where they live, and how much money you’re sending. These MTOs will then take all that information and do the “dirty work” for you, ensuring that your money gets where it needs to go—converting the money at the available exchange rate in between.
In most cases, MTOs are customer-facing, which means these services deal directly with the customers. They also usually use software given to them by bigger Remittance Service Providers (RSPs). When they get your money, the MTOs take a small fee for their services. A portion of that fee (usually the bigger cut) goes to the RSPs for the installation, subscription, and maintenance of the software.
Sounds simple enough, right? Well, in a way, they really are very simple. However, there are a lot of underlying issues with this system.
Problems with the current model of remittance
The main problems within the current remittance ecosystem boil down to two main aspects: price and speed. The fees can stack up and the remittance can take quite a while to get to its destination.
Traditional-money sending services will usually charge extra for withdrawals, deposits, and transfers. Also, they make money when they convert your money using their exchange rate. Most of the time, the fees charged will vary depending on the amount you’re sending and how fast you want your money transferred.
Some companies will allow same-day transfers, but for a little extra. So the question becomes: do you want to pay more for a quicker speed? If you aren’t willing to pay extra, then you better be ready to wait at least a couple of days before your recipient gets their money.
Unfortunately, even if you decide to transfer money online, you’ll suffer from the same tedious steps, high fees, and slow transfer speeds. With bank transfers, you’ll have to provide even more information (such as account number, SWIFT code, account number, etc.), waste more time confirming the transaction, and pay even more than online money transfer services.
Banks also sometimes set money limits alongside those two main problems, controlling the amount you can send and receive.
How to send money internationally with Bitcoin
Just like their traditional counterpart, Bitcoin remittances make use of MTOs. However, where the two differ is that Bitcoin MTOs are mostly cloud-hosted, meaning that their entire existence is digital.
The digital and decentralized aspect of Bitcoin MTOs makes them incredibly easy to use, especially for those who have limited to no access to a bank account. For those people, they can send money online instantly, only requiring a stable Internet connection.
“MTOs” in the context of Bitcoin and cryptocurrency can mean a lot of things: Bitcoin wallets, exchanges, or peer-to-peer marketplaces. Basically, if you know how to transfer Bitcoin, then you know how to do Bitcoin remittances.
To give you an example, let’s say you want to send money online using Paxful. To do so, you’ll first need to convert your fiat into BTC. You can do that by using one of the 300+ payment options available on the platform to buy BTC. Once you’ve done that, you can send it to your relative’s Bitcoin wallet. The best part? It only takes a couple of minutes to complete.
Once your recipient confirms that they indeed receive BTC from you, they can cash out by selling Bitcoin on Paxful using any mode of payment they prefer. Your recipient can even profit by selling the BTC at a higher price.
You can check our bitcoin converter page to learn the value of BTC in your local currency.
Pros and cons of using Bitcoin for international money transfers
First and foremost, Bitcoin remittances address the main issues that traditional remittances face: price and speed. They are not only much faster, but they’re also way cheaper. There are barely any middlemen, extra charges, and payment intermediaries that eat away at your hard-earned money with fees. The fact that it’s cheaper also allows you to earn profits. For example, exchange rates are lower in some countries than others. This means that you could buy BTC at a lower price from one country, then sell it at a higher price in another.
Next up: the decentralized aspect of Bitcoin. Since it isn’t tied to any specific government or institution, you can send as much as you want, anywhere you want, and at any time. Let’s not forget that banks are closed on holidays and weekends. On a regular workday, they close in the afternoon, barring you from making any middle-of-the-night transactions. Cross-border payments are also much easier because of the decentralized aspect, freeing your money up from the shackles of slow and expensive processes.
Using Bitcoin to send money overseas is also more flexible and versatile—in both payment options and amount. On Paxful alone, there are hundreds of ways to pay with specific payment options tailoring to particular countries. All you have to do is find your ideal payment option and send money online effortlessly. With these payment options available, you also get the option to buy smaller amounts of Bitcoin (as low as 10 USD).
Last but not least, Bitcoin gives you the power to be in control of your finances. When you drop your money off at a traditional MTO, it goes behind the curtain and you just hope that it crosses to the other side. With Bitcoin, you get to hold your money’s hand throughout the journey and make sure it gets to where it needs to go. Although it isn’t necessarily something people look for, we believe that it’s an immensely important aspect to consider.
Bitcoin remittances only have a few cons, which are easily fixed with a little time and patience.
The most obvious one is that although the sending speeds are quicker, there are more steps in the process, which is enough to steepen the learning curve and deter any beginner. Yes, it can be a little intimidating, but taking the time to learn and study the process can do you wonders. For now, this type of remittance is tailored to those that prioritize speed and expenses…that is until the use of cryptocurrencies becomes mainstream.
With that being said, if you’re one of the people that prioritize speed and expense, you must be extra careful and mindful of the exchanging prices. Remember that your money is being converted twice when you send money abroad to someone in another country with Bitcoin. The first conversion comes when you buy BTC using your fiat and then the second happens when your recipient converts it back.
If you aren’t careful about this part of the process, you can wind up losing money. To prevent that from happening, you have to be conscious and aware to make the best possible trades. Remember that cryptocurrencies are still part of volatile markets—the key is to know how to use that to your advantage.
Evolution is inevitable
Right now, we have something entirely new and because it’s unlike anything we’ve seen before, it can sometimes feel like it isn’t easier or better. But…isn’t that how new tech always feels?
We have to understand that there is a learning period with things that disrupt our “ordinary” way of life. When it comes to anything technology, it’s practical to expect the unexpected. That’s what technology does to us: it brings us new things that make life easier.
Look at when the Internet was first invented; not everyone welcomed it with open arms right away. But now, especially in the time we’re in, it’s practically impossible to live without it. Let’s face it, Bitcoin remittances are designed to disrupt the fiat money transfer business, but arguably, it’s for the better. As more people begin to realize that, the more chances it’ll hit the mainstream.
Who are we to deny ourselves of quicker, cheaper, and more secure money-sending methods? It’s safe to say that Bitcoin is making a name for itself as one of the best and cheapest ways to send money internationally.
We’re ready to make the change. Are you?
*The content of this article is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.