Let’s say you moved from Argentina to Canada five years ago to start a new and promising career, leaving your family behind. Now, you’re looking to help them out by sending money their way. After a couple of tries, you realize that there are two major challenges to sending money: it’s expensive and it takes forever. You’re now probably thinking: “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. In most cases, the sender is an immigrant and the recipient is a relative back home. Traditionally speaking, there are a couple of ways to send money overseas: wire transfer, electronic payment systems, mail, draft, or check.
Going back to our example earlier, let’s say you’re trying to send money from Canada to Argentina. What would be the first step? The first thing to do is to walk to your nearest Money Transfer Operator (MTO). The next step would be to 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 heavy lifting 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 agree to help you send your money, MTOs will often take a small fee for their services. A portion of that fee then goes to the RSPs for the installation, subscription, and software maintenance.
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 it 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 speedier transactions? 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, etc.), spend just as much time confirming the transaction, and pay even more than regular money transfer services.
Additionally, banks can sometimes set money limits alongside those two main problems, limiting 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, “MTOs” in Bitcoin can mean BTC wallets, exchanges, or peer-to-peer marketplaces. Basically, if you know how to send BTC, then you can do Bitcoin remittances.
Looking to send money internationally with Paxful? Here’s how you can do it:
- First, you and your recipient should create and verify your own Paxful account.
- Next, you need to Buy Bitcoin using any of the 350+ payment options available on Paxful.
- Ask your recipient to send their Paxful Bitcoin Wallet address or QR code to you.
- Once you have the recipient’s Bitcoin address, head on over to your Paxful Wallet and send Bitcoin by copying your recipient’s wallet address or scanning their QR code. Take note that Bitcoin transactions are irreversible so make sure that the wallet address is correct.
Simple, right? The best part is that cashing out is just as easy, all you need to do is reverse the process:
- The moment Bitcoin is transferred to your recipient’s Bitcoin wallet, tell them to cash out by selling Bitcoin on Paxful or checking existing offers on the Sell Bitcoin page. They can also create a new offer and cash out using any of the 350+ payment methods available.
The digital and decentralized aspect of Bitcoin makes it 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 smartphone and a stable Internet connection.
If you want to see the value of your local currency in BTC, you can check out our Bitcoin converter page.
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 may be lower in some countries than in 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 you can send money online effortlessly. With these payment methods 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 makes it to the other side. With Bitcoin, you get to see your money 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 intimidate any beginner. Yes, it can be a little scary, 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 exchange 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’s 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.