Global remittances slow, while regulation restricts access

In the latest edition of the World Bank’s Migration and Development Brief, released earlier this month, remittance only grew marginally last year. Remittances to developing countries amounted to $431.6 billion in 2015, an increase of 0.4 percent over 2014.

Although still growth, the pace is the slowest since the global financial crisis. Global remittances, which include those to high-income countries, contracted by 1.7 percent in 2015, to $581.6 billion.

Nonetheless, remittances remain buoyant in key remittance-receiving countries. Remittances to Vietnam are estimated to have increased by some 10 percent in 2015.

Workers’ remittances are a significant part of international capital flows, and the inspiration of many bitcoin and blockchain companies. A range of services now use the technology to expand access to remittance services, and bring down the cost of sending money home.

“Cutting prices by at least 5 percentage points can save up to $16 billion a year.”
— – The World Bank

In the fourth quarter of 2015, the global average cost of sending US$200 was about 7.4 percent, down 0.6 percent in comparison to 2014. Sub-Saharan Africa, with an average cost of 9.5 percent, remains the highest-cost region.

BitPesa is a universal payment and trading platform focusing on the African market, with headquarters in Nairobi and offices in Lagos, London and San Francisco.

Founded in 2013, the service is described as an easy way for businesses and individuals to buy and sell local African currencies using bitcoin, from anywhere in the world. Funds can be sent to Kenya, Nigeria, Uganda and Tanzania, with the monetary settlement taking place directly with African banks and mobile money accounts.

BitFury Capital, the investment arm of BitFury Group, made a strategic investment in BitPesa last Februaury. The group made its first bitcoin focused investment in 2014, funding Bitcoin wallet provider, Xapo. Investments have since been made in security specialist BitGo, and merchant processor GoCoin.

“Our mission is to make global transacting easier, especially for those who continue to face obstacles to financial growth,” said BitFury CEO Valery Vavilov. “A secure, transparent and trusted form of exchange is being made possible by BitPesa, and our investment will allow us to work together to leverage the innovative power of the Bitcoin Blockchain for the benefit of the entire pan-African continent.”

Connie M. Gallippi, Founder & Executive Director of the BitGive Foundation, states that BitPesa provides, “a fast, easy, and very inexpensive way for me to send money from the US directly to the Shisango Girls School Principal to buy clothes for some of the students.”

“It took 5 minutes to set up, cost $2 in fees and in about one hour, she received the money directly to her mobile phone in a remote town in western Kenya, 10,000 miles away. Amazing!”
— – Connie M. Gallippi, Founder & Executive Director of the BitGive Foundation

Rebit.ph has been tackling remittances in the Philippines, the third largest remittance market in the world. It has been in operation since 2014, and is part of Satoshi Citadel Industries. The platform offers international money transfers and bills payments to the Philippines via Bitcoin, with zero processing fees.

Funds sent as bitcoin over Rebit.ph platform are converted to fiat currency. Recipients receive a deposit into their connected banking account, or can pick it up cash from designated Rebit.ph centers.

“Our delivery options include forwarding to most local banks, as well as the most popular pawnshops and payment centers.”
— – Rebit.ph

However, the World Bank reports slowing remittance growth here too. The market is fighting the closure of money transfer operators (MTOs) bank accounts, in compliance with Anti-Money Laundering and Countering Financing of Terrorism (AML-CFT) regulations.

Over the past two years, 84 accounts of 32 Philippine remittance providers, including both banks and MTOs, were closed by 33 foreign banks in 13 major remittance-sending countries, according to the Philippine Central Bank.

Current regulation isn’t the only hurdle faced by remittance providers. Republican frontrunner for the United States Presidency, Donald Trump, shocked the world earlier this month when he revealed plans to force Mexico to pay for a multibillion-dollar wall along the US southern border.

Trump described halting money transfers from Mexican immigrants in the US, going to their families back home. According to the World Bank, these remittances account for roughly 2 percent of the Mexican gross domestic product, nearly $25bn each year.

“It’s an easy decision for Mexico,” Trump wrote. “Make a one-time payment of $5-$10bn to ensure that $24bn continues to flow into their country year after year.” Cryptographic and decentralized currencies are peer-to-peer, ideal for circumventing governmental restrictions.

Inspired by Trump’s proposition, Bitso launched a funding round on the online investment platform BnkToTheFuture.

“Here at Bitso, we’re the first company that’s working on building the Bitcoin and Blockchain infrastructure for Mexico so that the country is fully prepared for the future of finance.”
— – Bitso

Bitso has built a solution that that leverages integration with the Mexican Central Bank, allowing Mexicans to freely trade their dollars and mexican pesos in and out of Bitcoin. It is the first Bitcoin and Ethereum exchange available in Mexico, and has already attracted over US$1.9m of investment, for 16 percent equity.

Bitso CEO Pablo Gonzalez states “We believe that Mexicans should be able to send their money back home and Bitcoin is fast becoming a cheaper and faster way to do that as our platform volume increases. We feel making money flow freely is a great innovation that should not be hindered by traditional currency wars”