Bitcoin Undercuts Remittance Sharks

Remittance has become a common thread of discussion in the crypto currency community. According to a press release in April this year issued by the World Bank, $404 billion dollars flowed to developing countries in 2013, and this figure is expected to rise to $516 billion by 2016. This is not a new issue. In 2010, the G8 and G20 endorsed the 5×5 Objective to see the lowering in international money transmittance.

“We will work to reduce the average cost of transferring remittances from 10 percent to 5 percent by 2014, contributing to release an additional 15 billion USD per year for recipient families.”
— Cannes G20 Final Compliance Report

With 2014 coming to a close, little has been seen in the realms of price decrease in third world remittance. In fact, in a report this April, "Lost in intermediations – How excessive charges undermine the benefits of remittances for Africa", written by Kevin Watkins and Maria Quattri of the ODI (The Overseas Development Institute). Companies such as Western Union and MoneyGram came under fire for imposing a ‘Super-Tax’ on African remittance. These excess fees are on average 12% to transfer money to Sub-Saharan Africa. This equates to roughly $1.8 billion dollars a year.

“$1.8 billion would be sufficient, at current levels of per-pupil spending, to put almost 14 million of Africa’s children into schools.”
— The ODI Report

Worldbank.org states that customers in the South Africa to Botswana corridor are charged on average 20.18% per transfer. It appears that Western Union sits under this average at 15.12% for their ‘under one hour’ service. However, if you were to click on the Western Union tab the following blurb is provided: “This RSP [Remittance Service Provider] sends AUD and pays out USD in this corridor. Remittance recipients may incur an additional cost (not shown here) if and when converting USD to the local currency.” (see example here when clicking on Western Union)

Remittance Fees

What do bitcoiners have to say? Marni Melrose, also known as @MidasMarni, conducted an interview with Andrew Ittleman of Bitcoin remittances and the International Money Transmitters Conference, which takes place three times a year.

“If you want to understand if Bitcoin has value[…] remittance is a great place to start[…] the frictionless transfer of money globally will transform our world faster than anything.”
— Marni Melrose

Remittance will also be a key focus at the upcoming conference in Dubai. Gregory Simon, Co-founder of the Bitcoin Association, and responsible for organizing the sponsors of the upcoming conference says, “Remittance is a big topic in Dubai as they have a very large migrant population […] we have some people down in Africa doing some projects in Kenya [who] may come up and talk about what they are doing there.” With the technology of Bitcoin, there are fantastic opportunities for third party companies to assist with guiding those who desire to send or receive bitcoins.

So what exactly is happening in Kenya? According to remittance fees released by the World Bank for the second quarter of 2014, the average fee for sending 120 GBP from the United Kingdom to Kenya sits at an average of 9.68% of each transaction. Remember the 5×5 Objective? All is not lost. Companies such as BitPesa are certainly taking the remittance bull by the horns. Only charging 3% for their handling of transactions, BitPesa is certainly cheaper than the current market competitors. Their website is a fountain of information for those new to bitcoin, with fully fledged FAQ’s and exciting invites such as:

“Not sure about bitcoin? We can help. The good news: if you know email, you know bitcoin. Let us walk you through the bitcoin world – how to understand it, how to buy it, how to use it.”
— BitPesa Website.

It is an attractive alternative to the current market, which faces little healthy competition. It is possible that Bitcoin and its disruptive technology could shake down these large businesses and empower people once again.

B.Holmes

B.Holmes, author of The Range of Illusion and The Private Key instalments, is currently located in Thailand, researching and writing about crypto. You can follow B.Holmes on twitter @BanteringB, or contact via email: [email protected]