Introduction: There has been an increasing trend by migrant workers in foreign mature economies like North America and Europe to send money back to their families in their home country in the form of Remittance. Research predicts that by 2030 there will be an inflow of USD 6 Trillion with about half being sent to Asia. The biggest recipients of this fortune would be to developing countries with high rural population – India was the largest remittance market in the world in 2017 with USD 69 Billion being sent back to India alone. India was followed by China with a remittance amount of USD 64 Billion and Philippines with USD 33 Billion being the three largest remittance markets in the world. Aside from these three, more Asian countries like Pakistan and Vietnam were also on the list with remittance amounts of USD 20 Billion and USD 14 Billion with all of the mentioned countries being in the top 10. This helps explain why the Asian remittance market for 2017 was at USD 256 Billion.
The Issue: Although there is a significant amount of money being sent to these economies, a major portion is lost through transaction and service fees. In many developing economies, every penny counts as most families receiving remittance money use about 70% of the money received to cover their basic expenses. Transaction costs eat away a major chunk of the money with margins ranging from 2% to over 15% in developing markets. Although the global average is around 7% the number is majorly skewed with far higher rates in lower economic countries. This loss of funds as the cost of sending money home is causing a major dent in the role remittance can play towards the development of the global economy.
Opportunity: The implementation and growth of the peer to peer network for financial transactions and the growing need for a decentralized currency has led to the explosive increase in demand for crypto currency, mainly Bit coin. Although Bit coin is the most prominent there are other crypto currencies that exist which are gaining popularity and increasing value like Ethereum, Litecoin, Ripple, etc. The major growth, while positive for the future outlook of the economy and for crypto currency has had a large portion owing to people buying crypto currency without fully understanding the concept and its application. The second roadblock has been the level of adoption by vendors and companies owing to the skeptical nature of crypto currency. These factors have led to Bitcoins being worth USD 0.09 per bitcoin in July 2010 to USD 17,549.67 by Dec 2017. Although the volatility of the currency has yet to be addressed due to the lack of a law regime for regulation and due to a waving market sentiment. The security and validation offered allow for bitcoin or any solid crypto currency to be the most stable medium for the future of finance. Having all transactions done using crypto currency would result in a completely decentralized and open financial system which would completely be controlled by the network using it ensuring no one party gains through an unfavorable or unsavory method. Given these advantages, there are major applications for remittance through crypto currency. This trend has already started to see growth in South Korea and China with companies aiming to use crypto currency for remittance transactions and the trend is also expected to be implemented soon in Malaysia. Given that financial technology companies have had a major growth rate in Asian markets there is a major scope for a strong, well branded and trusted crypto remittance company to ensure that maximum remittance amounts reach the families that need them. Start-ups such as Bitspark in Hong Kong, and Bloom, Payphil, coins.ph and Satoshi Citadel Industries’ (SCI) remittance unit Rebit in Philippines, are trying to turn that into a business model. There is an even bigger advantage for developing economies: Reduced demand for crypto currencies in smaller economies often can lead to lower bitcoin prices, so sending $100 to Indonesia or the Philippines via bitcoin would result in the equivalent of more than $100 at the other end. Without the bank fees, the shops say they can charge their customers 25 to 75 percent less. This means a great deal to countries where the majority are in poverty and need every bit they can get. The introduction of Crypto currency has led to easier and safer transactions and while there are still security issues which need to be resolved, they are expected to be sorted out in the near future as research indicates that by 2030, Bitcoin will become the 6th largest global reserve currency leading to it having a mainstream place in society and therefore the economy
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Ankur Gupta, Head Marketing & Communications