Revolutionizing remittance industry with Blockchain

In this article, we’ll discuss how blockchain technology revolutionizes the remittance industry and way in which it can be made easier for the people.

According to the World Bank, the officially recorded remittances to developing countries during 2016 is $429 billion. This may come as a surprise to those who are unfamiliar with the multi-billion dollar market of remittance industry. Technically speaking, remittance is a peer-to-peer transaction among migrant workers to their families in the home country. These global transactions are vital for a country’s economic growth. The top three countries receiving remittances in 2017 in absolute figures are located in Asia: India (USD 69 billion), China (USD 64 billion) and the Philippines (USD 33 billion). Many of the developing countries mainly rely on these remittances for its survival.

Traditional remittance method

The amount received through remittances globally is increasing with the growth in the volume of migrants. However, there are several pain points faced by the migrants in the traditional money exchange system. In most of the developing countries, only 20-30% of citizens have bank accounts and more than half of them doesn’t really have bank accounts. So most of them rely on unbanked services known as money transfer operators (MTO) to receive remittances. But with MTOs, the family members of migrants have to pay a significant amount as a transfer fee out of the hard earned money sent by the migrants. People with bank accounts get remittances as demand draft and bank cheque. But in order for a cheque to get accepted, it takes 2-3 weeks. The transaction flow of a remittance is started by converting the migrant’s money into dollars and transferred to the recipient’s account. The amount in dollars is then converted back to the recipient’s local currency. Doing many transactions like this will cause a loss in the currency, even time spent on for transfer approvals and not to mention the tedious paper works. Moreover, Involvement of third-party agents in between transactions will make the transactions time-consuming. Different agencies have a different set of customs to follow for a global money transaction. Most of these agencies don’t have a tracking system to check the status of the transfer. The risk of losing the track is very high in traditional remittance methods. Also, the transaction fees in here are unreasonably high. This causes the transactions through middlemen to turn out to be ineffective and worthless. let’s see how blockchain can help in the remittance industry.

How blockchain works its magic to shut down traditional system pain points.

An effective and time-saving process of international money transfer is vital for the migrant’s families to get the money sent out by their dear ones. Blockchain with its distributed decentralized digital ledger technology and several other unique features will help to conduct the money transfer to the individuals orderly, avoiding all the inconveniences that basically are seen in the conventional money transfer method. let’s see all the advantages that can be guaranteed by using blockchain as a medium for the international money transfer.

Very low transfer cost: In a traditional money exchange system, additional transfer charges are remitted on both the sender’s side and recipient’s side. Which is unreasonably high. Blockchain’s remittance process will not cost much for the money transfer because of its decentralized nature. There’s no middleman or service that charge you as seen in the conventional method.

Simplified experience: There’s a straightforward approach in the blockchain, avoiding all the complex steps as seen in the banks and other money transfer processes. The involvement of people in the blockchain is much lesser hence a simplified and effective approach is assured.

Speed: Transfer of money is near instant in the blockchain. That means, in place of weeks, the technology allows a successful transfer within minutes. With this pace, the productivity of businesses, as well as individuals, will be increased. The level of speed can also help in the cash flow, helping companies in all dimensions to have greater control over the money expenses.

No middleman: In the traditional system, interference of the third parties are essential to grant permission to release a payment. The blockchain as a decentralized system allows the entire processes in the remittance process to go faster since there is no middleman in between the transactions. Which is also the main reason for its low transaction fees.

Security measures: Security that is provided in the technology during a transaction is unbreakable. As it is a decentralized system of digital ledger with peer to peer networks, it is difficult for hackers to intrude into the system.

Blockchain as a technology has provided with many useful solutions in several industries. With its unique features, remittances of workers can be transferred to their family and friends efficiently with low transfer fees. As the technology is developing more and more applications including remittance can be made easier for the people.