Bitcoin’s peer-to-peer network allows it to reduce transaction fees that banks and credit card companies impose on the merchants and individuals. Because of this, it is a good payment alternative for many small to medium businesses as well as brick and mortar establishments. But one of the biggest industries that bitcoin could potentially dominate in the future is remittances and money transfer.
The money transfer industry today
In a study released by the Pew Hispanic Center, a non-partisan research organization, the cost of transferring money back home in Latin America has dropped since the last 1990’s; but it “slowed markedly” from 2002-2004. In 2012, the global remittance flow increased 10.77% reaching $514 billion while it is estimated to reach $608 billion in 2015.
For over 160 years, Western Union is the front runner in the industry having a market share of almost 15% with over 500,000 branches spread over 200 countries. The average charge for money remittances and money transfer ranges from $8-$100. Now, if you think about it, that’s a big hole in your pocket.
This where bitcoin comes in
Bitcoin is the first decentralized digital currency. No central financial institution or government controls it. Instead, all transactions can be viewed in a public ledger called the “block chain.” In a bitcoin transaction, you only need two things—a bitcoin wallet and a unique address. Your address is your password, and without it, the transaction cannot be processed. Because it does not go through banks, there’s no transaction fees needed.
This idea should work very well in the money transfer industry. Think about it, the transaction fee could be totally eliminated thus saving a lot of money and time for both parties.
A threat to the big guys?
Last year they saw a weak streak for Western Union. In Mexico, they lost exclusive partnership to Grupo Elektra and lost over 7,000 agents due to compliance issues in the country. More so, because of this obvious advantage, speculations arose that WU is threatened by its presence. But instead, they released a statement saying:
“We will continue to track the use of virtual currency in the market, and expect that it should comply with the same regulations and oversight that the rest of the financial services industry must adhere to, to ensure that the consumers are protected.”
It is clear from this statement that Western Union remains unfazed by Bitcoin.
The Bitcoin advantage
Regulators are still neutral about bitcoin’s viability because of it volatile price value. But regardless, it proves to be a very possible alternative to Western Union, isn’t it? Migrant workers do not have to shoulder a big chunk of transaction fees whenever they are sending to their relatives abroad plus, they can do it anytime.