A recent investigation by BlockData states that money transfers made with the support of blockchain technology turn out to be 388 times faster and 127 times cheaper than traditional financial systems, which reveals very interesting data about how financial solutions based on Block chains are willing to change the prevalence of the current remittance system forever.
The global remittance sector is massive, in which billions of dollars are traded every day. According to a report compiled by the World Bank, in 2017 global remittances had grown to reach a total of 613 billion dollars. That figure meant a seven percent increase of US $ 573 billion in 2016 and established a new brand. In addition, in 2017, five main destinations, namely: Mexico, the Philippines, India, France and China, contributed with 35 percent of the bulk of money remittance operations. China and India, notably, participated with the largest amounts, which would be almost 60 billion dollars in 2017.
The main firms that perform in this sector continue to record juicy revenues every year. To mention one, TransferWise, the leading Fintech European company in remittances, announced that, for the fiscal year that ended in March 2018, it would have obtained a net profit of US $ 8 million after taxes. In addition, TransferWise also let know that its 4 million users made transactions for 3,900 million dollars per month.
The data suggest that the global remittance industry will continue to grow. The projections carried out by different research companies usually calculate that the amount of money mobilized will exceed the trillion dollar limit in the coming years. The report by Blockdata reinforces this forecast by stating that “the global remittance industry is projected to reach US $ 1 trillion by 2022 and US $ 1.4 trillion by 2025.”
Much faster and cheaper remittances with Blockchain
While the global money transfer industry is immense, it is not without challenges. Moving money across borders is, for the most part, a slow and expensive process. Due to global financial regulations, many of which have to do with Anti-Money Laundering (AML) provisions, financial institutions must agilely overcome an extensive and complex bureaucracy while processing such payments. Generally, these processes take their time, everything to be able to comply with the spirit of the law.
In addition, financial institutions traditionally charge high fees to process payments, some of which can be attributed, as a rule, to the number of third parties involved in a cross-border transaction.
In its investigation, Blockdata determined that cross-border payments processed through blockchain-based systems are significantly faster than those that go through the established financial system. The report stated: “The clearance time for remittances is 388 times faster using blockchain than when traditional channels are used.”
To calculate this figure, Blockdata made use of the data provided by the World Bank and data obtained from some particular block chains. The firm used the average transaction times of a sample of 1,800 remittance payments, as well as the average transaction times of the block chains selected to reach that number. The report also added that “transfers are (…) 127 times cheaper than those made through traditional remittance channels.”
The interest of the remittance firms in the block chain grows
In order to capitalize on the advantages offered by blockchain technology, entrepreneurs are eager to implement solutions based on block chains designed specifically for the global remittance industry. Blockdata found that the number of remittance companies using blockchain technology, which drives the operation of digital assets known as cryptocurrencies, has been growing steadily over the past ten years.
As important remittance companies supported by blockchain, the report highlights InstaReM, established in Singapore, GCash, centered in the Philippines and SureRemit, based in Nigeria. As an interesting fact, the
Blockdata’s team found that most of the service providers that use blockchain technology did not create their own chain of blocks, nor a new token or digital asset. The report notes the following:
“Our findings indicate that approximately two-thirds of these new companies use blockchain technology without their own token. Most of these providers rely on an existing blockchain infrastructure, such as RippleNet or Stellar.”
Another important result is the verification that traditional corporations are quite interested in the adoption of blockchain technology to improve their services. Two of the largest in global money remittances, MoneyGram and Western Union, have been testing for some time with xCurrent, a service provided by Ripple that provides a blockchain-based settlement solution for cross-border payments.
In addition, banks such as UBS, Deutsche Bank and the American Express company are also developing products for blockchain-based remittances.
The irresistible charm of Blockchain
The enormous potential of blockchain technology to facilitate cross-border payments is attracting even seemingly non-financial participants. Reports have already been published that point to the social media giant Facebook and its plans to launch a cryptocurrency focused on remittances, to be used within the WhatsApp messaging application.
For users of the global remittance industry, the advantages gained through the use of blockchain technology have far-reaching implications. The blockchain settlement times are usually just a few minutes, while those of the regular financial system can mean up to a week. The speed of remittances can make the difference between the ability to pay rent on time or not for recipients. Therefore, the increase in the speed of settlement is of first importance to the end user.