Despite being one of the most affected industries by blockchain disruption, remittances still appear to have a lot of room for growth.
Like migration, like remittance
CEO of Netcoins, Michael Vogel explains to TTMNews that the rate of globalization and global migration over the past few centuries mirrors the development of the remittance industry. Vogel notes that most remittance transactions are made between family members, predominantly sent by individuals who have left their home country to work elsewhere, and wish to send money back home on a regular basis.
Remittance is generally thought of in an international context, although domestic payments is of course also a huge industry as it encompasses all forms of money transfers and business payments.
Western Union is an example of a dominant player in the international remittance industry, and it’s a 166 year old company, founded in 1851!
Blockchain offers ultra-low cost remittance
While considering the benefits of blockchain technology for the remittance industry, Vogel notes that fundamentally, Bitcoin allows for ultra-low cost remittance because there is no third party involved.
“With blockchain technology, for the first time in history it means that two parties that don’t know (or trust) each other can transact, because the transaction itself is guaranteed and secured on the Blockchain. In other words, as long as the sender and receiver share the same blockchain (or ledger), then that means that the entire remittance doesn’t need to be overseen by a single entity such as Western Union. In fact, the sender and receiver can be from different entities”.
A habit-based industry
However, Vogel identifies a major reason that may be slowing down the development of blockchain-based remittances. According to him, remittance is very much a habit-based industry, because people often send remittances to family members on a regular basis (just visit any Western Union location on a Friday afternoon and you’ll see people arriving in droves).
Hence, customers are generally comfortable with using the same store every time for their transaction, even if it means paying 2% more than the store down the road.
“I think this is primarily the obstacle faced by blockchain-remittance companies, it is really the same obstacle faced by any new remittance company”, says Vogel..
It’s all about efficiency
In terms of mainstream adoption, the interesting thing is that customers don’t even need to know that their remittance transaction is being processed through a blockchain because the net effect is the same: fiat money gets sent, and fiat money is received at the other end.
Blockchain technology is perhaps proving to be the greatest innovation of this generation, offering basically upside implementation benefits with remittances.
However, every industry, not just remittance, will benefit from blockchain technology. Blockchain makes transactions simpler, faster and more accurate.