How Bitcoin Is Changing the Remittance Market

The digital currency, Bitcoin, is getting into the massive remittance market. Imagine buying something online. But instead of paying for it using usual means (like PayPal or a credit card), you pay with Bitcoin.


This time, there are no banks or clearinghouses involve in the process. And no fees! Is Bitcoin going to change the remittance market?


Wait. What is Bitcoin Anyway?


Bitcoin is one of several cryptocurrencies available. A cryptocurrency is mined using a powerful machine that computes complex mathematical calculations. And those unique calculations are valued a dollar amount.


It was invented as a peer-to-peer online payment system that does not require a trusted central authority (like a bank). The need for such is inessential because everyone who has a Bitcoin has ALL the transaction history of ALL the Bitcoins in existence.


This is likely to be thousands of computers connected to an “online ledger” called the Blockchain.


Related Article: Everything You’ve Ever Wanted to Know About Bitcoin But Were Too Shy (Or Confused) to Ask


Is This the Future of Remittance?  


The remittance market is worth $582 billion in 2014 according to the World Bank. Remittances to India and China contributed largest followed by the Philippines with $25 billion.


These startup companies are marketing the Bitcoin technology as a cheaper way to send money back home. It removes the 10% fee that traditional remittance companies usually charge.


If we follow the Bitcoin’s premise, this peer-to-peer sharing nature of goes away with the traditional transaction fees from banks. Thus, it costs almost nothing to send.


Abra, a startup remittance company is planning to offer its service without any charge.   This is possible as the company takes advantage of the digital currency, Bitcoin, and has recently received $12M in funding.


They plan to serve people from all over the world, marketing its service as “private, secure, and instant.” But, no specific date was given as of yet.


According to Abra CEO, Bill Barhydt, Abra is an app that facilitates storing digital currency equivalent to US Dollars directly on your smartphone and transferring your money from your Abra App to any other Abra App anywhere in the world.


There are other remittance companies using the new technology as well like Africa’s BitPesa, Southeast Asia’s BitSpark and North America’s Align Commerce and the Philippines’ Will more players enter the coming years?




The use of Bitcoins has not replaced the use of credit cards in yet. In fact, Visa and Master Cards process $32 billion dollars a day compared to the digital currency’s $50 million in 2014.


Not a lot of people understand or have even heard of Bitcoins and other digital currencies. It may even be hard to convince traditional users to switch from tangible currency to an online currency.


The remittance companies are targeting developing countries. Although, it might be difficult for most of the population to even have their own smartphones or a reliable Internet connection.


A Balancing Act: Security vs. Anonymity


Unlike banks who need to verify your identification and location, using a Bitcoin guarantees anonymity. The computers only process the Bitcoin ID to make sure that no one uses a Bitcoin he/she does not own (and it only takes a few minutes max).


There is no central authority. Instead, it is an open source software. Software updates are done only after the consensus of miners, with the technology’s interest at heart. Anyone can peek into it, either to mine Bitcoins or to improve the system.


The numbers of miners involved in decision-making acts like a check and balance system. It protects the technology from being manipulated.


People who have issues with privacy also find the use of Bitcoin attractive because it promises anonymity. However, this also attracted people from the black market. The anonymous nature of the transaction may promote money laundering. Such is the case with this alleged Russian money launderer.


And amidst the Blockchain being secure, another problem that plagued the use of this technology are hackers. The blockchain system itself is secure but the bitcoin “wallets” where bitcoins are stored had a history of being hacked and “stolen.”


Such example is the 2014 $460 Million Bitcoin Heist and the recent NEM (a cryptocurrency) heist worth $500 Million. How can you find something not tangible?


Risky? Consider Country-to-Country Regulations


Experts believe that Bitcoin remittances are unverified and no model has been thought out properly yet. The costs of remittances come from other incurred expenses where Bitcoins does not seem to offer any advantage.


Experts argue that fees are not due to greedy remittance companies but rather due to the cost of compliance and regulations of the countries involved in the transaction.   This is the reason why Coincove was forced to go back to its drawing board after it was regulated out of the US market.


Another startup in Ghana, Beam, backed away from receiving Bitcoins remittances. Instead, it offers “value remittance” due to Bitcoin being expensive after computing the exchange cost between local currency and digital currency.


Different countries will always have their regulations to secure financial stability from money launderers and even terrorist threats.


Other countries will be open about this new technology like Norway or completely close its doors like China. Startup companies have to consider this and innovate along the way or else risk losing their biggest marketing strategy which is having little to no fees.




In addition, Bitcoin’s worth fluctuated wildly within its years of history. In the beginning, 1 Bitcoin was only worth a few dollars but in 2013 it was worth $1,000 per 1 Bitcoin. Went down to around $230, shoot up to $15,000, and went down again.


With the volatility of the exchange rate, companies should secure protection against these fluctuations.


Is it Worth It?  


Right now, Bitcoins have a lot of issues to work on especially in the remittance market. Many are raving about it and hailing it as the new innovation in the financing world in 500 years.


There may be many skeptics but there are also big name companies investing in this new technology. Supporters are comparing it to launch of the Internet. Most do not understand back then. But look at the way it changed our society. We now embrace it as part of our everyday lives.


Dr. Lawrence Summers, a former U.S. Treasury secretary is quoted saying that “ the “substantial inefficiencies” of an outdated financial system make it “ripe for disruption.” That alone means it would be “a serious mistake to write off [digital currencies] as either ill-conceived or illegitimate.”


Yes, the Bitcoin has an uphill battle in the remittance industry and it is not without fault. The Bitcoin has a lot to improve on. As a digital currency, it might not be the best option in the future. But experts believe that the technology behind it is.


For the meantime, you can try using the services of an AUSTRAC-registered, convenient, and trusted remittance company for you and your loved ones. *wink wink*

Candice C

Candice is a school teacher and a mother, She loves writing about practical guides and of course, parenting advice.


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