Building the
Eastern Union
A Look at Bitcoin Remittance Startups
Around the World
A couple of months ago, I published a guide explaining how entrepreneurs might leverage Bitcoin and the blockchain to build remittance businesses that leapfrog some of the limitations of traditional finance. A lot of it was based on our experiences running Rebit out of the Philippines, but an even larger part was based on conversations with other fledgling startups working within this same corner of the industry.
Although the notion of using Bitcoin as a remittance platform (or “rebittance,” as we’ve come to refer to the method) has been around for as long as the currency itself, there were only a handful of these startups back in 2013 — hardly the kind of nascent competition that would worry Western Union or its cohorts. Just under a year later, their collective numbers and reach have increased exponentially, and 2015 may finally be the year where the world can watch a new kind of union finally begin to take shape.
Rebittance Around the World
A lot of the new activity within the rebittance space was centered around the ASEAN region in 2014. In Hong Kong, there was favourable press coverage for Bitspark’s young service, which catered to the 180,000 Filipino migrant workers living in the city, and charged roughly 1% per rebittance. A month later, they expanded that service to include an off-ramp in Indonesia as well, by partnering with one of the pioneers of the region, Artabit.
In Africa, the most well-known rebittance service is still Bitpesa, which recently closed a $1.1M round of founding led by Pantera Capital. It’s expanded its coverage from just the UK-Kenya corridor to include off-ramps in Ghana, Tanzania, and Uganda. A younger competitor, Beam, also focuses on the UK-Ghana and UK-Nigeria remittance corridors. Both companies charge between 3% and 4% per transaction, which is a far cry from the fiercely competitive ASEAN market. Traditional providers in Africa reportedly charge as high as 12%, so in that environment the Bitcoin alternative is especially compelling.
Across the Atlantic, Volabit and SatoshiTango have recently teamed up to build a remittance corridor between Argentina and Mexico. Using a proprietary platform dubbed “Coinnect” (not to be confused with the Coinnect ATM company in Macau), the two companies aim to eventually plug other countries into the platform and extend their reach beyond their respective borders.
Coinnect’s intent is strongly reminiscent of BitX’s FALCON protocol, although the Singaporean startup takes great care to emphasise that FALCON is meant to be community-designed and wholly open-source. In theory, a universal protocol that allows disparate Bitcoin businesses to facilitate money transfers and settle debt would be extremely valuable, but each new contender’s usefulness won’t become apparent until more than a couple of companies are hooked up to them.
The remittance trend is such that even Bitcoin companies that didn’t previously focus on remittances have started to add it to their list of services. Last month, the former Bitcoin ATM leader Robocoin announced that their renewed focus on the software side of the business would enable standard ATMs to offer rebittances right from their terminals. Their strategy is representative of a growing trend amongst Bitcoin ATM providers, such as the recently funded LibertyX, who are moving away from the hardware business and focusing more on platforms. Meanwhile, newer entrants into the ATM industry like BitFX out of Hong Kong are building rebittance functionality right into their first wave of terminals.
Igot, a mostly-Australian Bitcoin exchange, recently announced that they were enabling international money transfer to and from the 40 countries where they had banking presence. This puts them squarely in competition with CoinX, a US-based startup that has been quietly laying the foundation for an international remittance platform over the past year.
And then there are the Uber-inspired P2P remittance apps, HelloBit, and the very recently launched and funded Abra, that hope to decentralise the movement even further by enabling individuals to act as both on-ramps or off-ramps.
The peer-to-peer approach seems unsustainable in a number of significant ways, not the least of which is the fact that the razor-thin profit margins in the competitive remittance environment tends to force consolidation, not diffusion.
Additionally, there’s often a harsh economic disparity between the on-ramp party residing in a developed economy, and the off-ramp party, who must dispense it in the developing world. It’ll be interesting to see if these startups have taken those nuances into account.
2015 Predictions
As these foundational rebittance companies continue to strengthen and stabilise their respective services, a new generation of app-based startups will begin to emerge that aim to capitalize on the off-ramps provided by the businesses that came before. Many of these are still in stealth, but it’s evident that the second and third quarters of 2015 should see quite a number of new entities all launch at the same time. Instead of operating off-ramps of their own, these businesses will focus purely on user-experience and on-boarding new customers.
The two largest remittance countries, India and China, are still noticeably absent from the list of Bitcoin-enabled corridors (as are a number of European countries), and it seems only reasonable to assume that startups from within these regions will launch their own rebittance solutions very soon.
Everywhere, the first hurdle still pertains to regulatory uncertainty, as most of the on-ramp countries tend to be developed economies with strict licensing requirements. The primary question is what responsibilities a Bitcoin vendor may have, if its customers were to use bitcoins purchased from them to transfer money overseas. And would those responsibilities be vastly different if the vendor aided the customer in sending those coins overseas? The answer to that appears to vary from one jurisdiction to the next.
In areas where the law allows for more options, traditional Bitcoin brokerages will begin adding money-transfer capabilities to their list of services simply because they can; it’s an obvious use for the cryptocurrency, and (regulation notwithstanding), a strong revenue stream.
In areas where the law is more stringent, alternative business models will pop up like innovative mushrooms in legislative darkness. Coupon codes, gift certificates, bills payment, and debit cards are all viable quasi-remittance methods that fulfil the needs of money transfer, without necessarily being subject to that specific set of regulations.
As more rebittance businesses come online, the need for an accepted protocol will become more and more apparent, as each new partnership would otherwise necessitate a lot of messy custom implementation. Whether it will be Coinnect, or FALCON, or something closer to the metal of the blockchain itself, remains to be seen.
For now, the one thing we can all be sure of is this: the Eastern Union is happening.
