Remittances play a large role in the economies of developing countries, raise their standard of living, and help fight poverty. They are also seen as an important part of disaster relief and often exceed official development assistance (ODA). For the past 25 years, remittances have exceeded development aid, and in some cases make up a significant portion of a country’s GDP.
As of 2019, there are more than 164M people who live and work overseas. Many of them send money back to their home countries to support their families. For example, 10.2 million Filipinos live abroad, which makes up a tenth of their domestic population. The majority of Overseas Filipinos (4.1M) live and work in the US and send $250 per person every 45 days. The most common way of making a remittance is by using an electronic payment system through a bank or money transfer service. Is this system efficient though?
Sending small sums is usually expensive. Some countries limit remittances to bank wires, although banks are the most expensive transfer channel. In the first quarter of 2019, banks charged an average of 11% in transfer fees, while post offices charge over 7%. The fees often exceed 10% when the destination is in Africa or a Pacific Ocean island.
According to the World Bank Data, in 2018 the market size for people sending remittances was equal to 300 million with a market value of around $1 trillion. The approximate loss in fees is $28 billion. The numbers are impressive enough, and slow service and low-speed transactions only add to the problem. Besides, with the ongoing pandemic many immigrants lost their jobs and income. Hence, they cannot send money home or afford large transfer fees.
One possible solution is offered by Cyclebit. Our cryptocurrency-based remittance service will provide instant transfer of funds at low fees. By utilizing the infrastructure and technology of our Cycle POS and crypto exchange solutions, we will enable any point-of-sale to work as a remittance office.
There are 18000 CXI exchange offices in the US, which can serve as potential remittance offices for Overseas Filipinos. Funds in USD cash will be converted into stablecoin and transferred via blockchain. On the other side, the recipients can withdraw their funds in Philippine pesos at any sari-sari shop with a Cycle POS.
One of the biggest data providers, Statista, projects digital remittances volume to reach $143 Billion by 2023. They estimate that the current number of users in this segment is about 8.5 million and will grow to 13.2 million users.
Such projections only mean vast opportunities for decentralized cryptocurrencies and the digital segment of the remittance. Therefore, companies that can offer an alternative for people who send money abroad should keep pushing the adoption of this technology to improve people’s lives.