Update: New Findings Distributing Bitcoin in Latin America
If you’d like further context, you can read Part I of our study here.
In December 2018, we conducted a series of Bitcoin workshops with 38 Mexico City residents to better understand the opportunities and challenges for adoption in the region. Based on this initial data, we shared our belief that Bitcoin has two hair on fire use cases in Latin America: 1) as a hedge against local currency inflation / devaluations and 2) as a low cost alternative for remittances.
These findings were exciting, but came from an admittedly small sample size. So we conducted a second set of workshops and surveys in conjunction with Bitso, Mexico’s leading cryptocurrency exchange, with ~300 Mexico City residents. Based on our updated findings, we argue that 1) the store of value use case is extremely compelling and 2) the international payments use case is not yet ready for consumer adoption (but is a great backend for existing remittance businesses). We also found new insights around existing public perception of Bitcoin and effective techniques & incentives to spur adoption.
Study Methodology + User Demographics
Our methodology:
- 15+ in-person workshops: ~100 participants interviewed
- 1 two-minute video followed by a 5 minute survey that started going viral: 200+ responses in < 48 hours
- 297 study participants in total
User demographics:
- ~⅔ male, ⅓ female
- 65% millennial (< 30 yo), 25% adult (< 45), 10% Baby Boomer (> 45)
- 80% university or higher level of education, 15% high school or less, 5% no response (the vast majority of participants were middle class)
- 55% referred by other users
- ~⅔ Android, ⅓ iOS
- 80% Mexicans; 20% foreigners living in Mexico
- ~60% of foreigners from LatAm, 40% from Europe
Updated Hypothesis #1: There is real demand for bitcoin as a hedge against inflation / devaluations
Based on an ~10x larger sample size, we now firmly believe that this remains the top use case for bitcoin and stablecoins in Latin America. >70% of our respondents believe that the peso will devalue vs. the U.S. dollar in the next 1–3 years.
Most would like to save more, but few have access to a savings instrument they trust. Only 11% have a foreign savings account.
Middle and lower class respondents described keeping their modest savings in physical cash (pesos and dollars) while upper middle class respondents report using both cash and physical assets like real estate. Virtually everyone expressed interest in diversifying a portion of their savings into both bitcoin and stablecoins pegged to the U.S. dollar (similar to what we saw in our first study).
Another interesting finding is that older Mexicans (45+ yo) are the most bearish on the peso and thus best able to intuitively grasp Bitcoin’s store of value use case. This makes sense as they’ve lived through Mexico’s massive devaluations in the 1980s and the Tequila Crisis in the 1990s.
These older users, however, are also the most skeptical of Bitcoin and digital money in general. Younger users are more bullish on the peso (likely because they haven’t experienced a massive devaluation in their adult lives), but are by far the most open to using digital currencies (as many are already accustomed to doing so in online games and communities).
We thus believe that the fastest route to Bitcoin adoption in the region is making it a family affair. We saw multiple cases where a millennial brought his or her parent to one of our workshops. The parent immediately grasped the use case, but was initially very skeptical. After 2+ hours of learning, however, almost all of them wanted to buy at least a small amount of bitcoin and TrueUSD. We see a ton of potential here in finding young people who are already interested in Bitcoin and helping them educate their families.
What’s more, we believe that there’s a huge opportunity for increasing access to other financial assets as well. Almost none of our respondents can buy instruments that many readers may take for granted, such as: U.S. stocks, bonds, CDs, etc. We’re particularly excited about the potential for products like Abra’s bitcoin-collateralized stocks and ETFs to help solve this problem.
Updated Hypothesis #2: Bitcoin as a means for remittances and international payments is not yet ready for consumer adoption
During our first study, we found initial promise in helping immigrants save 10–20% in fees when sending money back to their home countries. But that was with an even smaller sample size of 9 participants. We added an additional 50 participants this time, ~60% from other Latin American countries and ~40% from Europe. Our findings here are a bit nuanced. We now believe that using bitcoin (and other cryptocurrencies) is currently too complicated for an average user sending or receiving international payments. And this makes sense. There’s a ton of steps in going from zero to sending your first bitcoin transaction:
- Registering an account with an exchange in Mexico (in our case, Bitso)
- Registering an account with an exchange in your home country
- Buying bitcoin on the first exchange
- Withdrawing bitcoin and sending it to your home country exchange
- Figuring out how to convert the bitcoin into your home currency (plus waiting to complete any “Know Your Customer” verification processes necessary to withdraw fiat currencies into a traditional bank account)
All of these steps, of course, apply only if you have access to user friendly exchanges. In the case of countries with restricted or limited access like Venezuela, your only options are peer to peer exchanges like LocalBitcoins or Bisq, which have some big advantages but much less intuitive interfaces. This is a LOT of work for someone who doesn’t think playing with bitcoin is exciting (cryptocurrency geeks are still in the great minority). That said, people would still be willing to overcome these challenges if the benefit justified it. For those from sanctioned countries, who have no other way of getting money to their families, the amount of work is irrelevant because the payoff is ensuring your family survives. Censorship resistant payments will always remain a core use case for Bitcoin. But that’s not necessary for most people with access to reliable existing options (and potential new options like Facebook’s new Libra network).
While most are not thrilled with their current transfer methods, they at least trust that they work. >60% of users listed “reducing commissions” as their top request for improving their existing service. And yet, advertising a reduction of 10–20% in cost was largely ineffective at getting people to attend our workshops.
Saving what amounts to a few dollars each month in exchange for a ton of initial research and setup was simply not worth it for most. That said, for those who did attend the workshops, they were eventually able to master using bitcoin, which they’ll now continue using instead of their former service. Changing this behavior required an average of THREE in-person or over the phone sessions to build sufficient confidence so that they could buy and send bitcoin on their own.
Most companies don’t have the resources for that sort of user education. There is, however, one excellent use case for Bitcoin-based remittances. Existing remittance companies or networks with large users bases could easily use the Bitcoin rails in the background for their current customers. The company would save 10–20% in costs (which they could either pass on to the customer or keep as profit) and the end user would have no idea that Bitcoin is used.
This is pure speculation, but we have a hunch that existing remittance companies and less formal networks are already using Bitcoin in the background. This could help explain the rapid LocalBitcoins volume increase in countries like Colombia, Venezuela, Peru, and Mexico.
Other Findings:
In addition to our updated hypotheses, we found a number of interesting other findings worth highlighting:
- Bitcoin adoption in Latin America will likely be family driven. Adults will understand the use case and have the savings to invest while their millennial children will be open to the solution. We mentioned this one above, but think it’s important enough to stress again.
- The two biggest challenges facing cryptocurrency in Mexico today are ignorance of the subject and association with scams. 40% of respondents had no opinion of cryptocurrency whatsoever. This is a HUGE opportunity to help a plurality of Mexicans form their first opinion of a new monetary system.
34% of respondents had a negative perception of crypto, mostly citing associations with words like “scam,” “bubble,” and “get rich quick.”
This extremely reasonable skepticism can only be addressed through education and Bitcoin’s continued persistence over time.
- A small double-sided referral bonus ($5 USD) is NOT sufficient for most people to invest 2 hours learning how to use Bitcoin. Such a bonus IS effective to get people to take smaller actions like watching a 2-minute intro and registering for an application like Bitso. Especially if the bonus comes from a trusted friend. We believe there is a huge viral adoption potential here for companies and projects who can build on this finding. This is one of our top priorities for further development.
- There are two big barriers to adoption by the lower and middle classes: 1) a lack of savings to make an initial bitcoin purchase and 2) phone space to download an exchange app or wallet.
- Wealthy families in the region are very interested in diversifying their portfolios by allocating a small (relative to their net worth) amount to bitcoin. Their thinking follows along very similar lines to what Xapo CEO Wences Casares outlines in this essay.
What’s Next?
This study gave us several new insights around Bitcoin adoption in Latin America. We plan to build on this work by helping select clients design product and distribution strategies and repeating these studies in countries with higher inflation rates (e.g. Argentina).
If you’re interested in following our journey or potentially working with us, please join our mailing list or follow us on Facebook and Twitter. You can also reach us directly at entiendebitcoin@gmail.com.
