Remittance as a Market
When was the last time you sent money overseas? We don’t usually face the need of sending money overseas in life, especially if we don’t have international interactions. We may have experienced overseas payment transactions in an indirect manner but that would be it. However, if we take a little step into this industry and broaden your views, you can see that an unbelievable amount of money is being moved around the world from various countries. According to the World Bank Group, the total amount of international remittances in 2016 was approximately 601.3 billion dollars. (1)
Now that we see the scale of this market, it makes us wonder where in the world, for what reason, the unbelievable amount of money is being transferred. Among the total amount of transfers, approximately $ 445.3 Billion were transactions from migrant workers’ (approx 188 Million people), which accounted for 74%. (2) Within the 74%, the amount of money coming into the Asian region was about $ 243.6 Billion, with average $130 Billion coming from the United States. Thus, the percentage of migrant workers in overseas remittances is by far the largest.
The question we must ask is, has the money being sent delivered to the receiver safely? The answer is NO. In the market of international remittances, there has been a great monopoly of banks for a long time and the level of inefficiency have been pointed out, however these problems have not been overcome by banks creating a standard that the high fees due to these inefficiencies should be borne by the remitters. The migrant workers sending money back home say “the money being sent seems to be dropping as it goes across the ocean”. When purchasing goods at a supermarket, the price of goods rise as it goes through different distribution processes in the supply chain. Likewise in overseas remittance, there are various intermediaries supplementary to the local-overseas banks that we use for remittances creating additional fees.
As an alternative, remittance brokers such as Western Union and Moneygram have appeared and they are providing faster money transfer services as well as cheaper commissions than banks. In addition, due to the revision of related laws, the development of new technologies and the emergence of fintech companies that prioritize user-friendly services are coming in handy enough to break the through the cartel that the banks have been consolidating.
In fact, it is not a simple task to remit money overseas. There are more intermediaries than we think in the process of exchanging currency from one currency to another, which naturally leads to higher costs. Various means have been proposed to overcome this, but there seems to no better solution than the current blockchain technology.
Reference
Frédéric Ponsot, Donald F. Terry, Bibiana Vásquez, & Pedro de Vasconcelos (2017). Sending Money Home: Contributing to the SDGs, one family at a time. International Fund for Agricultural Development.
Join REMIIT’s Community
Telegram: https://t.me/remiit
Website: https://remiit.io/
Twitter: https://twitter.com/remiit_ico
Reddit: https://www.reddit.com/r/remiit/
