Cross-Border Remittance, a gigantic market with very inefficient solutions

Velo Team
Velo Team
Nov 20, 2019 · 5 min read

This article is part of Velo’s use cases series. We will explain about the potential opportunity of Velo’s first use case, cross border remittance.

When talking about cross border remittance, most people usually think about consumers transferring small amounts of money from country A to country B. Although, this statement is true but it’s only at the tip of the iceberg. Underneath it, the cross border settlement network between remittance service providers themselves is the key to facilitate those huge money transfer transactions. According to the data from the World Bank, global cross border remittance volume rose to $700 billion in 2018 with an annual growth of 3–5% per year.

Cost of transferring money is expensive

The data from the World Bank points that consumers have to pay around 5–10% of their transfered money as a service fee! This is insanely expensive. If you send $200, you will have to pay up to $20 on top as the transactional cost. Most of the people who send money back home are mostly low income earners, and having to pay the high fees takes a toll on thier hardship. These high transaction fees is a result of a network rail system that is simply inefficient and the consumers are the ones that end of suffering. Nonetheless, it can also mean an opportunity gap has for an entrepreneur in this case.

The current solutions in the market

Even Though there are many remittance service providers around the world. We can separate them into two main types (Source: Bain, Google and Temasek).

1. Established remittance service providers

These are service providers, which have been in the market for several decades i.e. Moneygram and Western Union. Basically, these companies use a network of agents and money transfer operators to deliver money to receivers. Sometimes, money has to go through many agents and operators before it reaches the hand of the receiver. It is very difficult to track the flow of the money since it bounces of multiple channels before arriving at the destination, and there is also a risk of fraud due to several on hand exchanges . This is one of the reasons why the service fee is quite expensive, nevertheless, the popularity of these services remains due to two main reasons, familiarity/ ease of access and those people being the underbanked. This is a familiar process for the underbanked and is most likely be the few options offered to them for transferring money overseas in many years to come.

2. Fintech players

Fintech companies are the new generation of independent players that have emerged to compete with digital financial services offered through new business models. An example of these companies is Transferwise. In short, Transferwise settles money transfer by matching the amounts with other users then it uses a pool of funds to pay out the transfers via local banking agent. An advancement of technology and a new business model can minimise the process and cut right through the cost benefiting both the transferring agent and consumers. With the innovative solution, Transferwise can capture some key markets in the UK, Europe and the US. These are the countries where the majority of citizens has access to banking services. On the other hand, countries where the majority of citizens are unbanked are stuck with the traditional method of sending money. The situation may improve as Transferwise has started to integrate with leading e-wallet providers in South East Asia.


Ripple is also considered as one of the leading fintech companies. It is the very first company that utilizes the blockchain technology to settle money transfer money. Ripple proved that blockchain technology can substantially reduce the cost of cross border remittance and at the same time increases the transaction time. However, Ripple was designed to be used among interbank transfers and not for consumers to consumers. Thus, businesses and unbanked are still facing the same problem of costly fees and long transactional time.

Money Settlement is the main problem

It is very clear that cross border remittance is expensive due to the inefficiency of money settlement rails. By using a blockchain solution from a fintech company can save a lot of process and cost, there is a shortcoming such as point of service.

Many countries, especially where the people need it the most, do not get access to the new solution provided by new fintech companies. Again, the main reason for such limitation is from the high operation cost of money settlement, hence, not viable for both financial institutes and fintech companies to operate there.

Why Velo is a game changer?

Velo provides a new innovative money settlement solution by utilizing the blockchain technology (We will cover the technology architect design in the future articles). In short, using Velo Protocol will tremendously reduce the process and the cost of money settlement between one country to another.

It is very important to note that Velo does not position itself as a remittance provider and compete with existing players like most of the crypto startups would always do. On the contrary, Velo will act as a backend settlement platform for remittance providers and fintech startups to transact money more efficiently. Through Velo’s trusted partner network, remittance providers can enjoy a low bid-ask spread, instant settlement of funds and extensive cash-in/cash-out points. In this case, we have Lightnet, a fintech remittance provider who will be utilizing Velo to tackle $150bn worth of unbanked market in South East Asia.

Cross-border Remittance is just one of the use cases of Velo, keep following to find out more what can Velo do.

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Velo Protocol

Velo is the next generation financial protocol built to enhance the current Credit and Reserve infrastructure using smart contract reserve system to enable stable digital credit issuance and borderless value transfers for businesses.

Velo Team

Written by

Velo Team

The next generation financial protocol built to enhance the current Credit and Reserve infrastructure using smart contract

Velo Protocol

Velo is the next generation financial protocol built to enhance the current Credit and Reserve infrastructure using smart contract reserve system to enable stable digital credit issuance and borderless value transfers for businesses.

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