8 Things Businesses Need to Know About Blockchain for Remittance
When it comes to remittance, also known as the process of sending a certain amount of money as payment, technology has been working to change the process into something that is easier, cheaper, and faster than it ever has been thanks to electronic processes now available.
More than ever, it’s has become important to find a solution for global remittance as more companies and individuals want to more money between countries.
Enter blockchain. Blockchain is an important technology set to completely improve the remittance system and potentially replace what has been a cumbersome bank settlement system.
The old system with the banks has been bogged down, especially because they insist on too many steps and they are laden with costs that are designed to prevent fraud. Blockchain’s public ledger is creating a new payment network that can help businesses.
Here’s what you need to know about blockchain for remittance, also now being labeled as “rebittance” services:
- No high transfer costs: Blockchain is set to lower the transfer costs of global remittance, including bank and fraud prevention fees. Add exchange rates and the fees to do currency exchange on both ends of the remittance and a traditional remittance transaction can quickly get expensive. However, none of these fees come into effect when using a blockchain remittance process.
- Simplified experience: Blockchain offers a straightforward remittance process thanks to the removal of multiple steps in the payment process. Since there are fewer people and processes involved, there is nothing complex about blockchain remittance. It follows a basic and proven transaction formula that has worked for other type of payment processing already as well as for non-financial transactions.
- Speed: With blockchain the transfer of money, is nearly instantaneous. This means that there will be no more five to seven business day averages with remittance. Blockchain provides the ability to move money at this rate, and can then speed up productivity in terms of what businesses and individuals can accomplish with that extra time. Plus, that level of speed can be a game changer when it comes to cash flow, helping businesses of all sizes and individuals to have greater control over their money and expenses.
- No middleman: While traditional remittance measures require a third-party that handles the authorization and release of the payment, blockchain removes this middleman. This decentralized structure to the entire process is one of the primary reasons the remittance process goes faster and costs less.
- Security measures: Blockchain offers an anti-fraud feature that makes it more difficult for hackers to break into transactions as well as features that prevent any access to payment data. Any security issues have been found to primarily relate to user error and have the ability to be fixed. Easily. Other security measures have been related primarily to the overall development and maturity of blockchain and how it can be used.
- Privacy and anonymity: While the ability to protect privacy and provide anonymity is a benefit to many businesses and organizations, there is concern with regulators and governments related to concerns over terrorists and criminals using it to move their money around the world. This is an ongoing issue that countries and regulators are exploring to see if there is a solution that will maintain privacy while not enabling criminals to take advantage of blockchain remittance.
- Still in its infancy: Blockchain for remittance is still in its trial stages in many countries so there is a ways to go before it becomes a common household word and a way to transfer money on a global basis. Many organizations are still reluctant because they are not sure if the world will agree to eventually forego traditional currency and cash for the digital currency that is used for blockchain-based remittance. Because this is a new way of looking at payments and money, more creative thinking and perspective are important by those within the financial industry as well as with businesses that will eventually adopt this type of remittance process. Despite the ongoing development, acceptance is growing as more blockchain companies emerge to illustrate how it can be used.
- Best served in underdeveloped markets: Blockchain is viewed as opening the door to working with underdeveloped markets, particularly those in Africa as well as in countries throughout Asia. With no real legacy infrastructure in place, it’s been difficult for businesses in these countries to join the global business environment, let alone conduct transactions in their own countries. The World Bank noted that India had $69 billion in remittances in 2015 while China had $64 billion, the Philippines had $28 billion, Mexico had $25 billion, and Nigeria had $21 billion. As the World Bank noted, “Remittances are an important and fairly stable source of income for millions of families and of foreign exchange to many developing However, if remittances continue to slow, and dramatically as in the case of Central Asian countries, poor families in many parts of the world would face serious challenges including nutrition, access to health care and education.” Blockchain provides the ability for cross border remittance products, which are in considerable demand as noted in the aforementioned statistics, and could significantly grow this market opportunity.
There’s so much happening in the world of blockchain and cryptocurrency, making it an exciting time to be operating within a realm that requires any type of transaction. There will continue to be evolution with blockchain across all types of applications, including remittance, which will help businesses and individuals access more options related to sending and receiving money anywhere in the world.