No more exploitation — A revolution in money transfer transactions for international migrants
The remittance industry is gaining its position in all nations’ economy due to the current trend of globalization. This vast ecosystem consists of various stakeholders, among whom are approximately 250 million international migrants worldwide. It is projected that remittances sent back home would then add up $444 billion in 2017, according to World Bank. This cross-border transfer is economically significant for not only the receiving families to maintain basic living conditions but also GDP of many developing or underdeveloped countries as one of the largest capital inflows.
Monopoly in the non-commercial market
Despite the potential of the money transfer industry, there are currently only a few players that dominate the market and control the infrastructure that enables money transfers across borders (i.e. Western Union/MoneyGram). Considering the biggest player alone, Western Union, Bloomberg reported the company had a vast 13% market share with $8.95 billion market capital in 2017. Alongside with MoneyGram, they dominate the current market and this monopoly allows them to dictate terms in the market.
Unnecessarily high transaction costs result in greater complication
An obvious example is the punitively high transactions costs varying substantially among different corridors. For instance, sending $200 from the US to El Salvador costs $8, but it’s $42 to send $500 to Burkina Faso through the Western Union website. This reflects not only the excessive cost but also financial exclusion of the system. As explained, these costs are due to consumer protection costs, local remittance taxes, market distribution, regulatory structure, volume, currency volatility and other market efficiencies.
However, logistical and regulatory costs alone cannot account for such extortionate fees and there are great technological alternatives to lower their costs, which these companies are reluctant to apply.
Having no better choice to make, migrants have to compromise with these costs, resulting in at least $32 billion lost in transaction fees. The only other way to lower this cost is through unofficial money operators with informal contracts and no money arrival guarantee, which will put you at high risk of losing your money. The world’s official volume of remittance will also lack up to $100 billion only because of this issue.
Restrictive business environment does not respond to market need
Another term they create is the restrictive business practices the incumbents have set in place. For instance, banks and agents have exclusive agreements which stipulate that once they work with each other, they are not allowed to work with other providers. This is an impassable barrier that restricts newcomers from entering the market as they traditionally need banks to enable cross-border payments.
This practice enforces migrants to have a bank account but signing up for one takes more time and more hectic procedures than the indigenous, thus making them reluctant to open an account and become the “unbanked”. With the current heavy reliance on the centralized banking system, it would cause lots of inconveniences to transfer money abroad.
This issue gives our solution more validity as we have designed a money transfer system that completely removes the reliance on banks by using cryptocurrencies to increase financial inclusion worldwide.
A technological solution is on the way!
ZeroBank employs the currently flourishing technologies — blockchain and smart contract — along with the proven sharing economy model to tackle the aforementioned problems in the market. Via this platform, money can be sent, received, and exchanged quickly, directly, at any time, anywhere in the world through a network of community agents.
End-users including immigrants can bear minimal costs since ZeroBank platform completely removes the interference of the centralized intermediaries like banks, or MTOs. Moreover, the user registration is consumer-oriented, which not only helps customers but also our system to verify their identities. Once verified through our KYC, with a smartphone connected to the Internet, they can make a transaction without any knowledge about cryptocurrencies.
ZeroBank is currently putting every effort in completing MVP, which is expected to be released on 15th August for trial as well as testing and finalizing product to be launched in three markets including France, United Kingdom and Vietnam next year.
The World Bank recently said that lower transaction fees could spur an increase in remittances and lift another 30 million people out of poverty. With this project, we hope to contribute to achieving this goal in the near future.
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