Could Bitcoin Save the Day? How the Poor Benefit from Choice in the Remittance Market

Bitcoin

Bitcoin and other means of transferring money online are disrupting the traditional remittance market.

“It is hard to think of any one thing that would have a faster and more positive effect on so many people in the world’s poorest countries.”

Surprisingly, the “one thing” venture capitalist Marc Andreessen is referring to in this New York Times article is Bitcoin. How is it that Bitcoin came into a discussion on global poverty?  As Andreessen explains, Bitcoin charges no (or very low) fees for the transfer of money, meaning migrant workers from developing countries – who sent home over $400 billion in 2013 and will send even more this year – could save on fees using Bitcoin. The savings would increase their purchasing power, improving quality of life for them and their families.

Tranches of money sent home by migrants are known as remittances, and, in research for CGAP, Dalberg came to a similar conclusion as Andreesssen. Dalberg’s Rasesh Mohan was part of a team investigating how online money transfer providers are disrupting the traditional remittance market, with potential to enhance the affordability and transparency of international remittances.

Rasesh explains the phenomenon:

“What we found was an industry in flux, with an increasing number of Internet-based remittance platforms entering the market and catering to senders of remittances. These trends have great potential to benefit the poor.

Traditionally, immigrants wanting to send money home went to money transfer agents situated in brick-and-mortar stores, such as neighborhood retailers affiliated with Western Union. As a result, a handful of big players have dominated the money transfer market, as the large upfront investment required to create an extensive agent network was an imposing barrier to market entry. However, with more people gaining access to the Internet, online money transfers are becoming more popular. The viability of online transfers has significantly leveled the playing field in the money transfer market, and a number of online money transfer companies have launched to compete with traditional players.

Online money transfer companies that are able to transfer money to mobile wallets can be grouped into three different models:

1. The websites of major traditional money transfer organizations, such as westernunion.com;

2. Recent digital-only MTOs, such as XoomRemitly, and WorldRemit;

3. Companies that provide online sending platforms for mobile network operators on a white label basis, such as MFS Africa.

These models are shifting the market by both (i) increasing affordability and (ii) increasing awareness around various channel options.”

Read the rest of Rasesh’s article on CGAP >>

For more of Dalberg’s work to examine the future of the international remittance market, check out the team’s thoughts on international transactions in relation to Facebook, mobile money, and branchless banking.

Western Union in Mali

Brick-and-mortar money transfer shops, like the Western Union outpost in Mali shown above, may be a thing of the past.

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One Response to Could Bitcoin Save the Day? How the Poor Benefit from Choice in the Remittance Market

  1. The real question isn’t whether Bitcoin determination tail off, dive before take us all on a crazy harass, it’s whether it determination truly subsist its inevitable test.

    You can aalso try tto broker a private deal with someone over IRC.
    So an entire virtual economy rigged floating on Linden dollars.

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