Remittance Industry Ripe for Blockchain Disruption

By Jay Derenthal

Remittances are funds that migrant workers send to their home countries. And the remittances industry, dominated by Western Union, MoneyGram and Ria, appears ripe for blockchain disruption.

Blockchain technology has the unique ability to solve many of the industry’s major pain points — including high processing fees, slow transaction times and fraud — in one fell swoop. Additionally, the countries to which migrant workers send money have strong demand for basic financial services and they have underdeveloped financial infrastructure — a situation that may act as a powerful catalyst for the adoption of cryptocurrency and other blockchain-based money transfer solutions.

The remittance industry assists millions of the developing world’s poor who depend on family members working in first-world countries for cash assistance. Most families in developing nations do not have a bank account to which a wire transfer or a PayPal money transfer can be sent. And PayPal debit cards are not available in these countries. These are the “unbanked” peoples of the world.

The average cost of sending remittances is 7.5 percent of the overall transaction. World Bank statistics show that global remittances from migrants working in first-world countries to their families in developing countries reached approximately $450 billion in 2016, with $33 billion of that total going to transaction fees. These fees hit senders and recipients who are hardest off and who accept the cost not out of choice but out of necessity.

Money-transfer operators charge high fees because they incur high costs. They “pre-fund” transfers by risking money that they float in destination countries to enable reasonably prompt settlement with a physical presence at both ends. Western Union has more than 550,000 outlets spread out across nearly every country in the world, and it must maintain and fund bank accounts throughout those areas.

Meeting regulatory mandates meant to deter money laundering and the financing of terrorism adds more cost. Money transfer companies must perform identity verifications, credit checks and audits. They often prefer to close the accounts of customers who are somehow viewed as high risk or who simply lack credentials.

In some ways, the giant and incumbent global remittances industry is a legacy financial sector acting largely as a toll collector for the unbanked. It is a sticky business whose customers are reluctant to move from a system that has worked for them, even if it charges steep fees.

That said, blockchain technology can be expected, over time, to severely weaken the hold that traditional money transmitters have on the market. If migrant workers and their families can switch to a cheaper provider that charges only currency conversion fees with near-zero processing fees, they eventually will. Bitcoin doesn’t depend on a central authority and can, theoretically, be moved around the world faster and more cheaply than any fiat currency.

The global remittance market is constantly expanding and evolving. It is reasonable to expect a new and better way of sending remittances to evolve and overtake the incumbent traditional remittance services. The more established newcomers taking aim at Western Union’s market, including TransferWise and WorldRemit, are not yet using blockchain technology, but their fast growth and popularity do signal that the remittances industry is ready to move toward faster and more efficient digital solutions.

Startups using blockchain technology as a solution for safe, quick, cheap money transfers seem to be getting the most traction in Asia. According to the World Bank, the top three countries receiving remittances in 2017 worldwide were India ($69 billion), China ($64 billion) and the Philippines ($33 billion). Remittances are a key component of the national economy in India and China, and they are the central pillar of the national economy of the Philippines.

Millions of families in the Philippines rely on remittances from overseas Filipino workers (OFWs) for half or more of their income. This money is used mainly for basic expenses such as food, clothing, transportation and education.

The Philippines seems to be the market most quickly adopting blockchain-based money transfer solutions. Sixty-nine percent of Filipinos have no bank account or credit card, according to the World Bank. According to a report from the Commission on Filipinos Overseas, there are over 10 million OFWs in 170 countries sending money home.

Additionally, as reported by the Philippines Department of Science and Technology Information and Communication Technology Office, there are 1.5 million Filipino freelancers working for offshore companies through the internet and receiving their pay via the incumbent remittances industry.

With such a large and globally connected populace, there may be no better place than the Philippines for blockchain disruption of the remittances industry.

Here are some Philippines-focused blockchain technology startups to keep an eye on: offers a mobile-centric platform that uses blockchain technology to allow users to pay bills and purchase mobile airtime top-ups, in addition to enabling overseas workers to send remittances to family members back home. To date, has attracted more than 5 million users, growing by 4 million users so far in 2018 alone. has a network of 26,000 disbursement and collection locations throughout the Philippines, including many 7-Eleven stores.

Satoshi Citadel Industries (SCI) operates a Bitcoin exchange that allows users to trade and invest in bitcoin in addition to a Bitcoin-based remittance service.

Toast uses blockchain technology to facilitate transfers behind the scenes. Its customers are OFWs in Singapore and Hong Kong who send money home to a family member through the Toast app in about two minutes. The recipients can then pick up cash at pawn shops and other partner stores across the Philippines.

Bloom Solutions is a Google Developers Launchpad accelerator startup that offers businesses an API that lowers their transaction costs and disbursement times across hundreds of remittance channels. The BloomRemit API allows for instant payments to unbanked Filipinos.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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