The Next Big Thing In The Remittance Space
However, as new entrants challenge established models the onus is on these financial institutions and operators to move online and on mobile.
Could the cream of digital technology, Bitcoin, allow them to do this?
Bitcoin and Blockchain
While too few merchants currently accept bitcoins to make it a viable means to make direct payments, some startups are using bitcoins for remittances. For example, Filipino company Satoshi Citadel Industries launched Rebit.ph, uses bitcoins to transfer money to the Philippines. Recipients receive currency in Philippine pesos, unaware that transactions are facilitated with bitcoins.
A similar service is available between the UK and Kenya with BitPesa, where the crypocurrency is converted into Kenyan Shillings when transferred into mobile wallets such as M-Pesa or Orange Money. These transactions happen within minutes and without the fees digital transfers would normally attract.
Challenge Of Going Digital
Key challenges for the banking sector to move into the digital remittance space, revolve around risk, compliance and regulation. KYC requirements to prevent money laundering and fraud require the remitter to be extremely aware of their customer base. This presents challenges for both new entrants to the remittance space and the traditional banking sector.
However as technologies evolve, fraud screening and AML technology becomes more sophisticated and EMoney licences more prevalent, the problems reduce. With the support of the FCA bitcoin, and blockchain, could become a key component to international money transfer. Blockchain has to potential to make the entire process of sending money abroad much simpler: no red tape, more transparent, easier to audit and save costs for AML and KYC.
While blockchain is not widely understood by the general public, its transparent nature provides many opportunities to prevent fraud and provide the reassurance they seek. Bitcoin is a traceable currency and blockchain a traceable transaction, unlike cash, therefore making it impossible to launder. It is also immune to fluctuating exchange rates, making it an attractive proposition to anyone sending money to regions with economic instability.
Regulation is a key driver here. More regulation across the industry will build trust with consumers as well as reassuring financial institutions looking for digital transformation.
To discuss further how blockchain could be utilised by your organisation contact our team on +44(0)808 301 8080 or email [email protected]