The future of the world remittance industry is digital. Money transfer operations have become more expensive. Depending on your country of destination, your method of transfer and other factors, remittance charges can range anywhere up to 13% of the total amount of money being sent. Banks are even more expensive, with only a fraction of the cost reaching your destination. Banks also take several days to a week transferring funds, aside from the fact that clients still worry about security. The growing sophistication of the finance sector will solve these challenges in the following four ways:
The blockchain eliminates security concerns by having a peer-to-peer computer network - think of skype or bittorrent - where all the users see your transactions, where you don't need a middle party, and where money changes hands within minutes. The decentralized system assures you that your money really gets there. The system is, also, cheaper since you don't need to pay hefty fees to banks, Western Union, MoneyGram, Ria, or other remittance providers.
At least eleven money transfer companies are already treading this route. These include Abra, Align Commerce and Bitspark that offer end-to-end blockchain powered remittance services. Most offer far lower-cost service than conventional services with a turn-around that averages 24 hours. Abra does not require users to have a bank account to use its service.
You can make the transfer yourself through the blockchain. You’ll need cryptocurrency, or digital coins, to do the transaction. The most famous is Bitcoin (BTC) but also includes Litecoin, Peercoin, and Dogecoin, among others, where you use an electronic coded address to make the transaction.
How does it work?
The blockchain, or decentralized ledger, is a global network-to network computer chain where each node in the network records and verifies the data of each transaction that occurs within the network. Records are permanent, comprehensive and public. This not only protects your business dealings and prevents theft, but, also, simplifies your affairs, quickens the process, reduces errors, and saves you from hiring a third party.
Smart contracts are digital contracts which are embedded with an if-this-then-that (IFTTT) code, which gives them self-execution. In real life, migrants send money to distributors, family friends or others and may want to specify what the funds should be used for. In the future, more people will use the blockchain to embed this contract, which will be instantly executed once conditions are met. The blockchain not only waives the need for third parties, but also ensures that all ledger participants know the contract details and that contractual terms implement automatically once conditions are met.
At the moment, we think of remittance flow in terms of cash, but the future could see all sorts of property rights being transmitted through the blockchain, where migrants can allow people in distant countries to instantly use their tangible or intangible property.
Smart property works in the following ways: Tangible or intangible property, such as cars, houses, or cookers, on the one hand, or patents, property titles, or company shares, on the other, can have smart technology embedded in them. Such registration can be stored on the ledger, along with contractual details of others who are allowed ownership in this property. Smart keys could be used to facilitate access with the permitted party. The ledger stores and allows exchange of these smart keys once the contract is verified. Making property smart decreases your risks of running into fraud, mediation fees, and questionable business situations. At the same time, it increases trust and efficiency.
The future will be fintech with more remittance players using the blockchain and tools such as digital currency, smart contracts and smart property to move money and property across the world in a faster, simpler and more risk-free way. Although cash won't disappear entirely, especially in developing nations, mobile wallets will continue to grow. This digital future will help remittance companies expand their markets.