In the first world, where the problems of life pale in comparison to those in the third world, there is a disconnect between what difficulties should be resolved, and those that need to be. Where in the first world, people are worried about where their coffee beans come from in their Starbucks order, those coffee bean farmers are worried about how they will get money to their family back home, across different borders.
While blockchain is aimed at disrupting and providing solutions for a multitude of life’s issues, from major to minor, there are areas where the technology should be intently focused. It can indeed help with first world issues and increase efficiency and productivity, for example, but it should be driven in the third world where it can change lives for the better.
Remittance payments is one area that is a lifeline for millions of people across the globe, especially in rural areas. People are finding work outside of their homelands and are needing to send money home to friends and family to support them. However, the remittance system as its stands is incredibly capitalist in that it is a huge business that takes away from the people that need it most.
It is an age old adage with regards to the power of blockchain. The decentralized and transparent nature, in a financial sense, can help alleviate the need for middle men and thus make payments - especially cross-border ones - cheaper, more efficient, and far less unnecessarily regulated.
It hands power back to the individuals - the individuals that need it most. People who are using remittance payments are scraping together every penny in order to survive and help their family survive, but they are being stymied by massive fees and long turn around times.
Blockchain’s cross-border potential
There is still a huge debate as to what will be the ‘killer app’ for blockchain. Some believe that cryptocurrencies in general are the way forward for this technology in terms of adoption and use, but that is a large sector. Thus, some feel that this global, digital currency that is borderless, can be the way to enact a blockchain adoption and there it will find its best use case.
It is a useful tool, to have a currency that can cross borders at a fraction of the cost of a bank and without all the red tape. Not to mention the added proficiency, efficiency and speed. Thus, when delving even deeper into it, it makes sense that blockchain, and cryptocurrencies, be directed to disrupt the current remittance system which is hugely unfair and inefficient.
Current state of remittance payments
Those who live by remittance payments have true insight into how difficult and harsh the system is, but, Lorien Gamaroff, who is the CEO of a blockchain wallet company called Centbee focusing in on Africa, explains the current state of affairs, and why something needs to be done.
“Millions of Africans leave their countries and work elsewhere. Every month and year they send money home to their families,” Gamaroff explains. “Existing remittance providers charge between 10% and 20% to remit money. Often the processes are onerous, requiring forms to be filled in, or inconvenient as well as expensive.
“Some cryptocurrencies, like Bitcoin Cash, have very low transaction costs, around 1 US cent for any amount. This is a very appealing idea for those people who earn very little and are looking to preserve as much value as they can in the transfer.”
It is not only an African problem, there is a huge portion of the global population that is under the breadline and requires remittance payments to help keep themselves, and their families, afloat.
“The major problem lies in its cross-border nature, which significantly complicates the passage of cash flows and adds costs,” explains Clarke Robertson, director of Noahcoin, another company looking to aid in cross-border payments and remittance systems, explains, this time in an Asian setting. “Using banking services or payment systems the workers have to pay huge fees: up to 9.82% in Japan, about 6%-10% in the Philippines.”
A simple upgrade for all
The notion is a simple one. The current state of remittance payments is not only undercutting the people who need the money most, but it is also leading to these people looking to get money across the borders by unregulated means.
So, while the upgrade from traditional remittance to a blockchain-based system clearly show advantages in removing an expensive intermediary, which is also ineffective and slow, it also has benefits for governments who want to keep track of the movements of money across borders.
Gamaroff goes on to explain how cryptocurrencies need not be fully anonymous and they can be used in accordance with KYC and AML rules, thus, for regulators, there is a way to keep record and taxation on this movement of money while still keeping fees manageable for the individuals.
“Regulatory obstacles are being eroded away as regulators become more educated around the mechanics of cryptocurrencies. They are beginning to realise that cryptocurrencies like Bitcoin Cash are not anonymous and easy to enforce existing KYC and AML rules upon. The nature of the transparent ledger means that regulators and tax authorities can have more visibility around transactions than traditional payment methods,” Gamaroff says.
“More than half of the money that moves cross border in Africa goes through informal channels. These are typically taxis that transport suitcases of money and other by other similar means. We are wanting to allow consumers to easily send something like Bitcoin Cash to a number of countries and then converts it to mobile money like EcoCash or MPesa.”
The transparency that Gamaroff mentions is echoed by Robertson, but in regard to security for the senders and receivers using Blockchain remittance.
“With Blockchain, both a sender and a recipient would be able to track the money flow and know exactly whether the funds have reached their destination or not. There is no risk of losing money somewhere between the parties and their wallets,” adds Robertson.
More effort required
There are many instances, especially in areas like Africa and rural Asia where blockchain technology can literally transform the lives of millions of people who need it most. It is a sad state of affairs where people in the most dire of situations are still being taken advantage of by centralized companies who offer life-saving services.
The need for remittance payments is only growing, and as such it is big business and is attracting more and more who want to take advantage of their intermediary cut.
“Labor migration is one of the main demographic trends of the last decades and the Asian countries are not an exclusion,” Robertson spells out what is happening in Asia. “What's more, in this region remittance payments quite often make up the bulk of the budget on which the families of overseas workers live at home and contribute a lot to the overall GDP. For example, in the Philippines, over 10% of the GDP (which is about $30 billion) comes from remittances.”
Blockchain technology is still finding its feet, and is being tested across a range of sectors, but really, it's direction should be heavily directed to where it can do the most good. Decentralized at its core, and not greedy in nature, blockchain technology should be shaped as the tool of the underpowered, but it needs a big push to get there.
