Remittance: Bank Alternatives Use BlockChain To Reduce Recipient Cost
About a billion people are involved in remittances globally. Remittances play a critical role in the livelihood of so many people; every savings on fees is a life-saver.
Remittances make it possible for many people in developing countries to eat well, afford life-saving healthcare, get an education and provide basic amenities for themselves and their extended family.
What Are Remittances?
According to the IMF, When migrants send home part of their earnings in the form of either cash or goods to support their families, these transfers are known as workers’ or migrant remittances.
The Life Saving Roles of Remittances In Developing Countries
According to the United Nations(UN), eight things you may not know about the transformative power of the money sent back home by migrants include
1. About one in nine people globally are supported by funds sent home by migrant workers. That is about 800 million persons
2. What migrants send back home represents only 15 percent of what they earn. On average, this is between US$200 - $300 every one or two months.
3. Remittances remain expensive to send, on average they cost about 7 percent of the total amounts sent.
4. The money received is key in helping millions out of poverty.
5. Half of the money sent goes straight to rural areas, where the world’s poorest live.
6. Specifically, remittances can help achieve at least seven of the 17 SDGs. Namely: SDG 1, No Poverty; SDG 2, Zero Hunger; SDG 3, Good Health and Well-Being; SDG 4, Quality Education; SDG 6, Clean Water and Sanitation; SDG 8, Decent Work and Economic Growth; and SDG 10, Reduced Inequality.
7. Remittances are three times more important than international aid, and counting
8. The UN is working to facilitate remittances worldwide
The World’s Top Remittance Recipients
Sending Remittances
A typical remittance transaction takes place in three steps
The migrant sender gives the sending agent the remittance.
The sending agent instructs its agent in the recipient’s country to deliver the remittance
The paying agent makes the payment to the beneficiary.
The Problem: Remittance Is Still Too Expensive
According to the UN remittance fees can cost up to 7% of the amount sent. The costs of a remittance transaction often include
A fee charged by the sending agent, often paid by the sender
A currency-conversion fee for delivery of local currency to the beneficiary in another country.
Other fees include charging the beneficiary a fee to collect remittances.
Bank Alternatives To The Rescue
Many alternatives to bank remittances are coming up with blockchain-based remittances that greatly reduce the time and cost of remittance. A few examples include Fluid, Moneygram(Stellar), etc.
Whilst Fluid is one entity with traditional Bank features on Blockchain, Moneygram is an integration with Stellar.
Fluid by design is digital in nature and globally available, and because it combines the best of traditional banking and decentralized finance in one app, it can move money seamlessly from Fiat to Digital and Digital to fiat allowing remittance to happen in near real-time at a reduced cost.
In a use case, the migrant sender mints the money she wants to send from her bank account directly to her Digital Account DigitalDollar (DUSD) and sends the money from there to the recipient’s Digital Cash Account, the recipient redeems the money from there directly into her Bank account.
Advantages of Fluid
All middlemen are eliminated
Fees and charges are 0 –1% at most
Remittance is near Real-Time
This is no Remittance Advice but an opinion, please do your own research.
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