In 2016 alone, $574 billion USD were sent in remittances all around the world. It is safe to say that this value has increased over the years. After all, we are more connected today than ever. Global immigration rates are high, leading to people wishing to send money to their home countries.
Not only this but in today’s highly globalized world, international money transfers are common for various other reasons as well. Buyers end money to their suppliers overseas. Employers pay their freelancers or offshored employees. You pay for international services.
Regardless of why people send their money abroad, the fact is that they do. And that too in large amounts. When you think of sending money overseas, you might think of the conventional way of doing so. However, it has been observed that this method is not just time-consuming and hassling but also expensive. By the end of 2017, the average rate of sending money abroad rose to 7.14% globally!
With increasing costs, people are now looking for other ways to send their money abroad. And they have found one through cryptocurrencies!
How can you use cryptocurrencies to send money abroad?
To understand how you can send cryptocurrency abroad, let’s take an example of Bitcoin. After all, Bitcoin continues to be the most popular virtual currency with a market capitalization of 67 Billion USD.
Here is how the method works:
- You deposit your fiat currency (it can be euro, yen or dollar, etc., depending on where you live) on a platform that buys and sells Bitcoins.
- You use the platform to purchase bitcoins in exchange for your fiat currency and send the bitcoins to the recipient abroad.
- Upon receiving the cryptocurrencies, the recipient can use the same platform to sell the bitcoins off for fiat currency.
- The currency is then withdrawn using a bank account.
You might have noticed that this method has a few extra steps compared to conventional money transfer methods. Also, remember, this process is entirely self-help. You must complete it all yourself without the help of an intermediary. This is why it costs less than traditional modes. However, the lack of support may as well be a disadvantage for those who don’t deal with cryptocurrencies usually.
Do Americans use cryptocurrencies to send money abroad?
Clover, which is a blockchain start-up, recently conducted a study to gauge the receptiveness of Americans to using cryptocurrency for money transfer. It was observed that over 15% of Americans use Bitcoin to send money abroad. Because cryptocurrency is a relatively new solution and its only since the past few years that it has gone mainstream, this is an excellent achievement for the blockchain technology.
According to the report, 707 people, each of whom had transferred money abroad, were surveyed for the remittance study. The objective of the research was to understand how money was being sent, who was it being sent to and for what purpose. As per the findings of the report, there were different methods that Americans were using to send money. This included using online payment services (for example, PayPal), bank wire transfers, money transfer services (as offered by Western Union), using prepaid cards and cryptocurrencies.
Out of the 707 respondents, 15.8% agreed that they used cryptocurrency to carry out the international only transfer. Of all the methods used, this garnered cryptocurrency the fourth place in the most used way. Conventional methods continue to be more popular with money transfer services contributing 50.9 percent to the mix.
What does it mean for cryptocurrency
This study showcased the potential for cryptocurrency to be a valid medium of money transfer. Yes, Americans use cryptocurrency for international money transfer. And the medium has already outshone some of the other conventional methods like mail cash and mail wire transfer. According to the researchers at Clovr, cryptocurrency has the potential to beat other mediums soon due to the value-adding proposition it offers. After all, via Bitcoin, you can send money swiftly and at a lower cost than conventional methods.
What does it mean for traditional bank wire transfers?
Did you know that with each money transfer done using Santander, a 10% profit was made by the bank in 2016? To predict that this margin would have increased in 2017 and 2018 won’t be farfetched.
The fact that cryptocurrency is slowing becoming a mainstream method of money transfer means that banks will lose quite a lot if this prediction comes true. As a customer, you will have a lot to gain. Think about it. When you use cryptocurrency, you won’t be required to go through a local exchange or a bank. Instead, you will be able to handle the fund transfer on your own. This will allow you to cut two parties from the equation thereby saving money you would otherwise have spent on transaction fee.
Apart from being cost-effective and fast, this method is much more secure than using banks. Traditional banks are vulnerable to security breaches. You might think that they are safe, but they are not. Especially not in today’s cyber world. For instance, in 2017, one of Italy’s largest and most popular banks was hacked and sensitive information of over 400,000 accounts was stolen! Considering how much confidential data is stored within a bank, this can be disastrous. The problem with traditional banking systems is that they store all the information in one place. Unlike this, cryptocurrency is equipped with blockchain technology. And it is this technology that makes the method considerably more secure.
This is because not only is blockchain technology encrypted but it doesn’t store data in one centralized place. This decentralization of the technology is what makes it so secure and such a significant threat to conventional bank wire systems.
While Americans are using cryptocurrency to send money abroad, the fact is that the method is still relatively new. Yes, it has a lot of potentials owing to the various benefits it delivers. However, to say the journey ahead will be easy for cryptocurrency would be too idealistic. Whenever a new solution comes on the horizon, it is bound to face opposition from the masses, especially those who are threatened by it. The fintech industry has been receiving great opposition from traditional banking systems. You will find various readings about how the method may not be the best option. You will see brick and mortar banks voicing their opinion against the virtual currency.
However, since the technology is relevant, beneficial and timely, the chances are it will withstand all opposition and gain mainstream success. Slowly, people are opening up to risks. Had they not, cryptocurrency wouldn’t have been where it is today.
With people accepting the technology, it is highly probable that the cryptocurrency will outstrip all conventional methods of international money transfer. How soon this will happen is something that only time will tell us.
For now, know that if you are planning to send money abroad, converting your fiat currency into crypto is a great way to do it. Try the method yourself and decide whether you prefer it to other options.