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Bitcoin Cross Border Remittance Cut Costs for African Migrants

Bitcoin Cross-Border Remittance Cuts Costs for African Migrants

Bitcoin Cross Border Remittance Cut Costs for African Migrants

When it comes to cross-border remittance, factions on both sides of fintech innovations and traditional financial institutions can attest to the fact that the blockchain has so much potential in changing how global payments are conducted. This premise has prompted many financial institutions to reassess their money transfer infrastructures and develop in-house solutions to augment their current banking protocols.

However, while the world waits for these banks and traditional payment processors to catch up with Bitcoin and many of the payment-based altcoins out there, these emerging technologies are playing banks, and are allowing money transfer seem effortless.

The peer-to-peer remittance design should be considered one of the most fundamental and yet astounding financial innovations to date, and we have Bitcoin to thank for that. The areas where cross-border payments through cryptocurrencies best the traditional systems include speed of transactions, relatively cheap fees in sending money via peer-to-peer systems and processors, and the convenience of having to transact in the simplest and easiest financial frameworks possible – buy digital currency from an exchange, get beneficiaries crypto wallet address, send to the other party, and in a matter of minutes or more, the transaction is confirmed on the blockchain, and viola – payment is done. The protocols in the conventional banking system require too many hoops to jump, and more financial entities which are rather unnecessary, hence the punitive cost.

Many poor migrants must pay exorbitant fees to send money home to their families. It is time to drive these costs down https://t.co/yHHT1R6lEk

— The Economist (@TheEconomist) April 27, 2019

Bitcoin, along with a host of other payment-based cryptocurrencies, is striving to make a difference in the financial world and cross border payments has proven to be a sufficient use case so far. This is because the blockchain and all of its properties make it easy to transact in ways the current traditional banking system falls short, although there’s a catch – further discussed in this article.

Cross-Border Payments in Developing Countries

Earlier this year, the World Bank reported significantly high remittance transactions borne to low- and middle-income countries reaching USD 529 billion in 2018, this was a 9% increase from the previous year. In the report, it was further stated that:

“Remittance costs across many African corridors and small islands in the Pacific remain above 10 percent… Banks were the most expensive remittance channels, charging an average fee of 11 percent in the first quarter of 2019.”

From the World Bank’s report, sending USD 500 across the border could leave the sender parting with more than they are willing, in this case, as much as USD 55 if they were to go through banks. An alternative would be to go through online payment processors such as PayPal, however, it’s been discovered that Bitcoin can cut through PayPal international transaction fees by as much as 30 times. Although, there may be discrepancies to such claims when viewed circumspectly, as far as ‘transfers’ go Bitcoin may appear to be in the lead.

Transfering abroad $100,000 in $BTC through the Blockchain: fees of $5-50.

Transfering abroad $100,000 of value through Paypal: fees of $1,500-4,000 + PayPal is able to lock the amount for some period

I mean, no brainer. #CRYPTO #BITCOIN $BTC

— Crypto Michaël (@CryptoMichNL) May 4, 2019

The Emerging Trends

Crypto-based payment processors are taking on the spotlight as they facilitate the payments done through cryptocurrencies. An example of growing usage of Bitcoin payments can be observed in their numbers as Africans and Asians now turn to cryptocurrencies to receive funds from their loved one overseas. BitPesa, a Bitcoin transfer service provider had at one time recorded an increase in its user base to as much as 60% as Bitcoins are transferred to say Kenya or Ghana. And this service is provided for a flat fee of 3%.

To make it even better, digital currency payments are increasingly being preferred by internet-based freelancers who normally through traditional payment processors would have to wait days or weeks before payments arrive, and this is without factoring in huge fees levied on users. Some have had it worse as they have been denied their earnings countless times as a result of chargebacks. Therefore, in a huge way, crypto is shutting out middlemen and streamlining payment processes.

Still A Long Way for Bitcoin

There appears to be a ton of roadblocks towards achieving a reality solely dependent on Bitcoin as a seamless payment infrastructure. This includes volatility and regulation, the two dreadful opponents to world-scale adoption of cryptocurrencies. Many believe that once these obstacles no longer exist, cryptocurrencies will eventually replace the current financial systems. It’s gradually happening, there are already crypto-based financial instruments, and many startups are currently racing towards providing suitable custody solutions to a growing number of forward-thinking institutions.

Another problem that seems to beset the cryptocurrency industry is the issue of scalability. In late 2017, Bitcoin transaction costs were seen to have skyrocketed as the load on the network was overwhelming. The repercussion was high volatility in the Bitcoin market, as Bitcoin price hit astronomical highs in just a short time.

This TPS problem stems from the native structure of the Bitcoin blockchain which allows it to process only 7 transactions per second. Apparently, a far cry from Visa’s network which handles about 1,736 transactions per second. However, layering with the Lightning Network has made it much easier to use the Bitcoin blockchain.

At least, if digital currencies don’t take over the world, they would have paved a way for traditional financial instructions to evolve and still it would perhaps be a win-win. This should be a non-negotiable mission for any institution that seeks to live through the current age as the world settles for an economic era built on the industry 4.0.

 

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Bitcoin Cuts Through PayPal International Transaction Fees by 30 Times, Really?

Bitcoin Cuts Through PayPal International Transaction Fees by 30 Times, Really?

Apparently, it’s a no brainer that cross-border transfer of money cost more in fees when using PayPal services, compared to Bitcoin transfers over the blockchain, according to a crypto enthusiast.

Crypto Michaël, a self-proclaimed full-time stock trader and technical analyst, lauded the abilities of funds transfer over the blockchain when using Bitcoin, highlighting a mere USD 5-50 in transaction fees when a bulk of USD 100,000 in Bitcoin equivalent is being sent over the blockchain. In comparison, he noted that using payment processors like PayPal would cost 30 times or more in fees – USD 1,500-4,000; for the same bulk transaction, adding that PayPal is able to lock the amount for some period.

Transfering abroad $100,000 in $BTC through the Blockchain: fees of $5-50.

Transfering abroad $100,000 of value through Paypal: fees of $1,500-4,000 + PayPal is able to lock the amount for some period

I mean, no brainer. #CRYPTO #BITCOIN $BTC

— Crypto Michaël (@CryptoMichNL) May 4, 2019

Arguably, one of the most active ecosystems where Bitcoin payments have become an effective medium of exchange is in the freelancing industry. Before the advent of Bitcoin, regardless of the payment processor being used, freelancers had to wait several days before payments would be processed and sent to them, and this only happened on the best of days when payment processors do not encounter any problems along the value transfer chain.

Another Twitter user argued with Michaël’s assessment, stating: “Yes, but at the moment to convert that BTC to spendable fiat with selling slippage and exchange costs + exchange rate costs your looking at a negligible difference between the two.”

It’s a noteworthy observation that cryptosystems also possess intermediaries – which, centralized by design, happen to impact the transfer-of-value chain; and Michaël’s assessment would only hold true when a peer-to-peer exchange is exclusive. However, the process of obtaining the funds (if not already acquired, as many merchants and business operators are yet to warm up to the idea of transacting exclusively in cryptocurrencies), is oftentimes a cumbersome task and could attract weighted fees, as buttressed by comparison guide Finder:

“For initial transfer fees, you’ll pay about the same amount for both PayPal and Bitcoin (assuming we use Coinbase as an example). But PayPal has a slight edge. When you sell your Bitcoin for fiat currency (or government-issued currency, like dollars and euros), you’ll pay another fee. Meanwhile, on PayPal you only pay a fee when you initiate the transfer.”

According to research, Bitcoin may still need about a decade worth of adoption and technical developments before it can overtake competitors like PayPal, Visa, and Mastercard, as it still lags behind in certain key transaction indicators.

Although, as it appears, many still do not believe in cryptocurrencies as an effective replacement to fiat and blockchain as a tool to eventually revamp payment processors. Still, Blockchain technology, though in its nascent state has proven to be a far more efficient means of value transfer across borders and has simplified the bureaucratic processes involved in cross-border payments for a number of businesses that have adopted the technology. The abilities of the blockchain have reached such limelight where even banks now consider moving their operations unto the blockchain in an attempt to streamline processes.

Just for kicks, while Bitcoin may be slandered – simply because of the decentralized terminology; blockchain technology (the integrity of Bitcoin technology) continues on even into rival territories.

 

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JP Morgan Promotes “Faster, Cheaper” Blockchain Payments

JP Morgan Promotes “Faster, Cheaper” Blockchain Payments

A JP Morgan executive has taken the opportunity on camera to promote blockchain payment methods as ”faster and cheaper” than the traditional alternatives.

Ron Karpovich, Global Head of eCommerce Solutions at JPMorgan Chase, was interviewed by CNBC’s Squawk Box earlier today where he explained blockchain technology was capable of proving the same, if not better, services than traditional banks while requiring lower fees.

Karpovich added that he saw the technology gave opportunities for “more partnership [with traditional banks] instead of competition”.

The self-proclaimed ”specialist in Cross-Border Payments” added that he ultimately believes it is only matter of time before e-commerce customers begin using blockchain to make their payments, even though it may remain ”behind the scenes” and customers may not be aware of it.

JP Morgan’s own JPM Coin was defended by the executive who determined it did not necessarily make the company convert in favor of cryptocurrency at large.

”I think there’s a difference between trading a cryptocurrency that’s in the market that’s ubiquitous versus using the technology to enhance your payments infrastructure,” he said, reaffirming that the financial institution’s interest in blockchain was to make payments ”faster and cheaper.”

 

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