The World Bank disclosed in its latest report that India received the largest remittances in 2018, with $80 billion coming from overseas. At the same time, users paid $4 billion for the payment service.
There are too many checkpoints in the middle of the current remittance model. If a person wants to transfer money from New York, USA to New Delhi, India, his funds will go through several intermediaries in the payment corridor. A local bank will first remit funds to a bank partner in London. There, the payment will wait a few days for confirmation and then travel to, for example, Dubai, the co-bank of New Delhi bank. In a few days, the funds will be confirmed and sent to the bank account in New Delhi.
Throughout the process, each participant took a considerable portion of the funds. This is why the traditional remittance model has become too expensive for everyday users.
According to the World Bank, commissions are more than 10% higher in more than 25% of remittance channels. Therefore, sending $100 home will cost at least $10.
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Why should India explore Blockchain and cryptocurrencies in the field of remittances?
The rapid development of the digital economy is expected to change the pattern of the entire remittance industry. Take the blockchain as an example. It opens up another payment channel that can send funds as fast as an email without paying a high commission. According to the World Bank, when people pay an average of 7.45%, the blockchain can be used to reduce this spending to a minimum of 1%.
Indian Tops Remittances in 2018.
$80bn sent back home.
$4bn paid as cost to International money transfer companies for sending this money back to India.
Adoption of crypto by India can eliminate this middlemen and save Billions for our nation.
— Crypto Kanoon (@cryptokanoon) December 9, 2018
However, India’s position on cryptocurrency is not entirely optimistic. The Reserve Bank of India (RBI) issued a notice this year asking banks to stop their relationship with cryptocurrency companies. Although this decision has hit the local exchange market, it has also hindered the development of many start-up companies that are brewing in the blockchain.
At the same time, banks using blockchains generally cannot reduce existing intermediaries from the payment corridor. It can only speed up the settlement at most when charging similar commissions.
India can explore interbank networks based on blockchain technology at all times, provided that central tokens are allowed to be issued on the network. However, this will still require them to have all banks on the same starting line – which seems unlikely. To put it simply, if a bank works like WhatsApp and another works like Instagram, users of WhatsApp can’t send messages to Instagram users, that is, they need a common protocol.
At the same time, despite bank bans, Indian remittance users can continue to explore cheaper decentralized payment models such as Bitcoin. Many Indian freelancers have accepted Bitcoin as a payment method and converted Bitcoin into Indian Rupee through the p2p trading platform.
In response to the report released by the World Bank, cryptocurrency analyst Joseph Young commented:
It’s almost impossible to buy or sell crypto in India and it’s a shame. India is the world’s biggest remittance market and cross-border transactions can be very difficult for expats w/out banking accounts in some regions.
Overregulation is killing a high potent market for crypto pic.twitter.com/a66tcgM6Jx
— Joseph Young (@iamjosephyoung) December 9, 2018
This article fully affirms the potential of cryptocurrencies in the field of remittances and also defines a direction for the future application of cryptocurrencies. With the development and improvement of the cryptocurrency ecosystem, there may be a killer application of cryptocurrency in the remittance field.