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Key Takeaways
The remittance industry has continued to experience significant growth in the past years, with global flow estimates reaching $905 billion in 2024.
However, traditional remittance systems are still plagued by relatively high fees and long processing times.
Blockchain technology can offer faster, more transparent, and cost-effective solutions by reducing intermediaries.
What Are Remittances?
Remittance can be defined as the transfer of money to a distant location, usually between individuals who live in different countries. Usually, it consists of an immigrant worker sending money to their home country. Along with international aid, remittances represent one of the largest inflows of funds into developing nations.
According to the World Bank Group, the remittance industry has continued to experience significant growth in the past few years. Estimates suggest that international remittance flows went from roughly $644 billion in 2017 to $905 billion in 2024 (up approximately 40% in 7 years).
"The top five recipient countries for remittances in 2024 are India, with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), the Philippines ($40 billion), and Pakistan ($33 billion).” – World Bank Group, 2024.
Some developing economies are heavily dependent on cash that comes from abroad, making remittances a substantial component of their economy. Migrant workers’ transfers are one of the main sources of income for many countries.
For example, Tajikistan received international remittances that accounted for more than 45% of the country’s GDP, followed by Tonga (38%), Nicaragua (27%), and Lebanon (27%).
The Remittance Problem
The World Bank estimates that the cost of sending a $200 remittance is around 6.65% (global average). Considering that worldwide remittances made up to $905 billion in 2024, 7% would count for roughly $60 billion paid in operational costs.
In addition to the high fees, most remittance solutions rely on third-party services and financial institutions. The need for multiple intermediaries makes the current system highly inefficient. Not only because the services are expensive but also because transfers may take days or even weeks.
In this context, blockchain technology may provide viable and more efficient alternatives to the remittance industry. This article introduces some of the possibilities and existing solutions, along with a few examples of companies working in the space.
Is Blockchain the Solution?
Unlike traditional services, a blockchain network doesn’t rely on a slow process of approving transactions, which usually goes through several mediators and requires a lot of manual work.
So, when compared to the traditional banking system, blockchain can provide faster and more reliable payment solutions at a much lower cost.
In other words, blockchain technology may solve some of the major problems faced by the remittance industry, such as high fees and long transaction times. The operational costs can drop substantially simply by reducing the number of intermediaries.
Blockchain-Based Remittance
Mobile applications and crypto wallets
Many companies are now experimenting with blockchain technology to deliver new payment solutions. Depending on your location, you may have access to a mobile wallet that allows you to make international remittances, pay bills, buy game credits, or trade cryptocurrencies.
There is a growing number of mobile crypto wallets that allow users to send and receive digital assets worldwide. Popular examples include MetaMask, Trust Wallet, and Binance Wallet.
Digital platforms
As a payment platform, Binance Pay allows users to send and receive cryptocurrencies globally with zero fees, offering a direct and efficient remittance option.
In addition, blockchain projects like Ripple and Stellar are operating an infrastructure that interacts directly with the traditional financial system, facilitating global trades between fiat and cryptocurrency assets.
Stablecoins
Stablecoins, such as USDT and USDC, are playing a crucial role in blockchain-based remittances. Pegged to stable assets like the US dollar, these cryptocurrencies mitigate the volatility typically associated with digital assets. They also facilitate financial inclusion, allowing unbanked users to access global financial systems through blockchain.
Challenges and Limitations
While it’s clear that blockchain technology can bring many advantages to the remittance industry, there is still a long way to go. Some of the potential limitations include:
Crypto-fiat conversion. The worldwide economy is still based on fiat currencies. Converting between crypto and fiat may be complicated or unavailable in some locations.
Mobile and Internet dependence. Millions of people living in underdeveloped countries still lack access to the Internet, and many don’t have a smartphone.
Regulation. Cryptocurrency regulation is still in its early stages. It is either unclear or inexistent in several countries, especially those relying on foreign cash inflow. However, further adoption of blockchain technology will likely push regulation forward.
Complexity. Using cryptocurrencies and digital wallets involves risk and requires a certain degree of technical knowledge.
Closing Thoughts
The remittance industry experienced significant growth in the past decade and will probably continue to expand in the following years. The increased immigration rate of people in search of work or educational opportunities is likely one of the main causes.
However, the remittance space is still troubled by inefficiencies and limitations. As a consequence, more companies and users are exploring blockchain solutions to provide more efficient alternatives.
Further Reading
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