FastCompany’s report revealed that overseas remittance totaled $429 billion in 2016. Some of the largest Remittance markets include China and the Philippines. Already, bitcoin startups have begun to dominate the remittance markets in the two countries, with the Philippines leading bitcoin remittance innovation.
Both domestic and international remittance is a massive market within the Philippines. Companies such as Lhuillier and Palawan operate thousands of branches throughout the country, with deeper market penetration in comparison to international remittance companies such as Western Union.
Since early 2016, bitcoin startups led by Coins.ph, a remittance and bitcoin payment service provider founded by CEO Ron Hose, began to threaten local remittance companies such as Lhuiller that have been dominant for decades. An appealing business model of Coins.ph was to enable a wide range of deposit and withdrawal methods suited for the needs of local recipients.
For instance, like Western Union, Lhuillier users must visit local Lhuillier branches in order to receive payments. Coins.ph however have partnered with banks, local remittance companies, convenience stores and other companies to provide as many options as possible for local users. Currently, Coins.ph users can receive payments via nationwide bank ATMs, Gcash–local digital currency developed by telecommunications company Globe Telecom that can be used to send and withdraw payments using Bank ATMs, more than 20 partnered banks, remittance outlets such as Lhuillier and LBC, and even door-to-door delivery.
Employees working in cities such as Manila can utilize door-to-door deliveries to send money to their families in the provinces and countryside to prevent additional expenses and time occurred by visiting local remittance outlets and receiving payments.
The popularity and penetration rate of Philippine bitcoin startups exponentially increased when the Philippine government officially legalized bitcoin as legal tender and as a remittance method. The official circular released by the central bank of the Philippines read:
“The Bangko Sentral does not intend to endorse any VC, such as Bitcoin, as a currency since it is neither issued or guaranteed by a central bank nor backed by any commodity. Rather, the BSP aims to regulate VCs when used for delivery of financial services, particularly, for payments and remittances, which have a material impact on anti-money laundering (AML) and combating the financing of terrorism (CFT), consumer protection and financial stability.”
In an interview with FastCompany, World Bank’s Marco Nicolo further emphasized that the emergence of innovative players and service providers within the global remittance markets has led to increased digital transactions in different forms. Nicolo stated:
“We have seen more innovation in the delivery channel stage of the transaction where players allow transactions to be initiated over the internet in different forms. Ultimately, however, most of these models have to rely on the corresponding banking network. This is where where the potential of [distributed ledger technology] and blockchain innovation is.”
However, executives of existing dominant remittance companies including Western Union reaffirmed that tight regulations and policies on remittance payments and service providers have made it more expensive to initiate payments internationally. Bitcoin can significantly reduce operating and regulatory costs in the sense that by using KYC and AML policies, each account or bitcoin wallet addressed are readily available for verification.
Expressing his skepticism over bitcoin and blockchain technology’s potential impact on the global remittance industry, Western Union’s chief information officer David Thompson stated:
“Technology doesn’t solve all those business and regulatory issues. Some pure technology plays forget that. We live in a world with criminal networks and entities that you have to keep out of your infrastructure. There’s a pretty high barrier to entry because of the risks associated with the market.”
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