Cryptocurrencies, Financial Technologies And The Remittance Economy

Introduction

Data from 2019 shows that the total valuation of the Global Remittance Economy stands at nearly $600 Billion. With globalization and the opening of traditional boundaries, the easy flow of manpower has made it possible to seek opportunities in foreign lands.

This is particularly true of developing economies from Asia and Africa. A large percentage of their skilled and semi-skilled workforce are employed in developed nations of the world. Millions of people send money back home to their families.

This has two major effects-

• The families can enjoy sustenance from the money that is sent by a family member.
• The overall economy of the nation thrives as families back home spend on essentials.

In recent years, the impact of new technologies and digitalization has been voiced by experts. In this regard, our article seeks to explain how financial technology, especially cryptocurrencies have the power of changing the remittance economy.

How Financial Technologies have helped Overcome Barriers to Traditional Banking

With the internet becoming such a huge part of our lives, it is but natural that this has an impact on the world’s financial situation. A desolate region might not have the presence of physical banks, but it might have internet connectivity.

With smartphone technology become more affordable than ever, the internet is being used to send money to these locations. The following are some of the major ways, developing financial technologies are helping these regions-

1. Even if you do not have a formal bank account, you can easily receive money in your digital wallet. This means that traditional banking barriers are removed.
2. Receiving and sending money from any part of the world is possible thanks to Net Banking. There are many platforms like Western Union and Money Gram present.
3. Money is received fast and efficiently. You do not have to wait for three days or even a week to get the money credited to your account.
4. Since payment gateways are used, there is very little chance of hackers and cybercriminals getting access. This means that it is safe and secure.
5. Given that there are no minimum requirements for funds, family members can send money whenever there is a need for the same. This boosts convenience.

The Problems with Current Financial Technologies in the World

It is essential to highlight some of the problems of existing financial technologies. This will help us better understand the change that cryptocurrencies can help bring to the remittance economy.

• For starters, the interest, commission, and hidden charges that established platforms demand are very high! This effectively reduces the total amount that is sent back home.
• Secondly, there is a hegemony of sorts that exists in the industry. A handful of platforms have decided to operate and charge equal commissions.
• Thirdly, the transaction fees also limit the spending power of the families back home. This reduces inputs into the local economy which could benefit from more spending.
• Fourthly, using and accessing advanced financial technologies is technically complex. This prevents many elder people from trusting devices, the internet, and more.
• Lastly, several financial technologies require people to either have a physical bank account or travel long distances to a collection depot to get their money.

The above points illustrate the fact that while financial technologies are beneficial there is no denying the fact that they are not without their share of problems.

Can Cryptocurrencies Help Improve the World’s Remittance Economy?

Many financial experts that have been closely studying Bitcoin and other cryptocurrencies feel that their application in the world’s remittance economy can yield rich dividends.

Bitcoin and other cryptocurrencies can work like a charm simply because of their lower commission rates. This can allow the families back home to receive the highest percentage of shared money, without losing out to hidden charges and commissions.

Since the internet is easily available, people can access their Digital Wallets and encash the crypto whenever they feel like it. The experiment has been very successful in countries like Nigeria, the Philippines, and Indonesia. In these countries, 32%, 21%, and 20% of the entire population hold some of the other cryptocurrencies.

While this might require the use of a banking account, the problem can be overcome by linking the same to mobile wallets. Experiments are underway in many parts of the world. Many people are using platforms like the bitcoin era site to earn profits on cryptocurrencies.

Using cryptocurrencies can be a fast, safe and effective way to send money to any part of the world. It not only reduces the dependency on platforms like Western Union and Money Gram, but it also ensures that families back home are receiving the maximum possible amount.

The Final Word

The benefits of cryptocurrencies for the remittance economy are not lost on nation-states. China is in the advanced stages of rolling out its CBDC, the Digital Renminbi. Other countries of the world are also following suit. They know and acknowledge the fact that this can be the next game-changer that can dictate global power dynamics.