Money transfer websites are starting to overtake banks. They are becoming difficult to compete with, with traditional banks struggling to keep up with their leveraging of fast-evolving technology and focused service.
Leading money transfer websites today are offering people better service and rates. 10 years ago, it was just corporations that would be offered these low-margin exchange rates. These days, the services tend to be open to anyone with very low minimum transfer amounts.
Potentially, the next step in trend is the use of cryptocurrencies. There are lots of similarities, but cryptocurrencies are somewhat even more exaggerated than the money transfer “fintechs”. Transferring cryptocurrencies bears essentially no cost, and only the purchasing of a cryptocurrency from a marketplace such as Coinbase will incur an exchange fee.
When we think about the step away from traditional banks, it is apparent that the public has a taste for decentralized services. Services such as TransferWise and Revolut aren’t even fully regulated but aren’t constrained. Setting up an account takes all of five minutes from your mobile. A single bank card can withdraw money in many countries, straight out of an ATM, with minimal fees and a near-perfect exchange rate.
This movement away from centralized, big players who have too much control, lackluster services and exploitative exchange rates seems to fall right in the hands of blockchain technology. Only, it hasn’t yet. Very few money transfer websites have integrated the function of cryptocurrencies into their services. Blockchain technology could only increase the speed of the transactions that they’re so prideful about and become even more technological.
Money transfer websites are starting to overtake banks. They are becoming difficult to compete with, with traditional banks struggling to keep up with their leveraging of fast-evolving technology and focused service.
Leading money transfer websites today are offering people better service and rates. 10 years ago, it was just corporations that would be offered these low-margin exchange rates. These days, the services tend to be open to anyone with very low minimum transfer amounts.
Potentially, the next step in trend is the use of cryptocurrencies. There are lots of similarities, but cryptocurrencies are somewhat even more exaggerated than the money transfer “fintechs”. Transferring cryptocurrencies bears essentially no cost, and only the purchasing of a cryptocurrency from a marketplace such as Coinbase will incur an exchange fee.
When we think about the step away from traditional banks, it is apparent that the public has a taste for decentralized services. Services such as TransferWise and Revolut aren’t even fully regulated but aren’t constrained. Setting up an account takes all of five minutes from your mobile. A single bank card can withdraw money in many countries, straight out of an ATM, with minimal fees and a near-perfect exchange rate.
This movement away from centralized, big players who have too much control, lackluster services and exploitative exchange rates seems to fall right in the hands of blockchain technology. Only, it hasn’t yet. Very few money transfer websites have integrated the function of cryptocurrencies into their services. Blockchain technology could only increase the speed of the transactions that they’re so prideful about and become even more technological.
The middleman is no longer necessary with blockchain technology, as transactions incur almost no charges and have no administrative periods.
Blockchain and money transfer companies
Many will see it as a missed opportunity, but money transfer companies tend to see the volatility as too much of a hurdle. The fine margins that are offered by such companies are because of how quickly they can hedge currencies and their lack of volatility in most cases (despite the markets closing at weekends). Many cryptocurrencies make this slightly riskier, with even Bitcoin tanking around a couple of thousand dollars on one given day.
Furthermore, most of the companies are not totally unregulated. Many of the regulations, in fact, make it difficult to support the integration of cryptocurrency. This is mainly due to it not being legal tender in most countries.
There are a couple of companies having a go at integrating blockchain, however. Veem and Flashfx are the two that come to mind.
Veem
Veem is a San Francisco-based money transfer startup that took the dive into blockchain technology. While many have been talking about the future benefits of blockchain, Veem has done something about it. The three methods they are now using are SWIFT, treasury (transfers in Veem’s control) and blockchain. What is unique about Veem is that they decide on the method for each transaction, not the customer.
Blockchain technology allows transactions to be completed outside of banking hours - and are much, much faster. Veem decides this.
Flashfx
Flashfx is another company using blockchain technology in their services. They use Ripple, which is a real-time remittance network. Ripple has been designed with banks in mind, with a real focus on instant transactions in order to improve security, transparency, and speed.
The two companies are useful mostly when it comes to cross-border transactions. SWIFT can take several days overseas, and incur charges. This middleman is no longer necessary with blockchain technology, as transactions incur almost no charges and have no administrative periods.
MoneyGram, an industry older timer when it comes to remittance, has struggled for years to keep up with cutting-edge exchange rates offered elsewhere. They have recently announced that they have struck a deal with Ripple too, with around a $30 million investment from Ripple (plus a potential $20 million). The mixture between established infrastructure meeting blockchain will be an interesting site, and they are yet to reveal exactly what the plans are.
What is interesting is that Ripple isn’t just a platform for exchange. It is also a cryptocurrency itself (XRP). This gives it a huge advantage. Bitcoin was never intended to provide simple payments as a service, as you must go to a currency exchange broker. Ripple can provide a 2-in-1, using both their product and service to benefit each other. The internal transaction commission is $0.00001. This amount disappears from the platform, as opposed to preserving, in order to prevent spam attacks.
Ripple doesn’t actually use blockchain either, technically, as it has its own Ripple Protocol Consensus Algorithm. However, this means the service is centralized, which is somewhat a pejorative in this industry. The tokens are already mined, and the developers release however many, and whenever they want.
The biggest factor holding money transfer companies back is still the amount of supply and demand for cryptocurrencies. In order to send your dollars to Brazil, these companies need to buy bitcoin (or another cryptocurrency) with dollars (or any fiatFiat
Paper money issued by governments as default currency. The US Dollar, Japenese Yen, Chinese Yuan, and Euro are all fiat currencies.
Ripple may have found a way around this, and companies are licking their lips at the opportunity to make use of Ripple’s services. However, it still has its restrictions. Ripple has the power to freeze transactions, and it is generally a centralized system where the Ripple Lab owns a monopoly on the coins. This may not sit well with the cryptocurrency advocates, and may only spur on more authentic blockchain competition.
Currently, blockchain transactions are a drop in the ocean compared to the remittance market that is currently worth multiple billions. It is a matter of more stable prices and higher volume that will truly integrate Bitcoin and other cryptocurrencies into the mainstream remittance market.
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