yes... i read more from google and the point is the bitcoin makes revolution on money transfer market.
cause what? if
BTC havent to revolution, its will make the problem, like a system must to make renewal,
like a product must have new product...
i hope this can give the answer.. read here
https://www.saveonsend.com/blog/bitcoin-money-transfer/even more reasonable experts seem to be de-emphasizing a fundamental diversion in understanding of Bitcoin value that shall be considered for its potential in international money transfers. Here are the key points made by Bitcoin proponents, usually taken at face value.
1. Large segment of consumers is suffering under existing, non-Bitcoin-based setup for money transfer
“The unexpected tragedy of the financial system” is quite representative in this regard. What is common about these articles is seemingly absolute lack of a field research or basic customer surveys. Speaking with enough low-income consumers who transfer money internationally, one could quickly discover that there is no “tragedy,” and, what is most puzzling, this segment is not even that eager to save on sending money. Why? It is not because low-income senders are lacking infrastructure. A large portion of SaveOnSend’ “cash” users have a smartphone and a bank account which could be easily linked for an online money transfer. BUT they are sticking with a cash agent, and, as the result, are paying 3-5-10 times more for sending money home. Counterintuitive? Yes. Tragedy? No.
Target segment for bitcoin money transfer
Target segment for bitcoin money transfer
And that is why, offline-to-online shift in remittances is happening at a crawling, 1-2% annually, pace and will be taking decades, not years. This is not unique to remittances. Such slow adoption is actually quite typical for other types of financial transactions: from cash to plastic cards, from checks to online billing, or from “swipe-insert” to “touch” payment.
2. Bitcoin money transfer can help the needy
Articles about fintech-bitcoin are often trying to invoke “unbanked” “poor” or “women” as the reason and special focus for money transfer startups. Instead of simply acknowledging that these startups are primarily founded to make money and accumulate market power, we are asked to believe in their higher calling. Not surprisingly, such articles are always missing two critical components which would make those claims believable: 1) specifics on targeting such segments, 2) explanation on how to make money with such targeting.
Bitcoin money transfer for unbanked
This argument is misinformed on both the sending and receiving ends of a money transfer transaction. By definition, most of the senders who transfer $200/month to their families in India, China, Philippines, Mexico have money. Which means that majority of them have both a bank account and a smart phone. There are of course immigrants who transfer money illegally, but they don’t represent majority and their number are declining due to stricter residence standards and increased deportations. According to Xoom’s analysis of 2011-2012 WorldBank and FDIC data, 78% of US resident non-citizens have a bank account.
On the receiving end of remittances, being unbanked is not a significant inconvenience or cost issue. With around 500,000 Western Union locations, money could be easily picked up by the great majority of such unbanked recipients. There will always be pockets of consumers who live in extremely remote areas, but reaching them with an advanced technology in a cost effective way is simply unrealistic at this point (more on this later).
can bitcoin money transfer be available in remote places?
There is virtually no advantage between receiving money into a bank account vs. picking them up from a cash agent – in most cases, a provider’s margins are the same for either method (check for yourself with SaveOnSend app).
3. Bitcoin money transfer is instant and, thus, doesn’t carry the FX volatility
There might be a misunderstanding about FX “volatility” in this context. Money transmitters, without bitcoin, are already evolving to a real-time-fixed-exchange-rate payment. For example, in the world’s largest corridor, USA-to-Mexico, many providers already deliver funds in minutes and more will join (see table below or see results with SaveOnSend app). The reason for why some money transmitters like Xoom or TransFast could already do it for 70-90% of bank-funded transfers while others still can’t is related to a risk management and bank connectivity, and, thus, could be eventually addressed.
Challenge for bitcoin money transfer: $300, Card-to-Cash, USA-to-Mexico, April 1, 2015
Challenge for bitcoin money transfer: $300, Card-to-Cash, USA-to-Mexico, April 1, 2015
On the other hand, money transfer via Bitcoin does carry an FX conversion disadvantage, a double-whammy of
– since bitcoin is more volatile than pretty much any other currency, its internal spread is higher (see the chart below) and so is its spread for each conversion
– bitcoin needs to be converted extra time or sometime even twice. For USD-to-MXN, it needs to be converted an additional time; for an USD-to-USD conversion when sending money from USA to countries like China or Philippines, it needs to be converted twice vs. zero times with regular remittance providers.
Ref_Rates_1_Edited
4. Bitcoin money transfer can dramatically reduce costs
Most of the potential savings for international money transfers could be realized today, immediately, IF ONLY senders stop going to cash agents and spend 3 minutes linking their bank accounts on their smart phones using their existing providers like Western Union or Ria Money Transfer. Not understanding why so many senders continue spending 3-5-10 times more while having a bank account and a smart phone will likely lead to many disappointments for bitcoin money transfer startups and their investors down the road (read our analysis of fundamental difference in behavior of senders from USA to India vs. Mexico).
Majority of Bitcoin remittance stakeholders don’t seem to be aware of how low the margins are in 2015. Many keep repeating an outdated adage of a 10% average margin instead of spending 30 seconds on SaveOnSend app or reading the latest brief from WorldBank. They would have quickly discovered that the weighted average global margin has been falling to 6% (Western Union‘s global margin is ~5.5%, Ria Money Transfer’s – ~4%).
So why are we seeing so many articles about high costs of sending money internationally? Because it was the case in the past, and it is hard to change our mindset to a fundamentally different input. As usually happens, high margins attracted more competition and prices have dropped 30% in the last 7 years alone (from the World Bank data):
Global Remittance Margins 2008-2015
Source: The World Bank
More relevant for Bitcoin-based remittance providers looking for tech-savvy early adopters, margins for online remittance in top corridors are in the 1-2% range. For money transfers from USA to India, the world’s most advanced corridor for the reasons we are describing in another SaveOnSend article, margins are approaching ZERO (see table below). And it is just a matter of time before other top corridors would follow same pattern.
Money Transfer Internationally: comparison of margins between incumbents and startups, USA-to-India, $1,500, bank-to-bank, July 1, 2015
Money Transfer Internationally: comparison of margins between incumbents and startups, USA-to-India, $1,500, bank-to-bank, July 1, 2015
Consumer or industry perspective aside, if a bitcoin-based approach is only different in how it moves funds across countries and how it records details of transactions, two conditions would need to be met in order for bitcoin to present a significant cost advantage: a) costs of those specific back-end processes need to be a substantial component of a provider’s P&L, AND b) existing providers are deploying those processes in a substantially inefficient manner.
Let’s review financial statements of publicly-traded consumer remittances companies. It becomes apparent that most of their costs are related to payments for receiving from and discharging funds to customers, customer acquisition, channel infrastructure, customer service, and risk-management-compliance, not in recording transactions or moving money cross-borders. Hence, providers are eagerly looking for more cost-effective ways to collect and distribute funds vis-a-vis customers, acquire customers, deploy offline and online channels, service customers, manage risks of releasing funds before getting paid… not functions where bitcoin seems to be offering a distinctive cost advantage. For example, Western Union spent HALF of all expenses in 2014 on “agent commissions” – whether underlying currency is fiat or bitcoin wouldn’t seem to make any difference. Or, let’s consider fraud-related expenses: the major issue in the remittance industry (e.g., the case of “employee impersonation” at Xoom or when people lie about having sufficient funds in their bank account or about not sending money or when hackers take over online accounts). Again, it is not clear why a bitcoin-based provider would be much better at preventing such “front-end” fraud unless it is a so-called “full bitcoin” transfer. In such case, we will have a potentially safer infrastructure, but a very slim chance of imminent mass adoption.
Some online remittance startups might be hoping to ride the current payments bubble, get $100-200MM of “cheap” capital from VCs and via IPO (TransferWise already raised $91MM and WorldRemit – $140M) and focus on profits a few years down the line. It is possible for a bitcoin-based remittance startup to follow the same approach… but then it is more about “cheap” money and not about reducing costs by leveraging “Bitcoin” innovation.
However, there are pockets of opportunities where costs of money transfer remain high. There is an obvious correlation between the corridor size and its competitiveness. For top-10 global corridors, each $10B+ in annual volume, including four covered by SaveOnSend app, margins for online transfers are generally below 2%. On the other end of the spectrum, there are numerous $1-5M corridors in intra-Africa with very little competition and, hence, much higher margins. For such prosaic reason, Western Union only enables digital transfer from less 20% of countries.
Western Union Online Send Markets - July 2015
So why are all well-known Bitcoin-remittance providers also targeting the world’s largest, most competitive corridors which already have the lowest margins? If their primary reason for a startup is to help poor, why not target corridors which are under the radar of incumbents and have no competition in digital (see the world’s most expensive corridors here)? Why setup headquarters in USA or UK and not in Africa where intra-countries margins are the highest?
Hypocrisy aside, finding a large enough corridor that makes a business sense for a bitcoin-based remittance startup while being small enough to avoid a price war with incumbents is a possibility that requires an extensive research. Let’s also keep in mind the trend in Western Union and MoneyGram’s margins over the last 5 years, including current price war for USA-to-India. Incumbents evidently don’t hesitate to lower prices/margins, even while losing money, in order to preserve their market share.
Another argument in favor of Bitcoin’s ability to reduce remittance costs is to focus on small amounts with an underlying assumption that such transfers would dramatically increase in quantity (e.g., if it costs little to send $10 to homeland, lots of migrants will begin initiating lots of small transfers). While some increase in smaller amount transfers is expected (read this interview with Western Union), we don’t perceive a major trend. If you come across any research on this topic, please specify it in the comments section below.
But even for smaller amounts, some mainstream providers are not charging any fee, in essence, creating variable-only pricing based only on the FX markup (see example below for sending $20 to Philippines). When it costs less than $1 to send money, it is hard to see how a Bitcoin-based remittance company could provide meaningful savings and persuade consumers to switch providers.
Bitcoin money transfer challenge: $20, USA-to-Philippines, Bank-to-Bank, April 15, 2015
Bitcoin money transfer challenge: $20, USA-to-Philippines, Bank-to-Bank, April 15, 2015
5. Bitcoin money transfer will destroy Western Union
Obsession with crushing Western Union seems to be a huge distraction for many startups, bitcoin and otherwise. One thing is to have a crazy audacious goal, another is to keep talking about it like such goal could be a reality in the next several years. To put things into perspective, 8 years since it got its act together, Xoom and Transfast are still 1/10+ of Western Union’s transfer volume, and after 4 years, Remitly is 1/50+ of Xoom’s. Remittances’ latest darling, TransferWise, is growing very fast and only after 4 years surpassed Xoom’s monthly volumes, but its business model is constrained to bank-to-bank transfers, therefore, its revenue would likely to stay marginal in comparison with Western Union’s (read why it will likely remain an industry leader in another SaveOnSend article).
International Consumer Cross-Border Remittances Revenue
Picking ANY corridor in the world and achieving 1% share would seem like a much more plausible milestone that a bitcoin community could rally around. Achieve that in few years and many skeptics would start taking bitcoin money transfer seriously. Instead, bitcoin community seeks energy in celebrating another clever way to compare its non-existing business with the world’s leader.
Money transfer - Western Union vs Bitcoin
Money transfer – Western Union vs Bitcoin
In the meantime, Western Union has proven in the last couple years as agile adaptor to online evolution – compare their online engagement statistics or online revenue in the previous chart with those of more recent entrants. And that maybe the biggest “blind spot” of bitcoin-based or remittance startups in general. They have an image, aka, “wishful thinking,” that Western Union is a cash-only business which missed telephony and clinged to telegraph into the 21st century. The reality is quite different, and Western Union’ decent stock performance leaves more doubt about its imminent demise.
Bitcoin Money Transfer: 2-year comparison of Western Union and other stock performance vs. S&P500 index
Bitcoin Money Transfer: 2-year comparison of Western Union and other stock performance vs. S&P500 index
6. The only reason preventing mass Bitcoin money transfer adoption is [enter your favorite]
Articles like this highlight something unique about stakeholders in a Bitcoin money transfer community, both startup founders and their investors. Rather than learning and embracing a challenging reality of consumer remittances today, they prefer to believe that Bitcoin by itself is a “game-changer” for remittances. The are betting on a miracle of new technology taking off once enough remittance consumers hear about Bitcoin features. In their views, if only a large retailer would agree to accept Bitcoin for money transfers or if a Bitcoin remittance startup would cut its fees and conversion rates to zero, mass adoption is guaranteed. Even more grounded Bitcoin remittance participants feel it is reasonable to compare Bitcoin with Skype and WhatsApp.
They seem to forget two most basic principle behind success of any innovation
1. Manifestation of product-service virality takes weeks-months not years. WhatsApp and other “viral” giants spread like fire to millions of users and didn’t require second guessing. Nothing even remotely close has been transpiring with ANY bitcoin-based apps, and the active user base of the ones focused on remittances is typically measured in hundreds. Yes, it is possible, that one day in the future somebody will invent a fundamentally better bitcoin remittance app than anything available on the market today, but that has nothing to do with existing startups and their investors.FastestGrowingUserBase
2. The happier consumers with their existing choices and the more work required by them to adopt, the more branding and marketing efforts are required to initiate said adoption. They should also embrace a harsh implication that an abundance of satisfactory options impedes adoption not only among customers but also among necessary business partners. Why would a grocery store engage with a brand new provider that has a miniscule remittance flow if they already have a satisfactory working relationship with “Western Union” and other well-known brands? Read how CEOs-founders of Bitcoin remittance startups describe this particular challenge: BitSpark, Abra and Rebit.
So even if some Bitcoin remittance startup raises $100MM of “cheap” money from VCs or via IPO and starts offering fiat-to-fiat money transfer for FREE, to win even a 1% market share in any top corridor would take years not months and require a full-out consumer engagement effort (SEO, PR, advertising, referral).
But even if successful, what happens when there is the next 2001/2008-type financial crisis and “cheap” money is no longer available? Operating with no margins, what “dream team”of executives would be required in order for such bitcoin-based provider to survive? To be clear, similar challenges apply to ANY remittance startup in the online world – for example, see our review TransferWise.
So the biggest barrier to mass adoption might be that a bitcoin community is still dominated by idealists who are stuck in the “Bitcoin=Internet” paradigm rather than sceptical practitioners who would consider Bitcoin as just another novelty. Whether it is new brand of vodka, clothes, car, or remittances, the real “game changer” is in superb execution of more-or-less standard playbook. Miracles are known for tardiness.
Specific examples of Bitcoin money transfer apps
See updated list of bitcoin money transfer providers here
Abra (A Better Remittance App)
It is hard to imagine a better parody on the disconnect between bitcoin’s ardent fans and reality of money transfers than this presentation and the follow-up reaction – please watch it (only 6 minutes).
Now, this is actually a real serious presentation that won 2015 “LAUNCH Festival” Award. Moreover, the Abra app was hailed as the finally arrived “uber for remittances” and “Western Union killer.” But if you are not inside of the bitcoin bubble, you could be forgiven for chuckling few times while watching the video. Abra presentation starts with: “I wanna talk to you about Mexican immigrant named Bill” and proceeds with painting us a story of human suffering of someone in Mexico who has to “drive 2.5 hours” to the nearest cash agent. And Abra has the solution for those apparently greatly inconvenienced folks called the “human teller.”
Considering the ubiquity of cash agents, it is not hard to imagine a place that is so remote. There are numerous small villages, 50-100 residents, in such hard-to-reach places which remain there for historical rather than economic reasons. For anyone who ventures to such villages few gaps become apparent in Abra’s presentation: a) Mobile data connectivity, which could be spotty even around NYC, is usually non-existent once you are this far from larger cities and infrastructure, there is just no business case for deploying such capabilities, b) comfort-trust of technology, especially as it relates to money is far behind in its evolution, c) while it is usually very safe to live in those communities, the overall protection coverage by government is quite limited. So this “uber for remittances” “killer app” will be deployed to THESE areas?!
There might be definitely one segment who could be eager early adopters: criminals. There is finally an app for them which allows to quickly identify somebody with money in a vicinity and thus significantly improve effectiveness of victim targeting.
Thief Joking aside, even if we stop worrying about common sense and just go with this story, how would it look as an investment? Spending on localization, wireless data, customer service, etc., all to serve few people in remote areas seem understandable if those were marginal expenditures to piggyback on key metropolitan areas, but not as a targeted investment.
Longer-term, there is still another question on how Abra could make money if they only charge “human tellers” on each side 0.5% assuming all FX risk. At least for now, bitcoin spreads are higher and hedging is very hard to find, hence, it is quite expensive (cheaper mining businesses in developing countries are already looking for the same hedge). If you add to Abra’s margin each teller’s markup of 1%, the total margin gets to around 3% which is on a high end for corridors like USA-to-Philippines (check SaveOnSend app for other corridors).
FX Markup USA-to-Philippines; Q4,2014-Q2,2015
FX Markup USA-to-Philippines; Q4,2014-Q2,2015
For now, Abra is a pilot mode, singing up thousands of “human tellers,” so it might be another year before we start seeing facts about its transfer volumes and revenues.
BitPesa
Probably the best-known “use case” for Bitcoin consumer remittances, BitPesa’s expertise and specific focus is on money transfers to the middle part of Africa. It has raised close to $2M to date and its transfer volume has been growing at 30%/month from $50K/month earlier in 2015 to $400K/month by the middle of 2015. At the same time, BitPesa has struggled to gain traction among core remittance users in the outbound country where it first launched, UK. Instead, its typical early adopter is a small business owner who sends money occasionally. Facing this challenge, BitPesa has expanded its marketing efforts to potential senders from other countries like Canada and USA and began targeting B2B x-border payments (see informative presentation by BitPesa’s CEO).
3. Rebit.ph
This startup has several success factors going for it. From the beginning, they understood that fiat-to-fiat is the only feasible path to gaining a meaningful interest among frequent money senders. Rebit also had a discipline to focus on just one destination market: Philippines; and starting with only few origination locations like the US and Hong Kong. They are also open-minded to a limited vision that Rebit might be only competitive for smaller money transfers.
So far, Rebit has raised only $100K. Its repeat customer base is in hundreds, but Rebit is also attracting one-off users, in total generating 50-100 daily transactions. Rebit doesn’t charge fees making money on the FX-Bitcoin spread. Read Rebit’s extensive update and Q&A on Reddit.
Question for YOU: which bitcoin money transfer provider do you think has a practical chance to reach 1% market share in ANY global corridor in the next several years? Please describe your brief rationale in the comments section below.
Poll
