Let's brainstorm remittances

[waxwing]

One of the truly world changing potential outcomes of Bitcoin is remittance of money to 3rd world countries.

Currently people from poor countries working in rich(er) countries face difficulties sending home money, which is usually the main reason for their being overseas in the first place.

The typical scenario is someone working as a maid, construction worker or cleaner or other service job and sending money home on a usually month by month basis. Typically they face very high costs to this transaction.

Here's an example with Western Union, numbers taken from their website, and I choose the UK as the sending country which might be a kind of "typical" case (the US will usually be a bit better than other sending countries, but I'm sure it varies).

Remitter wants to send 100 pounds sterling (GBP).
Current exchange rate on Google is 1GBP = 63.81 PHP (Philippine peso)
Western Union charges a flat fee of 6.90 GBP. So you are actually spending 106.90.
Meanwhile they're using an exchange rate of 62.50 instead of 63.81. So overall you are out of pocket (6821-6249)/6821 or 8.3%.

Of course there are other remittance services and it would be good to hear more information about them. I just looked at www.xoom.com and without doing detailed calculation I can see similar fees - maybe 6% to send a similar amount from the US.

People will of course save money if they send less often, but the nature of being poor is exactly that you have to transact more often.


It would be great to see real world solutions from bitcoin, but right now it seems a long way off. In order to send using bitcoins you need realistically to transact fiat-btc on both ends of the transfer. Certainly in a 3rd world country, for now, there isn't much if any exchange value in btc.

So, do people have any ideas? How can we make it easy for people to receive BTC in, say, the Philippines, and then somehow get that into Pesos for their living needs? Or Africa, India, South America?

I chose the Philippines not just because it's a classic remittance type economy but also because I got involved in some charity work there recently and would love to help out with a project there in some way. I'm going to have a lot of free time over the next year so let me know if you're involved in something and need a hand.

[mokimarket]

One of the truly world changing potential outcomes of Bitcoin is remittance of money to 3rd world countries.

Currently people from poor countries working in rich(er) countries face difficulties sending home money, which is usually the main reason for their being overseas in the first place.

The typical scenario is someone working as a maid, construction worker or cleaner or other service job and sending money home on a usually month by month basis. Typically they face very high costs to this transaction.

Here's an example with Western Union, numbers taken from their website, and I choose the UK as the sending country which might be a kind of "typical" case (the US will usually be a bit better than other sending countries, but I'm sure it varies).

Remitter wants to send 100 pounds sterling (GBP).
Current exchange rate on Google is 1GBP = 63.81 PHP (Philippine peso)
Western Union charges a flat fee of 6.90 GBP. So you are actually spending 106.90.
Meanwhile they're using an exchange rate of 62.50 instead of 63.81. So overall you are out of pocket (6821-6249)/6821 or 8.3%.

Of course there are other remittance services and it would be good to hear more information about them. I just looked at www.xoom.com and without doing detailed calculation I can see similar fees - maybe 6% to send a similar amount from the US.

People will of course save money if they send less often, but the nature of being poor is exactly that you have to transact more often.


It would be great to see real world solutions from bitcoin, but right now it seems a long way off. In order to send using bitcoins you need realistically to transact fiat-btc on both ends of the transfer. Certainly in a 3rd world country, for now, there isn't much if any exchange value in btc.

So, do people have any ideas? How can we make it easy for people to receive BTC in, say, the Philippines, and then somehow get that into Pesos for their living needs? Or Africa, India, South America?

I chose the Philippines not just because it's a classic remittance type economy but also because I got involved in some charity work there recently and would love to help out with a project there in some way. I'm going to have a lot of free time over the next year so let me know if you're involved in something and need a hand.

I am trying to do a similar thing here:
https://bitcointalk.org/index.php?topic=187843.0

And you are right, there need to be more talk about how to do this. My view is that there needs to be a linking between bitcoin and cell phone minutes (minutes is basically an accepted currency in many country where everybody has prepaid phones).

Sending bitcoins to Africa/Philippines/etc is easy..now if purchasing prepaid minutes for a cell phone becomes easy, I believe the technology will take off.

[waxwing]

Interesting. In that case, do we need to look at the http://en.wikipedia.org/wiki/M-Pesa model in Kenya? I suppose the problem here is that you've gone back to a centralised control model (the mobile operator). But it could be used to boostrap a BTC-BTC economy.

[Hiroaki]

remittance is one of the great possibilities that bitcoin offers.

The most important would be to explain it to people, who would need this service and offer EASY access to it.
A great solution would be if they can easily change BTC into FIAT in the country they are working and their home one.

A small shop owner could provide such a service...Someone has to start...

[franky1]

agreed. this is where satoshi had it envisioned that localbitcoins and individuals would work together to do money exchanges.

alot of people still think the only way in to bitcoin is to use the gateways that MTGox prefer.

this needs to be sucked out of the minds of the sheeple and a new era of local merchants, local exchangers need to rise up.

bring back the localbitcoin craze and make local bitcoins more popular then mtgox/dwolla/moneygram/bitinstant/okpay/AurumXchange

[Stephen Gornick]

So, do people have any ideas? How can we make it easy for people to receive BTC in, say, the Philippines, and then somehow get that into Pesos for their living needs? Or Africa, India, South America?

Hawala is about the same as Western Union, except that it is an informal value transfer system.   This means nobody is filing currency transaction reports (CTRs) for transactions greater than $3K USd or $10K or whatever.   And nobody is asking questions.     It exists today, ... someone in one country hands over some amount of cash to a hawalder and in another country that person's family member visits the hawalder partner there and receives the cash, less a 10% or 20% fee.

A hawalder is a network ... requiring presence in both countries ... the sender's country and the recipient's country.

Bitcoin breaks this down into there being two domestic transactions.   The person sending the money goes to 7-eleven, or does a domestic bank transaction or whatever to buy coins.   On the recipient's side, that too is simiply another domestic transaction -- the recipient redeems bitcoins in exchange for cash of the local currency.

So simply educating the hawalders about bitcoin, and how they can become independent bitcoin exchange agents to serve the remittance market, is one way to cause bitcoin to become more widely used for remittance payments.

Since there already is a pretty developed method for the person in the western world to obtain bitcoins, the challenge comes in ensuring that the remittance recipient can cash out securely, without losing a ton during the exchange.

Here's the problem that I see, however.   The independent local exchangers don't have much capital.   The "round trip" between selling bitcoins and using those cash proceeds to restock can take many days, and the fees to do so may be relatively prohibitive.    

So what is needed is a mid-level wholesale buyer who has an inventory of coins who can sell to the local exchangers in exchange for their cash.  This lets the local exchanger negotiate a trade with the confidence that cash proceeds from the sale can be converted back into bitcoins within a short amount of time (same day even) and thus exposure to exchange rate risk is lower and the capital requirements for operating the exchange business are lower.

The mid-level wholesale buyer would sell the coins purchased to local buyers or would convert the proceeds on an exchange.  This mid-level buyer would need to be well capitalized to accommodate the short term demand for cash as well as have banking connections sufficient to ensure that bitcoins sold at the exchange (generally in USDs, or EURs) can be converted back in to the local currency for use in making further purchases.

This is a function that can develop organically (as a better funded local trader with an entrepreneurial mind can rise to become a mid-level trader), however someone purposely filling this role can help cause this service to be available to the small time traders sooner.

So that's what is needed to bump Bitcoin's share of the remittance market up a notch or two.

[Hiroaki]

@Stephen you really wrote down some nice ideas...You should take the lead, but I guess you're busy with other projects...

Hawala is indeed a very interesting phenomen, a friend of me had to defend an Iranian in court and somehow they arranged payment via this method. That really sounded strange to me (as for many Bitcoin)...
Isn't a bit like ripple

[CryptStorm]

Hello,

The area of intersection between BTC and remittances seems absolutely fascinating. Is this a good place to continue this conversation still?

[CryptStorm]

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* I wasn't sure if my n00b status would let me post; as I'm in the clear, I'll continue
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I will never remit money. I live in the US, and my family isn't looking to me to send them money. But, that doesn't mean this topic isn't central to some core hurdles BTC still must pass over. I deeply believe in the power of Bitcoin, and want to contribute-- here is one beginning of that effort (beyond trading/investing). I'm building on comments above, thoughts and other reading.

As is obvious and has been said, a solid remittance mobile platform could lead the way to widespread BTC adoption and solve a major problem for those whose primary possession is an outdated mobile phone (or even just access to one).

Perhaps the best way to slice the problem is to consider two parties: the end user, lets imagine them a family with at least one member who works in another country, and the means to give/take cash on each end of their expensive remittance problem.

Let's also imagine that a centralized solution is undesirable. The first thing that comes to mind is a mobile app whose primary function is as a decentralized PersonWithCash? finder to put our family, how about we call them the Santos' (most common Filipino surname), in direct contact with said person, lets call her a Maker. The Maker (who knows about BTC and is willing to make house calls for ca$h  ) wants to get in or out of BTC, wants to deal in cash, and is geo-physically near enough to the Santos to meetup.

So, if a mobile app were developed, what else would it need? Presumably a calculator and fee method to determine a fair price for the Santos family and the Maker. Neither one wants to get ripped off, and they probably don't want to haggle too much (although haggling is a part of most exchanges). Also, by dividing the goals of each party with their solution, each gets what they want, cash or remittance (now), and access to the BTC market as a means to acquire wealth/perform a business function beyond Mt.Gox or other platform (for whatever reason).*

What problems are obvious so far?

Regarding mobile, it just seems much more obvious a starting place than a web app, given the root problem and the infrastructure in place.

In terms of goals/directions, a mobile app that builds a group of families who want to remit at a more fair price and simultaneously builds a parallel group who will exchange cash for BTC (and vice versa) seems a complementary path.

How could the Maker group and that part of the solution further develop the business functions or community or decentralization of BTC?

If anyone is interested, I would gladly like to participate with them.

What else?

*[It's worth the footnote that BTC must have solutions that understand the critical nature of cash, and work *with* it. This is not to sidestep legality, or taxes, or any of those deeply real concerns-- but there is and always will be a cash component of every local economy. Let's work, as the BTC community, to build solutions to that end. Anyone ever been a waitress? How about a handyman? A small business owner? A tutor? Then you know the value of cash as part of your means of survival. Ignore for a moment the Ross Ulbrichts of the world, and think small-- then we can really think big!]

[themusicgod1]

****************************************************************************************
* I wasn't sure if my n00b status would let me post; as I'm in the clear, I'll continue
****************************************************************************************

I will never remit money. I live in the US, and my family isn't looking to me to send them money. But, that doesn't mean this topic isn't central to some core hurdles BTC still must pass over. I deeply believe in the power of Bitcoin, and want to contribute-- here is one beginning of that effort (beyond trading/investing). I'm building on comments above, thoughts and other reading.

As is obvious and has been said, a solid remittance mobile platform could lead the way to widespread BTC adoption and solve a major problem for those whose primary possession is an outdated mobile phone (or even just access to one).

Perhaps the best way to slice the problem is to consider two parties: the end user, lets imagine them a family with at least one member who works in another country, and the means to give/take cash on each end of their expensive remittance problem.

Let's also imagine that a centralized solution is undesirable. The first thing that comes to mind is a mobile app whose primary function is as a decentralized PersonWithCash? finder to put our family, how about we call them the Santos' (most common Filipino surname), in direct contact with said person, lets call her a Maker. The Maker (who knows about BTC and is willing to make house calls for ca$h  ) wants to get in or out of BTC, wants to deal in cash, and is geo-physically near enough to the Santos to meetup.

So, if a mobile app were developed, what else would it need? Presumably a calculator and fee method to determine a fair price for the Santos family and the Maker. Neither one wants to get ripped off, and they probably don't want to haggle too much (although haggling is a part of most exchanges). Also, by dividing the goals of each party with their solution, each gets what they want, cash or remittance (now), and access to the BTC market as a means to acquire wealth/perform a business function beyond Mt.Gox or other platform (for whatever reason).*

What problems are obvious so far?

Regarding mobile, it just seems much more obvious a starting place than a web app, given the root problem and the infrastructure in place.

In terms of goals/directions, a mobile app that builds a group of families who want to remit at a more fair price and simultaneously builds a parallel group who will exchange cash for BTC (and vice versa) seems a complementary path.

How could the Maker group and that part of the solution further develop the business functions or community or decentralization of BTC?

If anyone is interested, I would gladly like to participate with them.

What else?

*[It's worth the footnote that BTC must have solutions that understand the critical nature of cash, and work *with* it. This is not to sidestep legality, or taxes, or any of those deeply real concerns-- but there is and always will be a cash component of every local economy. Let's work, as the BTC community, to build solutions to that end. Anyone ever been a waitress? How about a handyman? A small business owner? A tutor? Then you know the value of cash as part of your means of survival. Ignore for a moment the Ross Ulbrichts of the world, and think small-- then we can really think big!]

Most if not all of the hard work you described is more or less done - Ripple is ready to be used in just this fashion.

[histman]

Remitting money doesn't require any transfer service, per say. Both people just need access to the same wallet.  Pedro goes to work abroad, uploads his BTC to blockchain.info, his wife at home can access it. 

The only trick is converting it to local fiat, but it won't be long at all before the wife can just buy local stuff with BTC because local sellers will figure out that she has BTC to spend.

[Kokomoka]

This is a topic I have spent a lot of time thinking about, and during that process I also became aware of the incredible Hawalla system.

The first thing I would like to say is that a lot of people immediately associate remittances with poverty. A lot of wealthy expats are also keen to transfer money back to their home countries without paying eye watering fees. I am a British expat living and working in Kuwait. One of my colleagues was complaining to me recently about the costs of transfering his salary back home. Although I don't have a great deal of experience in the issue, I assume that many small and medium sized businesses also pay a hefty price for international transactions.

I have a number of different bitcoin business ideas and I would like to sound this one out right here.

Suppose we have a network of inidividuals all across the world who all have one thing in common, quick and efficent access to buying and selling bitcoins. This means they can quickly buy and sell bitcoins at market rates from local bitcoins, and/or their personal contacts. For clarity, call these members of the network "nodes".

A remittance system would work as follows. (This is basically a carbon copy of the existing Hawalla system).

A client approaches node A and asks to transfer say 1000 KWD (Kuwaiti currency) to the UK. They pay this 1000 KWD in cash. Node A immediately contacts node B in the UK and requests that 1000 KWD equivalent (minus a small fee) in GBP is transfered by wire transfer to a given account. As far as the client is concerned, that is it. A simple cash payment in one country results in an instant bank deposit in a foreign country. They go away happy.

Meanwhile, node A is 1000 KWD better off, and node B is an equivalent amount worse off. These two individuals need to settle their debt. How? Bitcoin of course. Both parties split the fee between them. Both nodes need to be able to cheaply and quickly recycle thier fiat and bitcoins in order to maintain a balance between the two. The Hawalla network on which this business model is based is thousands of years old. Previously, the different nodes of the network would keep a paper record of who owes who. Debts where periodically cleared by which ever means possible. Many Hawalla agents would work in the import/export business. To settle a debt, they may agree to import $10,000 worth of goods but one party would only pay $9,000 for them, thereby settling a $1,000 debt between them. Bitcoin makes this step trivial to resolve, simply transfer the required amount of coins.

Such a network can't be built over night, and I would like to see it get of the ground somehow. Here is what could potentially arise:

Firstly, if we have n nodes in the network, how many potential transfers are possible? There will be (n^2 - n)/2 connections between the nodes, therefore the network grows at a quadratic rate as more and more people join. If there are 20 members of the network, then there are 190 different potential routes of money transfer. Basicially, what I am trying to get across is that the network can be very effective with only a small number of members.

How can the network communicate with each other? We can maintain a database of members that gives a means of contact, (cell phone, email etc) a location, (longitude and latitude?), bitcoin public address, a territory and what volume of money are able to deal with. For example, someone in the UK with a bank balance of say 10,000 GBP will be able to service anyone in the UK up to say 9,000 GBP a time. When a client approaches you to do a deal, search on the database of the most appropriate node and make the transaction (assuming one can be found of course). Such a database can also be used to distribute email instructions to the different members as well as arranging the bitcoin transfers.

Like I said at the beginning, wealthy people working overseas are a big potential market. So too are small and medium sized businesses that do international trade. Once the network has built up, then maybe smaller remittances will also become profitable.

I of course volunteer to get started. I can run a Kuwaiti node and a British partner would make an ideal seond member. China could be a big market due to the tremendous volume of goods they export. Troops based on foreign military basis could also be ideal members of the network too.

PM's invited.

Kokomoka.

[histman]

That's a great idea, Koko, except that in a couple of years the person needing to transfer the money will be able to easily buy the bitcoins himself and send them home.  Bitcoin ATMs and the like will cut out the need for other people to get involved. The person on the receiving end will be able to convert them back to fiat just as easily, or, for that matter just spend them as BTC.

[Kokomoka]

That's a great idea, Koko, except that in a couple of years the person needing to transfer the money will be able to easily buy the bitcoins himself and send them home.  Bitcoin ATMs and the like will cut out the need for other people to get involved. The person on the receiving end will be able to convert them back to fiat just as easily, or, for that matter just spend them as BTC.

I don't buy that. You could say the same thing about fiat money, but money changers like Western Union still exist. Such a service would be especially powerfull in parts of the world where bitcoins are not widely known about or used. If you live in such a place and you have access to bitcoins then you could provide a very cost effective service. I would love to team up with a UK based for the purposes of running remittances on behalf filthy rich tax dodging petroleum engineering expats.

[kdrop22]

The most important thing to have is an large scale exchange in every country. We have a lot of new exchanges popping up trading in USD or Euro. But what we need instead is an exchange for every country.
e.g.,
one for
- Phillipines
- India
- Mexico
and so on.... in their local currencies.
Once we have an exchange, it will just be a matter of time before some enterprising locals figure out that this can be used to run an remittance business.