Using Bitcoin agents for international money transfers

[ffe]

There are a number of sites that discuss international money transfers. I thought some of the advantages they attribute to “non-traditional” money transfer methods apply to Bitcoin. So I plagiarized the following comparison.

The example is a person living in New York who has saved $5,000 that he wants to send to his brother, now living in Karachi. His first stop is a major bank. At the bank, he learns several things:

•   The bank would prefer that he open an account before doing business with them;
•   The bank will sell him Pakistani rupees (Rs) at the official rate of 31 to the dollar; and
•   The bank will charge $25 to issue a bank draft.

This will allow him to get, in New York, Rs 154,225. Delivery to his brother would be extra; a courier service (surface mail is not always that reliable, especially if it contains something valuable) can cost as much as $40 to Pakistan and take as much as a week to arrive.

Contacting a local Bitcoin agent in New York he is offered the following deal:

•   A fee of 1 rupee for each dollar transferred;
•   37 rupees for a dollar; and
•   Delivery is included.

Under these terms he can send his brother Rs 180,000. The Bitcoin transaction proceeds as follows:

•   He gives the $5,000 to the New York Agent;
•   The agent contacts a Bitcoin agent in Karachi he knows, and gives him the details;
•   The agent transfers ~$5000 in Bitcoin to the Karachi agent.
•   The Karachi agent arranges to have Rs 180,000 delivered to the client’s brother.

This is a good 16% extra cash to the brother. A Bitcoin remittance takes place in, at most, one or two days. This can be contrasted with the week or so required for an international wire transfer involving at least one correspondent bank (as well as delays due to holidays, weekends and time differences) or about the same amount of time required to send a bank draft from North America to South Asia via a courier service (surface mail is not a reliable option where the contents are valuable, and it can also take several weeks to arrive).

[1714098250]

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[kiba]

Well, surely there must be an exchange market in both country to allow these kind of transactions to happen?

[xf2_org]

Sounds like a great way to get busted by the feds, for being a money mule.

[mimarob]

You are describing a classic Ha wala network.

Ironically I've heard somewhere that it was invented by the christian crusaders.

One of the advantages of these kinds of businesses is that in the classical case of two brothers (one in U.S. and one in Pakistan for instance), money seldom has to be transfered internationally, as long as there is an equal transaction flow in both directions and/or adequate buffers.

The cool thing about bitcoins is that they replace the classical two brothers. The problem is then changed to finding someone near you that will trade the bitcoins...

[Anonymous]

You are describing a classic Ha wala network.

Ironically I've heard somewhere that it was invented by the christian crusaders.

One of the advantages of these kinds of businesses is that in the classical case of two brothers (one in U.S. and one in Pakistan for instance), money seldom has to be transfered internationally, as long as there is an equal transaction flow in both directions and/or adequate buffers.

The cool thing about bitcoins is that they replace the classical two brothers. The problem is then changed to finding someone near you that will trade the bitcoins...

That's what bank deposits are for....

Depositing money over the counter to buy bitcoins in your local currency is sorely needed.

I would suggest a market based on technocash .

[error]

Not only describing a classic hawala network, but using slightly modified text from Wikipedia to do so.

Though, this differs from a hawala network in that the settlement takes place immediately as the bitcoins are sent. It's no more than a classic money transmittal service, albeit with two currency exchanges.

[ffe]

Oh, I agree. As I said in the post "I plagiarized the following comparison."

It's nothing new. I just found it interesting to think of Bitcoin while reading about money transfers. The comparison goes into more details than usual about what it takes to transfer money.

[mimarob]

Not that I am an expert in Hawala dealing, but shouldn't a simple phonecall between two trusted parts settle the deal immediately? (Even more so than waiting an hour or so for confirms on a bitcoin transaction? :-)

[Jered Kenna (TradeHill)]

Not that I am an expert in Hawala dealing, but shouldn't a simple phonecall between two trusted parts settle the deal immediately? (Even more so than waiting an hour or so for confirms on a bitcoin transaction? :-)

Yeah and you can do the same with Bitcoin, if you trust they're not going to try a double spend as soon as you see it show up you can pay out.
Or even as soon as they say "I'll send it" if you trust them enough.

[ffe]

Not that I am an expert in Hawala dealing, but shouldn't a simple phonecall between two trusted parts settle the deal immediately? (Even more so than waiting an hour or so for confirms on a bitcoin transaction? :-)

Yeah and you can do the same with Bitcoin, if you trust they're not going to try a double spend as soon as you see it show up you can pay out.
Or even as soon as they say "I'll send it" if you trust them enough.

That's the point. Bitcoin allows short term trust as opposed to some long term "if you pay me now I'll gladly pay you back next month" deal. You may have good intentions but your circumstances may change in a month. We both trust you can pay me now, but, do I trust your finances will still be good in a month?

[ericools]

I started a new thread but sgornick let me know about this one so this was my thinking:


"
What I would like to see is a network of money changers that could accept cash, send bitcoins between each other then dispense cash at the other end just as western union and money gram locations do now.

We would need to form some sort of organization to create a brand name for the service and over see that all the money changers play by the rules, but we could offer membership to any currently existing stores that currently user like services.  The advantage to them is that they could undercut existing services and still keep more of the profits than they are able to currently.

Perhaps someone a little more code savvy than myself could develop an online interface where the customer could just enter all the information for the transaction (recipient, sending and receiving locations, password, amount) and that information could stay private except for the amount would show up on the sending stores screen and they could confirm it was paid for before the transaction goes though.

Thoughts?
"

[kiba]

I guess this is what ubitex could help facilitate, a digital hawla network using bitcoin.

[ericools]

I was thinking less Craigslist and more, my local pawn shop or grocery store.

[radracer]

this area has huge potential for bitcoin.  according to the world bank info here http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22757744~pagePK:64257043~piPK:437376~theSitePK:4607,00.html

The top remittance sending countries in 2009 were the United States, Saudi Arabia, Switzerland, Russia, and Germany. Worldwide, the top recipient countries in 2010 are India, China, Mexico, the Philippines, and France.

it would behoove the community to make sure bitcoin and instructions are localized for these countries, and that active exchanges exist, and then to begin outreach efforts to migrant communities.

[tomcollins]

What is the reason why the fees are so high in some places?  Are there expensive regulations to adhere to?  Taxes?

[goatpig]

What is the reason why the fees are so high in some places?  Are there expensive regulations to adhere to?  Taxes?

Well you have to consider that changing into a local currency can be really expensive. If a friend sends me a bank wire for $100 dollar, ill be getting 65.5 euros instead of 70.5. The Bitcoin would help avoiding that.

[tomcollins]

What is the reason why the fees are so high in some places?  Are there expensive regulations to adhere to?  Taxes?

Well you have to consider that changing into a local currency can be really expensive. If a friend sends me a bank wire for $100 dollar, ill be getting 65.5 euros instead of 70.5. The Bitcoin would help avoiding that.

The fees you are paying are much more insignificant than other countries.  I expect some fee to be eaten up on overhead.  The banks will pay a fee when they exchange on the market, and they will want some money for their trouble as well.  You are paying a 7% fee.  Sure, that's high, but perhaps it's not too crazy.  Obviously Bitcoin would help (but perhaps not for only 7% fee).  For the huge fees mentioned earlier, I'm trying to figure out why they are so high.  If you wanted to recreate the same experience for the USD to EUR wire, the 7% seems in line.  You go somewhere physically and hand them cash.  They wire the money, then your friend picks it up somewhere.  This could be linked direct to bank accounts, but let's focus on this case.

You buy your bitcoins in a store, perhaps using a BitBill or some other service.  Say that's a 3.5% fee (no idea what BitBill charges).  Then you cash out using a local trader who charges a 3.5% fee.  There's your 7%.

If you never have to convert currency then you don't get bit, but same could be said if your friend just sent you $100 and you never needed to convert it.


The 25% fees, that's where i want to know where they are coming from.  That will be the place where Bitcoin could be superior.

[goatpig]

The fees you are paying are much more insignificant than other countries.  I expect some fee to be eaten up on overhead.  The banks will pay a fee when they exchange on the market, and they will want some money for their trouble as well.  You are paying a 7% fee.  Sure, that's high, but perhaps it's not too crazy.  Obviously Bitcoin would help (but perhaps not for only 7% fee).  For the huge fees mentioned earlier, I'm trying to figure out why they are so high.  If you wanted to recreate the same experience for the USD to EUR wire, the 7% seems in line.  You go somewhere physically and hand them cash.  They wire the money, then your friend picks it up somewhere.  This could be linked direct to bank accounts, but let's focus on this case.

You buy your bitcoins in a store, perhaps using a BitBill or some other service.  Say that's a 3.5% fee (no idea what BitBill charges).  Then you cash out using a local trader who charges a 3.5% fee.  There's your 7%.

If you never have to convert currency then you don't get bit, but same could be said if your friend just sent you $100 and you never needed to convert it.


The 25% fees, that's where i want to know where they are coming from.  That will be the place where Bitcoin could be superior.

I'm already more than satisfied to be able to reduce a 7% fee to 3.5% thanks to Bitcoin. That's ample argument for me.

The 25% sounds outrageous.

[tomcollins]

The fees you are paying are much more insignificant than other countries.  I expect some fee to be eaten up on overhead.  The banks will pay a fee when they exchange on the market, and they will want some money for their trouble as well.  You are paying a 7% fee.  Sure, that's high, but perhaps it's not too crazy.  Obviously Bitcoin would help (but perhaps not for only 7% fee).  For the huge fees mentioned earlier, I'm trying to figure out why they are so high.  If you wanted to recreate the same experience for the USD to EUR wire, the 7% seems in line.  You go somewhere physically and hand them cash.  They wire the money, then your friend picks it up somewhere.  This could be linked direct to bank accounts, but let's focus on this case.

You buy your bitcoins in a store, perhaps using a BitBill or some other service.  Say that's a 3.5% fee (no idea what BitBill charges).  Then you cash out using a local trader who charges a 3.5% fee.  There's your 7%.

If you never have to convert currency then you don't get bit, but same could be said if your friend just sent you $100 and you never needed to convert it.


The 25% fees, that's where i want to know where they are coming from.  That will be the place where Bitcoin could be superior.

I'm already more than satisfied to be able to reduce a 7% fee to 3.5% thanks to Bitcoin. That's ample argument for me.

The 25% sounds outrageous.

How are you able to do it?  What is the fee you pay?

How did you do it before?

[goatpig]

How are you able to do it?  What is the fee you pay?

How did you do it before?

My point was only speculative. I have not sold any of my Bitcoins yet so I can't tell what fees i'd incure by experience. But let's say I want to send euros to someone with an account denominated in dollars, I'd buy BTC for euros on the OTC channel prolly, and have my friend cash out the BTC whichever way he sees fit. The other way around, he'd buy BTC on Gox, and I'd look for a f2f trade for cash on my side. Either way, the global fee would be around 1-2% I think. Much better than PayPal or Bank wire. A bigger market for EUR would make it even easier.

The first 5870 I bought, I had a friend buy it for me off of Newegg and ship it to France. I paid $200 and it cost me 145 euros through PayPal. EUR/USD at that time was 1.45, so I paid an outrageous 9% fee. Even buying BTC at 5% above spot, I would have had it better. The funny thing is that I could still turn around and sell the card for a profit when I got it.