The Future of Money Remittance

MSB Talk 4

Update: Carter Dougherty released a great article for Bloomberg this morning that better articulates my point. 

The protocol of Bitcoin and other digital currencies provide perfect platforms to disrupt the money transfer industry. It’s no secret that remitting money around the world can be a costly and often times lengthy process. The current financial system requires money transmitters to use antiquated procedures that include multiple touch points.

A Personal Story

I spent 2 years living in the Dominican Republic. While living in the DR I regularly received money from family in the US. Because I was in the country on a service mission, I did not have a personal bank account which made receiving funds very difficult. At the beginning, my family used traditional money transmitters in the US. They would wire money to the company in the US and then the company would use an agent in the DR to issue me the funds. Everything seemed to work smoothly to my family, but to me the process was difficult and costly. It took 3-4 days from the time the transfer was initiated in the US for me to receive the funds and I typically only received 80-90% of the original transferred value.

Things haven’t changed much since my time in the DR, but thanks to digital currency protocols, FinTech entrepreneurs are beginning to address the long standing issues of money transmission. Using a digital currency protocol to transmit funds is a less expensive and faster solution. Transfers made on the Bitcoin network for instance can be done for less than 1% and can be settled in less 15 minutes.

An Example

In a December 2013 article published by Coindesk, Coincove, a California based company, is featured as the poster child for digital currency based money transmitters. Coincove uses the Localbitcoins platform to make remittance easier in Latin America. However, the Localbitcoins platform is built on an in-person marketplace and although it is substantial and growing at a rapid pace, digital currency money transmitters must seek a better long-term solution before they can effectively support the billions of dollars remitted annually.

Conclusion

We are in the infancy stages of digital currencies so we can expect to see major improvements in the digital currency money transmitter space in the coming months and years. Traditional money transmitters should take notice now and begin developing a strategy to leverage digital currency protocols.

If you’re interested in seeing an example, I suggest looking into Ripple. Please let us know of other examples in the comments section.

Full Disclosure: I am not associated with or receive payment from Coincove or Ripple in any way. 

Author, Brian Nelson

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IMTC Conference Review – Industry Disruption: New Payment Protocols

MSB Talk 4

Mohr World Consulting along with the NMTA held another great conference for money transmitters in Miami Florida last week. The IMTC Miami conference has become the world’s largest conference dedicated to the money transfer industry and continues to grow year over year. It was great to see old friends and new faces as we all work together in building a more compliant and accepted industry throughout the world.

My main take away: New technologies are beginning to disrupt the money transfer industry.

Bitcoin

Although they are still in their infancy, protocols such as the Bitcoin protocol and Ripple are starting to compete with Swift as a transfer settlement tool. The new technologies are making money transfers easier, cheaper and more secure. However, it is apparent that these technologies still have a long road to travel before they have the traction and volume to make a big impact on the industry.

Traditional money transfer companies are hesitant to make any changes with their operations because of the potential compliance issues associated with using the new protocols. But…that will quickly change if companies like Ripple succeed in landing a couple big name money transmitters.

It was apparent during the Virtual Currency panel, that traditional money transmitters are still not convinced of the power of Digital Currencies. However, a number of individuals in the room later expressed interest in either partnering with Bitcoin companies or using a service that would provide a better settlement tool using the Bitcoin protocol. Now that the ball is rolling, it’s only a matter of time before the industry adopts new protocols to facilitate money remittances.

All in all, I truly enjoyed the conference and look forward to reconnecting with everyone again soon.

– Brian Nelson