Today, it’s easier than ever to send money overseas. In the past, making an international payment might have involved waiting weeks for the next ship to depart; but now it’s possible to just do an electronic transfer.
And in a globalized world, there are lots of reasons to do this. These range from sending money to family and friends around the world, to buying things from foreign retailers or paying the mortgage on a second home abroad.
This makes international money transfers a big market —according to research by Finder millions of people in the UK alone send money abroad every year.
But for all its popularity, the process of making an international transfer is still full of complications.
The problems with sending money abroad
One of the biggest annoyances for those who make this kind of transfer regularly is the fees involved. Transaction fees can be very high, and average global remittance costs are currently about 7.09%.
That means sending $200 abroad would result in a fee of more than $14 — which is a considerable amount. This kind of thing adds up fast, and can be a real pain if you make payments on a regular basis.
Often, transfer services require a minimum fee regardless of how much money you’re actually sending. If the transfer is only for a small amount – called a micro transaction – the fee could be even higher than the payment.
To make matters even more frustrating, users of these services have to deal with conversion rates and costs. There’s often a fee for converting currencies, and even then the rates offered can be worse than expected.
Finally, users have to deal with long waiting periods. The average time taken for a cross-border transaction is 3 to 5 days. That’s irritating at the best of times, but if you urgently need to send money it can be a serious problem.
Many people turn to payment services like Stripe and PayPal, but even these come with their own fees and can take several days to process payments.
There’s a lot of difficulty involved in sending money abroad even when using major currencies like the U.S. Dollar, and for smaller, weaker currencies these problems can be magnified.
This is without even mentioning the safety issue. There are plenty of reports of people who have been cheated during international transactions. Unfortunately, it’s all too easy for people to scam others in different jurisdictions and escape punishment. In the UK last year, 20,000 people lost a total of £100 million in online bank transfer fraud.
Fortunately, there is a solution to all of these issues.
The cryptocurrency solution
Using cryptocurrency to send money abroad isn’t actually a new concept. People have been using this technique for years, and with good reason.
Cryptocurrency transfers can be much cheaper, quicker, and easier than traditional methods like bank transfers and wire transfers, and there’s no need to convert currency.
That’s why people in developing countries are especially fond of crypto transfers. It’s common for residents of richer nations to send money to their relatives in poorer places via cryptocurrency.
And given that about 2 billion people are unbanked, cryptocurrency provides a way of sending and receiving money that doesn’t involve paying the high fees involved in setting up a bank account. Many people in third world countries are unable to meet the stringent requirements for starting a bank account, and crypto provides a way for them to receive money from abroad.
But the possibilities in this space are even bigger. Using blockchain, the technology that underpins cryptocurrencies, it’s possible to build large decentralized networks that work globally. This makes exchange between countries extremely quick and easy.
This is what a number of companies, are working on. These kind of blockchain-based systems can ensure security for transactions and work well with micropayments by reducing fees. They present a solution to many of the issues with international transfers, ignoring borders and completing transactions in just seconds.
Anyone can get involved in these companies’ success by trading their tokens. For example, it’s easy to buy xlm tokens for the blockchain-based service Stellar.
They use blockchain’s inherently secure and tamper-proof mechanism to avoid any scams or foul play by users, and can do things like freeze payments if one of the parties is unhappy. Many banks are concerned about lack of regulation in cryptocurrency, and more structured platforms could help allay those fears.
Blockchain could change the way millions of people send money abroad and open up new opportunities for people in some of the world’s poorest countries.