Monthly Archives: September 2015

Bitcoin will destroy the remittances industry

Good headline. But not true. Or is it?

I think it is. Just not quite yet.

Because what is a remittance? I am sitting in London with £200 in my pocket. My mum is sitting in Colombia and needs 800,000 pesos (which, for the sake of argument is about £200). I am a nice son, so I want to send her the £200. I turn up at a remittances agent and hand over my money. Some hours later my mum magically receives 750,000 pesos.

What is this magic that transforms British pounds in London into Colombian pesos in Bogotá within a few hours? Essentially a long chain of intermediaries (banks, exchanges, agents) who change pounds into dollars, dollars into pesos and order their agents to deposit the pesos into my mum’s bank account or hand over the cash. And they all take their cut along the way (did you notice how my mum didn’t actually get 800,000 pesos?).
The cut takes two forms: upfront commissions and uncompetitive exchange rates.

But I have to pay them because otherwise who will perform the magic?

Well, with bitcoin, I can!

I get a bitcoin wallet, go to a bitcoin exchange and buy £200 worth of bitcoin, which goes into my wallet.
I then get my mum in Bogotá to get a bitcoin wallet. I transfer my bitcoin to her wallet. She can then sell the bitcoin for Colombian pesos at a bitcoin exchange.

That’s it. Done. I have performed the magic of turning pounds into pesos within hours. And no banks, no middlemen and only a tiny (and I mean pennies) fee for moving bitcoin between wallets. I didn’t even have to leave my house.

I have actually done this. And it actually works!

And this magic is available today, right now, to every Colombian migrant worker in the world. They could totally destroy the business model of Western Union, Moneygram and all those others!

So why isn’t it happening? Why don’t I hear the rush of keystrokes to get those bitcoin wallets? Why can’t I hear the sobs of panic of all those Western Union executives as they see their bonuses and share options (their very jobs) disappear?

Well, it’s never as simple as that is it?

In my next article I will talk about the things that are standing in the way of this revolution.