A recent report on “Remittance Market & Blockchain Technology,” by BlockData reveals the emerging role of blockchain in a booming remittance industry where Ripple, Stellar, and Ethereum are making a lot of advances.
Talking about the impact of remittances inflow, it has a positive effect on a country on a macroeconomic level by increasing the disposable income and acceleration GDP growth while at the household level, it reduces income disparities and alleviates poverty.
According to this report, authored by Lukas Schweiger, CDO, and head of research and Daniel Hangan, the research analyst at Blockdata, in 2018, it grew by 10 percent with the current valuation of $689 billion. Next year it is expected to grow by 3.7 percent.
Moreover, in the next three years the global remittance market is projected to grow to $1.035 trillion while by 2025, the growth is expected to reach $1.413 trillion.
Countries With Highest Inflows & Outflows
The highest inflows are expected to be in East Asia and the Pacific while the highest growth will be seen in Sub-Saharan Africa.
In 2017, India China, Mexico, France, and The Philippines made 35 percent of total remittance inflows while the US, UAE, Germany, Switzerland, and Saudi Arabia made 44 percent of total outflows.
Blockchain Companies In Remittance Market
Traditional cross-border money transfer leaders still own a significant portion of the market, resulting in high costs and poor levels of service. Western Union that operates in 200 countries dominates the cross-money transfers and charges some of the
“highest commission rates”
out of all the remittances intermediaries.
Disruption in this industry can meet the needs of more than 3 billion people, states the report. Given the fact that blockchain based transactions are 127 times cheaper and 388 times faster than traditional remittances, big corporations are looking to partner with blockchain startups to innovate remittances.
Though blockchain companies solve the issues of high fees, long transaction times and the abundance of intermediaries, its growth has been relatively “small” with only 39 companies created in the last 9 years. Bitpay, Ripple, Bitpesa, and Wyre are some of the first blockchain remittance projects.
In order to innovate remittances, the core services focused by these companies are payment & storage applications, lending, FX, global settlement systems, and credit scoring.
Blockchain startups are still in the early stages of development and implementation takes a time that can be costly so the related costs and benefits remain “somewhat unclear”. Though many remittance businesses are reluctant to cooperate, blockchain has its merits in the way that it can bring separate actors together and remove intermediaries and centralized authorities to improve the remittance ecosystem.