30 Jan 2025
Understanding Blockchain technology for you as an expatriate is important on two counts: one because it impacts how you send money online from abroad back home for your family’s financial support or two, how the global remittance industry is changing course due to Blockchain technology.
Of the several technological advancements and inventions, the gradual digitization of the movement of funds from one place to another has almost completely changed the course of this activity.
If you take a look at the remittance transfer’s recent history and draw a simple comparison between then and now, you will witness a sea change in the process. Albeit, different methods, old and new, are still in vogue for cross-border payments, the most recent addition to it is Blockchain technology.
This blog will shed light on Blockchain technology and try to encompass the role it plays in the global remittance industry.
Blockchain is a network of decentralised and distributed data, also known as a ledger. Simply put, it means that users share the ownership and management of the network through computer nodes.
Blockchain stores data in digital format in blocks, linking them with each other to form chains. These blocks have a certain capacity according to which data is filled in them and, when filled, are closed and linked to the previously filled block. Any newly-added information forms a new block and is added to the chain of blocks after being filled according to the given capacity.
Following are a few developments that recently shaped up in blockchain worldwide. But remember that these developments are only focused on the link between remittances and blockchain.
Yes, indeed.
This is one of your biggest concerns as an expatriate in your money transfer. Many families lose a substantial amount in the process as a fee. A report by the World Bank has said that the average transfer fee for remittances is 6.8%, which is a serious cut.
Sub-Saharan Africa is one of the most expensive regions to send money to, as the average fee is 8.9%.
However, the use of blockchain has decreased the fee substantially. Its details are discussed below.
Currently, remittances are transferred through several intermediaries charging fees for service offerings. The global average of sending $200 between countries is about 6.94%, which means that around $48 billion in remittances is reduced straight in fee and service charges.
The time a transfer takes stretches between hours and days to complete.
Blockchain has reduced costs and time and has streamlined the process.
Its impacts on remittances are as follows:.
Blockchain has immutability, which means its data cannot be tempered after it is recorded within the network. The current CRUD (Create, Read, Update, Delete) model allows changes in the data once it is recorded, but it is not possible in blockchain.
The public can trust the network since any user and member of the network can verify the recorded data, given that the system is decentralised.
This is not possible in other databases that are centralised as only a part of it can be made public, which the public still cannot verify.
Blockchain aims to reduce the cost of sending remittances from the current global average of 6.9% per $200 to a projected less than 3% by 2030.
It also aims to disintermediate banks and other financial institutions that are currently integral for cross-border payments.
Blockchain creates an audit trail that is easy for you to provide to the customers if there is a need. Besides, traceability data can also expose holes in a supply chain in case some goods might sit on a loading dock waiting to be transited.
Since Blockchain stores data digitally, it eliminates the need for documentation that is time-consuming and prone to human error. It also eliminates the need to reconcile multiple ledgers and thus makes the process more efficient and swift.
Your transactions are automated with Smart Contracts, which makes the process even more efficient. Smart contracts are programs stored on the blockchain that run when a few predetermined conditions are met.
Once these conditions are met, the next step of the process is automatically initiated. It increases the speed and efficiency of the process as a whole.
Remittance transfers with blockchain provide the above-mentioned benefits, but all of the benefits are not entirely available worldwide. Some of the features are still being worked on. Therefore, the better option is to find a service that practically offers features now that Blockchain promises in the future.
Blockchain promises to offer many features shortly in a global money transfer, like reduced fees, etc., that can be had now in your remittance transfers with ACE Money Transfer.
You will also get live currency exchange rates, 24/7 service access, speed, safety, and much more from just one window here.
(Blockchain in Finance & Fintech: The Future of Financial Services | ConsenSys)
(Blockdata | Blockchain in Remittance & Money Transfer Services)
(Blockdata | Blockchain in Remittance & Money Transfer Services)