“Bitcoin transactions are inexpensive and it is an ideal currency for remittance purposes.” These are frequently used words while explaining the advantages of bitcoin. Anyone who is part of the bitcoin community would have repeated these words countless times. Live Bitcoin News and other Cryptocurrency news sites have also repeatedly written about these benefits. But, what is the ground reality? Is it really inexpensive?
Technically, whatever we have been talking and writing about bitcoin is sound, but we are not accounting for other factors which may affect these well accepted properties of bitcoin. Luis Buenaventure, the co-founder of Rebit.ph, a well-known bitcoin based remittance platform agrees to it.
In a recent blog post, Luis Buenaventure writes that the rise of digital currency has done nothing significant to reduce remittance costs. According to Luis Buenaventure, most of the bitcoin based remittance platforms transfer fiat currency from one place to another in the form of bitcoin, whereas the customers will by depositing and withdrawing the funds as fiat, and not bitcoin itself. The only difference between regular remittance channels like Western Union, MoneyGram and bitcoin remittance platforms like Rebit.ph is the channel through which funds are transferred.
Conventional remittance platforms like Western Union use SWIFT network, the same network used by banks and other financial institutions. Using SWIFT network requires the platform to adhere to stringent regulations and huge amounts of minimum cash reserves they have to maintain. However, the operating costs for bitcoin based remittance platform is very less and they don’t have to maintain a huge amounts of cash reserves. But these things don’t matter when it comes to the actual cost incurred by the customer who is transferring funds over bitcoin based remittance services.
Luis Buenaventure takes the example of his own start up, Rebit.ph. Rebit.ph is one of the leading remittance platforms in Philippines which is powered by bitcoin. Like any other bitcoin based remittance platforms, most of the transaction costs incurred during remittance is at the last mile – the ones who deal directly with the customers sending and receiving money. Rebit.ph uses pawnbrokers who are scattered everywhere across Philippines as last mile partners. The main reason being their widespread presence and accessibility to customers. The transaction charges charged by pawnbrokers from customers can’t be controlled which allows them to charge how much ever transaction fees they wish to charge.
The transaction fee charged by these pawnbrokers is close to the charges incurred by a customer sending money over conventional services, even though the costs incurred during transfer is negligible. In the end, the customer ends up paying the same transaction fees as he would have otherwise paid to Western Union or MoneyGram.