Mexico’s central bank has released information that shows the country’s migrant workers sent a record $36 billion to their family and friends in 2019, roughly a $2.5 billion increase from the year before. Global remittance figures are only expected to increase heading into the 2020s and Bitcoin could help boost this growing industry.
As Visa fees change, the development of blockchain technology and cryptocurrencies comes at the right time, especially considering how time-consuming and expensive international payments are.
The Multi-Billion Mexican Remittance Industry
Mexico’s remittance payments have hit a record high, totaling $36 billion, up 7% from the previous year’s $33.67 billion. [Mexican Central Bank] It was also revealed that this figure was higher than the country’s revenue from foreign tourism and annual petroleum exports, which amounted to $25 billion and $22.4 billion respectively.
The report makes two more interesting points: the average value of transactions sent home is $300, and electronic transfers are the predominant means of sending money.
For migrants workers and their families who use the money to pay for basic survival, it is especially important that remittance systems be improved. With preferences now leaning towards electronic means of transfer, and remittances growing ever bigger, there is no better time for blockchain-based systems to be used for all sorts of payments.
The Potential for Bitcoin and Cryptocurrencies Showing
This is especially important to mention the potential for Bitcoin and other cryptocurrencies, given that Visa recently revealed that it plans to overhaul its fees structure. [Bloomberg] In some cases, such as real estate, Visa plans to lower the cost of fees, but in others such as e-commerce spending, increased fees are coming.
The comparatively high fees and processing time of traditional payments networks, whether remittances or otherwise, has put the spotlight on cryptocurrencies as a superior alternative in every way possible.
Multiple Cross-Border Pilots Tested
Several banks and financial institutions have conducted Distributed Ledger Technology (DLT) pilots for the purposes of cross border transfers and remittances.
Ripple is by far the most involved player in this particular niche, though there are several other projects that are offering their own unique solutions. Most notably of these solutions is Bitcoin used for cross-border transfers as well as Stellar Lumens (XLM), a network with similar goals as Ripple.
Ripple’s bid to become ‘SWIFT 2.0,’ as CEO Brad Garlinghouse has put it, has seen the company successfully conduct pilots in Thailand, Japan, India, Saudi Arabia, Latin America, and North America. Transactions are typically executed within seconds at a fraction of the cost.
IBM has also created the World Wire, an international payments network that is gaining traction.