The official documented amount of remittances sent to developing nations in 2016 is $429 billion, according to the World Bank. Those who are not familiar with the multi-billion dollar remittance sector may find this surprising. Remittances are, technically speaking, peer-to-peer transfers made by migrant workers to their relatives back home. These international exchanges are essential for a nation’s economic development. Asia is home to the top three recipients of remittances in 2017 in terms of absolute numbers: India (USD 69 billion), China (USD 64 billion), and the Philippines (USD 33 billion). The survival of many underdeveloped nations is largely dependent on these remittances.
Let’s Explore Traditional Remittance!
Globally, the amount received through remittances is rising along with the number of migrants. However, the traditional money exchange system has a number of drawbacks that immigrants must deal with. Only 20–30% of people in the majority of developing nations have bank accounts, and more than half don’t actually have any. In order to receive remittances, the majority of them rely on unbanked services known as money transfer operators (MTO). However, MTOs require the family members of migrants to pay a sizable amount as a transfer charge out of the migrants’ hard-earned funds. Remittances are sent to people with bank accounts as bank checks and demand draughts. But it takes two to three weeks for a check to be accepted.
A remittance’s transaction flow begins with the currency conversion into dollars and transfer to the recipient’s account. The recipient’s local currency is subsequently changed back to the amount in dollars. A loss in currency will result from performing numerous transfers in this manner, as will time wasted waiting for transfer approvals and laborious documentation. A further factor that will lengthen transaction times is the engagement of third-party agents. In order to conduct a global money transaction, various agencies must adhere to a separate set of traditions. Most of these organizations lack a tracking method to determine the transfer’s status. Traditional remittance techniques carry a very high danger of losing the trail. Additionally, the transaction costs are very high here. Due to this, transactions made through middlemen end up being useless and ineffectual. Let’s look at how blockchain can be useful for the remittance sector.
How Blockchain solves problems in Conventional Systems?
In order for the families of migrants to receive the money that their loved ones have sent abroad, an efficient and time-saving international money transfer method is essential. Blockchain will help to conduct the money transfer to the individuals in an orderly manner, avoiding all the inconveniences that are essentially seen in the conventional money transfer method. Blockchain has distributed decentralised digital ledger technology as well as several other unique features. Let’s look at all the benefits that adopting blockchain as a method of international money transfer can ensure.
Also Read Here: Top Most Trusted Blockchain Development Companies Worldwide
Very cheap transfer fee:
Additional transfer fees are paid by both the sender and the recipient in a standard money exchange system. This is disproportionately high. Due to its decentralised nature, the blockchain’s remittance procedure will not incur significant fees for the money transfer. As with the traditional technique, there is no middleman or service that charges you.
Simplified process:
The blockchain takes a direct approach rather than the lengthy procedures used by banks and other money transfer services. Since fewer people are involved in the blockchain, a straightforward and successful strategy is guaranteed.
Speed:
With the blockchain, money transfers happen almost instantly. In other words, the technology enables a successful transfer within minutes rather than taking weeks. The productivity of both individuals and corporations will rise at this rate. Speed can also help with cash flow, giving businesses in various areas more control over their financial outlays.
No middleman:
Under the old system, authorization from third parties was required before a payment could be released. As a decentralised system, the blockchain makes it possible for the entire remittance process to go more quickly because there is no middleman between the transactions. In addition, this is the primary cause of its low transaction fees.
Security measures:
The technology used during a transaction provides unbreakable security. It is challenging for hackers to break into the system since it is a decentralised peer-to-peer digital ledger.
Bottom Line
Blockchain development services have offered numerous practical solutions across numerous industries. With its special characteristics, workers’ remittances can be sent to their friends and family quickly and for a little transfer cost. More and more applications, like remittance, may be made simpler for individuals as technology advances.
