Remitting money is colloquially defined as the act of sending money to someone, typically to the home nation of the remitter who works in another nation. Sending money across borders, across oceans, and entire continents is an enormous industry, totaling almost $600 billion in 2014 according to the Word Bank. Due to Bitcoin’s touted simplicity when compared to traditional banking methods like a Western Union transfer, the remittance business is a likely candidate for Bitcoin startups, and more mature firms backed by venture capitalists who expect returns for their early investments.
The theme for Bitcoin boils down to a simple example: Person 1 has Bitcoin. Person 2 has a wallet with an address to receive Bitcoin. Person 1 sends Bitcoin with essentially no fee to person 2, who is free to spend it. That’s a stark contrast to the current method of remittance which can involve fees around 10% of the transaction, and require identification, paperwork, and specific instructions on where the recipient can pick up their money. The case for Bitcoin as a tool for remittance is compelling; simple, and low cost. Firms like rebit, artabit, and bitpesa are all looking to exploit those benefits in their respective nations or regions.
Part of the struggle involved in conducting business with Bitcoin has been the ongoing regulatory battle to define Bitcoin, as noted by a co-founder of rebit in an article about remittance. Because Bitcoin operators must register as money transmitting businesses, they must also abide by the regulations imposed on money transmitters. These requirements vary by nation, and can be especially stringent for money crossing borders. Entrepreneurs who seek to benefit from the low cost of Bitcoin transactions may find that the cost of abiding by financial regulations severely limits their profit margin, and their attractiveness to future investors.
First mover advantage is a significant draw for investors. Being first to market with a product built on Bitcoin that offers users dramatically lower costs and does business in a multi-billion dollar industry is a slam-dunk for profit-hungry venture capitalists and the entrepreneurs they work with. Widespread belief in the potential of Bitcoin and improved financial transaction capabilities have prompted huge backing for Bitcoin startups. As financial regulation becomes clearer, however, that backing may dry up. Many startups gambled that Bitcoin would remain unregulated, or loosely regulated. The speed with which governments have responded to Bitcoin has been the death of firms that sought first mover advantage without waiting to see if their business model would be viable in a regulated Bitcoin market.
Remittance is an enormous industry, and will grow in the future. The use case for Bitcoin in remittance transactions is clear, as are the benefits to users. People who depend on every penny can suddenly cut costs by 50% or more, a huge upside. The increasing reach of mobile phones and internet connectivity means even the poorest areas have internet access, or soon will. Winners in Bitcoin-driven remittance will seize the opportunity to undercut traditional money transmitters, but the battle is far from over.
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