Over $2.3 Billion Was Paid In Money Transfer Fees In India Last Year – Would Use Of Bitcoin Bring Down Costs?
Though much of the attention in money transfers is usually on speed and ease of use, the fees can add up. In money transfers involved in India, whether with citizens or non-citizens, the total cost added up to over $2.3 billion in fees to clear payments. India holds the biggest inward remittance market in the world, so there needs to be a solution to make it less costly for consumers. CEO of WazirX, a local Bitcoin exchange, believes that cryptocurrency could make the fees almost nothing.
Much of the attention is on the percentage of the transaction that is used to calculate the fee. Around the world, the average costs are 7% of the amount being sent, though there are countries that aim above and blow this.
The process of transferring funds through banks and financial institutions is difficult, even with a bank account. The recipient and sender often must both have a bank account. If the receiver does not, then they become subject to local remittance outlets and local networks to make the payment possible. In the Philippines, millions of workers must send their funds back home as they work outside the country, and high fees from microfinancing companies like Palawan and Lhuillier can lessen the amount that they can afford to send home.
When transfers have to be sent outside of the country, the person that has to pay the fees is usually the recipient, which is necessary for their livelihood. The poorer countries are usually the biggest victim of these fees, according to a report from the Times of India. The publication continued,
“In India’s case, most remittances come from the Middle East, where millions of migrants work as labor. But transaction fees eat into their earnings. The main transfer methods are through banks, money transfer operators or post offices. But with any method, a sizeable chunk of the money transferred is deducted by the transferring body.”
Sending funds domestically is exponentially cheaper, and there’s fixed fees for smaller transactions that would easily challenge the fees associated with Bitcoin. However, Bitcoin and other cryptocurrencies could help offset the costs of large or international transactions, considering the miniscule fees. Bitcoin network fees are not backed on a percentage. In fact, in a $600 million transaction by Binance in November last year, the cost was just $7. The same fee would apply for a 7% fee against a $100 transaction for fiat currency.
Realistically, the only way to bring in Bitcoin is through remittance providers, though there are local companies that already use cryptocurrency established. If Bitcoin is used as the token to move funds, the savings that these individuals will experience will impact the world’s remittance fees as a whole.