blockchain and bitcoin in global remittance: disruptor or facilitator
Post on 19-Jan-2017
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Blockchain and Bitcoin in Global Remittance: Disruptor or
Facilitator?
Executive Summary • Global remittance is becoming cheaper and faster, although the rate is still high • There is no major price difference between startup and incumbent MTOs in general• Blockchain can drive down cost further by lowering bank fees through public ledger,
and fraud prevention fees through its anti-fraud feature• Blockchain will facilitate the incumbents rather than become a disrupter• Bitcoin is less likely to provide cost savings due to double exchange issue and higher
spread contributed to higher currency volatility
Why Important?$650 billion / year
$450 billion to developing countries
Average $200 - $300 / transaction
30% - 50% of household income
8% transaction fees
G-20 5*5 objective: reduce cost to 3% by 2020 ($20 billion)
Current System $650 billion
MTOs Banks
53%24%
Bank accountTransaction
Cash Account or Cash
Industrial Trend
2. Lower Fees and Duration1. Offline-Online shift 3. Increasing Regulation
• Anti-money laundry, anti-terrorist activity, customer protection
• 2001: US Patriot Act• 2008: “violent acts or
acts danger to human life”
1-2% annually
Transaction Fees % and Duration
1001341682022362703043383724064404745085425766106446787127467808148488829169509840.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Average Transaction Fees % ($100-1,000)
MTOs Banks
MTOs Banks0
50
100
150
200
250
Duration Range (hrs)
Fee Structure Comparison
Banks MTOs• fixed amount• Outgoing fees + incoming fees + FX spread
• Increase with the amount, varies with destination• Transaction fee + FX spread
Duration Comparison
Banks MTOs• Messaging system: SWIFT• Settlement system: ACH, correspondent banks
• Local Money Agents
+
Why Banks Charge High Rate?Global Remittances is too small 1 2 Compliance cost is too high
• 2001: US Patriot Act
• 2008: “violent acts or acts danger to human life”
Why Bank Account Transfer is Slow?
MTOs LandscapeBig 3
Upcoming
Startup
500,000 agents, 200+ countries 350,000 agents, 200+ countries 290,000 agents, 150+ countries
Incumbent vs UpcomingIncumbent
• Online + offline• Cash + bank account• Direct relationship with banks• Possess license worldwide• Transaction fee + FX spread
Upcoming• Online only• Account only• Third party payment network provider • Acquire license in multiple regions • Transaction fee + FX spread
Who’s cheaper?No Difference!!
MTO cost structure comparison
Agent com-missions
50%
Bank fees25%
SG&A25%
Cost Structure of Western Union
Cost of Revenue
34%
SG&A66%
Cost Structure of XOOM
Within SG&A, High cost related to compliance, license, Fraud Prevention
Blockchain can save cost in…Blockchain Can Save….
Commission
bank fees public ledger
lisence
fraud anti-fraud
cyber security
compliance
Self vs third party payment network
PAYMENT NETWORKWestern Union direct
MoneyGram direct
Ria direct
Transfast direct
XOOM Earthport
Transferwise Currency Cloud
Worldremit Earthport
Azimo Earthport
Viamericas Earthport based on Blockchain technology
Blockchain
EarthPort
XOOM WorldRemit Azimo
Apps
Infrastructure
Technology
Bitcoin is unlikely to save cost and time…
1. Double exchange issueBefore:
After:
$¥
$¥
2. High spread due to higher volatility
Conclusion• Global remittance is becoming cheaper and faster, although the rate remains high• There is no major price difference between startup and incumbent MTOs in genral• Blockchain can drive down cost further by lowering bank fees through public ledger,
and fraud prevention fees through its anti-fraud feature• Blockchain will facilitate the incumbents rather than become a disrupter• Bitcoin is less likely to provide cost savings due to double exchange issue and higher
spread contributed to higher currency volatility
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