How Bitcoin is Disrupting Southeast Asia’s Remittance Industry
For the region’s migrant workers, an alternative to traditional channels
PHOTO CREDIT: Getty Images
In 2012, Southeast Asia received almost $48 billion in remittances from migrant workers scattered throughout the globe, according to a 2013 report by the International Fund for Agricultural Development and the World Bank. The Philippines is the third-largest recipient in the world after India and China. In the region, it is the largest recipient, followed by Vietnam, Indonesia, and Thailand.
Remittance in Southeast Asia is a huge market, and many believe it's ripe for innovation.
Enter Bitcoin and its technological backbone, blockchain. In Ho Chi Minh City, Bitcoin Vietnam, the first full-service Bitcoin company in the country, operates cash2vn, a dedicated Bitcoin remittance platform. In the Philippines, there’s coins.ph, a mobile wallet that runs on Blockchain technology, and Rebit, a remittance platform run by Satoshi Citadel Industries (SCI). Bitcoin Indonesia, a Bitcoin exchange, is likewise planning to grow their services to cover the remittance sector in order to serve Indonesian domestic workers.
Perfect for remitting small amounts
For migrant workers sending smaller amounts, Bitcoin may be the way to go.
Says Bitcoin Vietnam co-founder Dominik Weil: “There are channels which provide very, very efficient underground remittance networks – especially places with large Vietnamese overseas communities like the U.S., Australia, or Germany. Other channels like Hong Kong have, in general, a very competitive landscape of traditional remittance providers. And then there are the ‘underserved’ channels where your only option is to pay ridiculous amounts of fees to some of the very large and well-known traditional remittance companies – for instance, from Israel to Vietnam.”
He adds: “Where Bitcoin certainly has an impact is on smaller remittances, that is, in the migrant worker space, where the remittance amounts are usually just a couple of hundreds of dollars per transaction… Generally speaking, the larger the amount you want to remit, the less attractive becomes Bitcoin for that purpose. For 5digit USD amounts and more, usually the bank fees are very competitive.”
Cheaper and faster, and recipients can withdraw through their usual channels
“Once you have a block chain client, such as a wallet, you can actually transfer funds to anyone directly over the blockchain without having to pay an intermediary,” says coins.ph founder Ron Hose. “And it happens within seconds.”
Coins.ph partners with banks and other financial institutions to make the remittance possible. Says Hose, once the transfer is made over the Bitcoin network, recipients can receive their funds through traditional channels, such as major remittance centers, door-to-door delivery, and smart money, among others. “So, on the receiving side, it's the same. The one we're replacing is the company that's abroad, for instance, Western Union,” he says.
They’ve also partnered with Security Bank to allow clients to withdraw the amount from any Security Bank ATM using just a pin code sent via SMS. No need for an ATM card or a bank account. “In the Philippines, people actually have more Facebook accounts than bank accounts. It shows you that banks are really having a hard time reaching customers. We want to bridge that gap,” Hose says.
It’s the same for Bitcoin Vietnam. “We have by now integrated with several companies from around the globe to put their remittance streams on the Bitcoin Blockchain, but the open nature of the system also allows individual users to send remittances to Vietnam via Bitcoin in a direct fashion,” says Weil. “The recipient of the remittances will receive the money either in his bank account or can pick it up in cash at over 7,000 locations in the country – and the money arrives with the recipient usually after a few hours at maximum.”
The company has also seen excellent results in the B2B case and in paying offshore workers. Says Weil, “While an international bank wire inside Southeast Asia clears surprisingly fast, often within just a few hours, bank wires from the U.S. or Europe might take several days until they are routed through all the intermediary banks towards the recipient bank in Vietnam. Bitcoin allows you to get your money into the recipient’s bank about within the hour.”
Bitcoin needs to better educate the market
Still, a lack of knowledge about the technology remains the biggest roadblock to wider consumer adoption.
Says John Bailon, co-founder and CEO at SCI, “Bitcoin, as it is, is complicated enough for a regular person to understand. Making migrant workers rely on it for sending their hard-earned money, their very purpose for leaving their loved ones behind, is a huge change in consumer behavior, one that is up against the alternative: a fellow Filipino teller in a remittance shop, with hundreds of other fellow migrant workers lined up to hand their cold cash to be sent away to the Philippines.”
The same can be said for businesses, says Bailon. “There are only a hand full of bitcoin companies who are capable of running these new corridors through Bitcoin's rails. I think, in time, this will improve and we will eventually see more and more payments, and money transfers go through cryptocurrency.”
Eddie Chng, vice president for Business Development and Partnerships at Singapore-
based bitcoin trading platform Quoine, is optimistic: “As time goes on, people will gradually become accustomed to faster, better methods that blockchain technology facilitate. Getting into a stranger's car instead of a taxi might seem a bit alien at first, but how many of us hesitate to use an Uber now?”