The international money transfer market is not merely big, it’s enormous. The foreign currency exchange trade volume reaches $4.8 trillion on an average day and last year global remittances to low and middle-income countries reached the record $529 billion. This number will, no doubt, keep growing as the globalization makes it easier for people to find employment worldwide.
The growing volume of these transactions requires changes to the money transfer industry itself. Not so long ago, remittances were prohibitively expensive, which stopped many of the developing economies from getting real benefits these transfers can offer.
The situation is slowly changing with money transfer companies offering cheap or even no-fees transactions, thus making remittances affordable. However, these services aren’t so widespread as to be available in every part of the world that needs cheap money transfers.
Blockchain technology and cryptocurrency might be solutions for this. In theory, they provide an opportunity to make international money transfers extremely cheap. However, there are many factors that prevent these fintech solutions from becoming the industry standard. The question here is whether this situation will change or if the hype around it dies down and the whole thing will be forgotten.
International Money Transfer Market Layout Today: Where Is Crypto Exactly?
For all the changes caused by the rise of affordable money transfer platforms, the industry is still dominated by banks and few money transfer companies that have an extremely extensive network. Western Union and MoneyGram are top providers among those.
Among money transfer companies, Currencies Direct, WorldFirst, and Global Reach are the foreign currency transfer leaders in 2019. And they will definitely stay at the top of the lists come 2020 and 2021. However, what happens in five or ten years is much harder to predict.
Those predictions are so hard because the role of cryptocurrency remains an unknown. Its presence and acceptance are growing worldwide, but experts are doubtful that it will actually reach the point where it replaces fiat currency.
Yet, the benefits of blockchain technology and cryptocurrencies cannot be denied, especially for the money transfer market as they make such transactions, basically, free. Should cryptocurrency become universally accepted, money transfer companies risk going out of business altogether. And the places of current leaders places will be taken over by Veem and FlashFX, which had the foresight to start using crypto early.
MoneyGram is also taking steps to ensure it survives the rise of crypto by integrating ripple. The xRapid is still in the experimental stage for this company, but it shows great promise. Most importantly, it shows the company’s acceptance of the inevitable change.
Banks are catching on and starting to use blockchain and crypto. They aren’t as fast to accept cryptocurrencies, in particular, because of the risks associated with them. However, we can see that various financial institutions are looking for ways to adapt to these fintech developments.
Even governments of the world are trying to experiment with creating local digital currencies. These might be the replacement for modern cryptocurrencies, which will actually stick due to lower volatility.
One thing is sure, cryptocurrency won’t replace fiat money overnight, if ever. Therefore, the companies and financial institutions that are leading the industry now might adjust and find ways to adopt crypto and blockchain technology in some form. After all, being innovative is what got them to be leaders in the first place.
Why Isn’t Crypto Widespread Yet?
The benefits of cryptocurrency and blockchain technology are many, and their growing popularity makes one wonder why exactly these solutions seem to have such a hard time integrating? It’s true that massive changes are extremely difficult to achieve in the world of finance, but the solutions that offer huge advantages get adopted fast. And making international money transfers fee-free is a tremendous advantage.
In fact, this kind of advantage should be motivation enough for cryptocurrencies to receive government backing as they can make big changes for many economies, where remittances add a significant amount to the GDP.
However, the situation seems the opposite. Instead of growing big and fast, cryptocurrencies seem to be ion the decline. The main reasons for this include:
- Extreme volatility: As long as this volatility remains, businesses will not be able to work efficiently with crypto because the risks are too high.
- Lack of awareness: The number of resources dedicated to cryptocurrency is increasing, but they make very little change. The majority of people who make international transactions simply don’t know that such a solution is available and how to use it. For this to change, there should be specialized educational programs instituted on the state level. This is the only way to spread the awareness of cryptocurrency operation as wide as possible. Otherwise, it will remain a niche service.
- Lack of regulation: While some people, especially those who use cryptocurrency for speculation, see the lack of regulation as a major benefit, it’s actually one of the main factors that prevent it from becoming a universally-accepted currency. Without a proper regulatory system in place, crypto cannot be used as a payment method by the majority of businesses as it doesn’t comply with any tax or statutory requirements. Local digital currencies might be able to solve this problem.
All in all, crypto and blockchain technology definitely has a future on the global finance market. However, what kind of a future this will remain to be seen. The way they are now, they are too imperfect to become major players. However, as the fintech industry continues to evolve, there might appear solutions that will become universally-accepted worldwide. They might be born from the current attempts by the industry leaders to adopt these technologies.