and What Works Now!
Remember when Bitcoin was going to answer all our prayers even for money transfers overseas?
It just hasn’t worked – just yet..
The reality was that dealing currently with Bitcoin for money transfer is relatively messy, costly and slow because of the need to use an exchange and wallet. You also still needed your fiat currency (like USD, GBP, EUR, CAD, AUD) at the start and end of each transaction.
Costs, speed and frustration aside – the biggest problem I found personally is the fluctuations in the Bitcoin price. In just days of holding Bitcoin you could loose or make 2, 5, 10% or more. That is not risk I or many others want to take.
But a solution is brewing!
Meanwhile Fintech companies like OFX, TorFX and WorldFirst and Remit Companies have been getting a growing piece of the market and more recently P2P providers like TransferWise and CurrencyFair have lowered costs.
For a while I thought P2P would offer the solution because they hold the potential to swap money with others on the other side of globe instantaneously and very inexpensively. In practice though when I did some research and some real world transactions with my own hard earned dollars, I found that they were focused on doing everything online and were geared towards smaller transactions where most their market was. For smaller amounts (less then $7000 USD) I think P2P services offer the best solution – cheap, relatively fast and with great online platforms.
You might also want to consider PayPal for amount of just a few hundred dollars or less.
But this can be a limitation for larger amounts. ($7000 USD/£4000 GBP/€4500 EU/$9500 CAD/AUD)
I found costs rose as amounts increased as they had to step in and complete transactions if they can not find someone on the other side to swap with. It can also be surprisingly helpful to speak with a knowledgeable human when you are setting up your account and need to understand how certain banks work on the other side of the globe. Even just getting your money out of your sending bank often needs guidance as there are usually a multitude of ways to do so as regulations and costs for each bank differ.
For a small percentage of customers, they also have a slightly alarming practice of asking for more ID and potentially locking your account after you sent them your money to their account – if you exceeded certain thresholds in order to for them to meet regulations.
At the end of the day for larger amounts, it turns out that companies like OFX, TorFX and WorldFirst – the companies that originally carved 70-80% off the costs of using a bank and provide a customer focused service – are the still the best way to go if you want to move larger amounts. I also think there can be huge advantage to choosing a service with offices in your country for service and security reasons.
A mixed future
Incredibly there is already a blockchain solution that seems to have few of the drawbacks Bitcoin has. Without going into detail on the technicalities, it has some major differences to Bitcoin and most other cryptocurrencies. Its name is XRP (wikipedia). It is a custom solution to the challenges of money transfers. A stepping stone between fiat currency and the benefits of a distributed ledger – it supports (rather than threatens) banks, money transfer companies including P2P services and makes it easier, faster and cheaper for all of them to do business.
What this means for you
XRP and the Ripple infrastructure is designed to work with the existing dominant players and make them work better. Assuming they become dominant (or something else) this means all services are likely just going to get better across the board. Transfer companies, Remittance, FOREX brokers and even Banks will all continue to evolve. There may be new money transfer companies but I think existing companies and banks will just become even better as they focus on the cost, speed and the services we want.
Good news for everyone!
Stay tuned to Transumo for what is best for you as things change.
Note: This post was written to try to help others understand the future of money transfers. At the time of writing the author does not have a financial interest in XRP but by the time you read this that has likely to have changed. Caveat Emptor.