A new report is indicating how virtual currencies and distributed ledgers, like bitcoin, are gaining strength in emerging economies by cutting out huge fees charged by local banks and financial institutions.
According to the report, the cost for receiving $200 remittance transfers in emerging economies averages about 10 percent, and it can be much higher for certain emerging economies.
This is mainly due to the severe emerging economies’ over-regulation and low competition keeping bank fees high.
Most countries have access to some type of money transfer organization (MTO), like Western Union which have a vested interest in shadow pricing banks to maximize their percentage fees.
Enter Bitcoin, which offers transaction costs that are almost free.
A huge number of local entrepreneurs to leveraging Internet connection in even remote locations to provide extremely secure, efficient and low-cost remittance transfers.
BitPesa, for example, enables relatives send money by opening a Bitcoin wallet account, exchanging British pounds for bitcoins, and initiating a transfer. BitPesa then sends a message through their gateway to deposit Kenyan shillings into a recipient’s bank or Mobile Money account.