India is the largest remittance market in the world and in fact, the country depends on a great degree on inward remittances, more so since the global economic crisis of 2008 than ever before. This should not come as a surprise as Indians form the world’s largest diaspora, according to figures released by the United Nations. In the past five years, more than two mln have migrated abroad. In total about 15.6 mln people born in India now live abroad.
According to the Wall Street Journal, Indians working abroad sent a record $72 bln in remittances to India. In the last decade, remittances have typically made up three to four percent of India’s GDP. The table below illustrates the countries that sent the most remittances to India according to Pew Global:
More bang for your buck
Sending money abroad is an expensive business. In countries like India, where people are unfortunately one of its largest exports due to endemic unemployment, poverty and lack of opportunities, and price consciousness of money transfer rates is rather high.
At the moment most such international remittances flow through commercial banks, non-bank Money-Transfer Operators (MTOs), foreign exchange bureaus, post offices etc.
However, using any of these channels is expensive.
In a press release by the Indian Bitcoin company Unocoin a partnership with Bitwage has been announced, a Blockchain powered platform which works on an international payroll. The press release illustrated how the new partnership can provide cost-effective means of international money transfers to Indians living abroad:
“Indians can now receive payments from the United States, Europe and the United Kingdom at better rates than ever. For instance, an employee receiving $1,000 sent to India could receive 70250.00 INR with Bitwage, far more than an estimated 64481.60 INR through Paypal or approximately 65660.00 INR via Citibank India.”
Bitcoin under the bonnet
Unocoin and Bitwage are using Bitcoin as a means to send money in the background. Bitwage will be able to utilize Unocoin API and employers will be able to directly and automatically sell Bitcoin and the beneficiary will be able to receive Indian rupees directly in their bank account in India.
We asked Sunny Ray, CEO of Unocoin about the last mile transfer of money to the beneficiary and he had this to say,
“We simply use NEFT and other traditional bank rails to move funds to customer accounts. For the international remittance, we use Bitcoin. That’s what makes it cheaper and faster compared to traditional rails.”
NEFT or National Electronic Funds Transfer is an electronic fund transfer system used by banks in India.
Effective protocol to build upon
It goes without saying that moving money globally through Bitcoin is one of the most cherished use cases of Bitcoin. Money can be transferred nearly instantly across borders and with lower costs than traditional banking channels.
Sunny Ray explains that there is a trend of companies using Bitcoin in the background as protocol rather than just simply as a currency. He expressed his optimism on the uptake of Bitcoin in India, “We will see more and more applications in this direction mainly because it is a vital use case that needs addressing. Due to the higher Bitcoin prices in India, it gives incentive for the rest of the world to send Bitcoins to India.”
The tragic demonetization of 86 percent of circulating currency in India has led to long queues of people at Banks and ATMs. In these days of economic uncertainty in India, many people have started seeing the potential in Bitcoin and prices of Bitcoin in India have surged majestically.
However, Bitcoin has also attracted some negative media coverage. We asked Sunny Ray if he thought these stories needed a counter-narrative,”What’s to counter? Bitcoin is an open source, no one is arguing that fact. It is digital. It is global. It is distributed. It is fast. It is cheap to send and receive. It goes up in value. What’s not to love? And regarding the negative stories. Do you remember how 20 years ago people used to talk about the negative things about the Internet? Well now, those same people have email and Facebook, etc. Just because something can be used for bad doesn’t make that thing bad. For example, a knife can be used to do bad things, but it can also be used to do many many good things like cut vegetables!”
Bitcoin has real utilitarian potential in a country like India which is so heavily dependent on its workers sending money from foreign countries. If this huge workforce can use Bitcoin-based systems to put more food on the table for their families, it is a win-win situation for everyone. In fact, India may be a good test-case for the success of Bitcoin considering the sheer potential in the remittance field.