When considering a new car you suddenly start seeing the car you fancy everywhere. There are not suddenly more cars of the particular brand and model driving around, but you are much more receptive to notice the car. You are just suffering from a clear case of “selective perception”.
It is as if your personal filtering process has a new setting to pick up relevant information from the avalanche of “noise” all around you. This process is sometimes referred to as the “cocktail party effect” (wikipedia).
Lately I see information on “Remittances” everywhere. Is this selective perception on my side – due some professional challenges – or is something more profound and substantial happening out there?
Last week I reported on what I perceive as right out thievery when paying by debit card abroad (see Malignant Differential Pricing at POS for foreigners ). I incurred a totally useless markup cost of 5,5%.
Then I read, and tweeted about:
And I was complaining about 5,5%….12,3% is huge friction cost to transfer payments for society. Disruption needed. http://t.co/hXUvdjWKWM
— Jan Willem Mars (@redplanetdust) March 10, 2015
The remittance market is a multi-billion-dollar industry and Africa is a major – and growing – destination, with inbound payments quadrupling between 1990 and 2010. Often, the recipients are underbanked or lack a simple way to transfer funds electronically, meaning that overseas payments typically come with hefty fees. All this means that some of the poorest workers in the world are forced to forfeit a substantial cut of their wages just to hand them over to their families.[emphasis RPD]
One way or an other i never let it really into my brains what the cost of remittances are. or was I fallen victim to cognitive dissonance and tried to rationalise the inconvenient truth?
It is obvious: disruption is needed in remittances
Yes, things are changing:
Vodafone mobile money service M-Pesa will now allow customers in Kenya and Tanzania to send money to one another at the same cost as local transfers. Transferring money internationally through banks or money transfer operators can cost up to 31 per cent of the transaction [emphasis RPD], while using M-Pesa to transfer $50 over the Tanzania-Kenya would cost around 1 per cent of the transaction, plus a foreign exchange fee.
This caught my eyes: “Abra taps the blockchain for P2P remittances” a mesh up of P2P mobile app, bitcoin and hawala. A surprising combination.
A US startup is hoping to shake up the multi-billion dollar remittance market with a mobile app that bypasses the middle men by using the bitcoin blockchain and a network of ‘human ATMs’.
The brainchild of Bill Barhydt and backed by RRE Ventures, Abra (A Better Remittance App) is an iPhone and Android software cash wallet and money transfer application that promises to help users bypass the expensive fees involved in the $550 billion remittances by cutting out the middle man.
The app relies on a network of ‘tellers’ who facilitate transactions. When a user wants to deposit some money into their account, they can either use their debit card or pull up a map within the app that shows nearby tellers, their ratings from users and their fees. The user then picks a teller and arranges to meet them in person and hand over cash in exchange for “digital cash”.
The digital cash is sent to the user’s phone using the blockchain to settle. However, the funds are guaranteed in US dollars and the value of the holdings in the wallet do not fluctuate with the value of bitcoin for at least three days after the initial deposit. The user sees everything in dollars, with bitcoin kept in the background.
Once the user has funds in their account they can send money to someone oversees. The recipient gets a message telling them they have been sent funds and pulls up a list of nearby tellers before meeting one and withdrawing the money.
The system is based on the Hawala model… Traditional Hawala’s are generally illegal in the US as no one is allowed to hold or remit funds on behalf of someone else without being a licensed money transmitter. But Abra users and tellers are always holding their own money just as with the standard open source bitcoin software.