In an article posted on Ripple’s website on Jan 16, the company suggests that the Asia-Pacific (APAC) region offers huge potential for remittance companies and Ripple in particular. According to the World Bank’s statistics, there was a 12% increase in the APAC remittance market, in 2018 and annual remittance transactions were worth around $2 billion. Blockchain technology could replace outdated financial infrastructure in the region to offer a seamless, transparent and reliable solution.
Growing Demand for Remittance Payments
The demand in the region is strong and continues to rise. In 2018, remittance in Thailand and the Philippines rose to $529 billion. It is estimated that 2019 saw a further increase of $21 billion, hitting $550 billion.
The Philippines is the third-largest country in the world when in tomes to receiving remittance payments. Around 10 million Filipinos are estimated to be working abroad providing a huge inflow of money flow back to their families and relatives. Such inflows provide support for the country’s consumer spending and promote local investment.
Australia’s, on the other hand, is a major remittance sender in the region with outflows of $7.2 billion totaled 0.5% of the country’s GDP in 2018.
The demand for remittance payments in these APAC countries is only expected to grow over the next five years. A MarketWatch report estimated that the APAC digital transfer and remittance market will experience an annual growth rate of 24.2% from 2018 until 2025.
Current Problems People Face
The major issue with the current system in place is how expensive these transactions cost. According to statistics, in 2019 the average cost of sending $200 was 6.84%, with banks charging the highest fee of 10.34%.
Furthermore, there is a high price difference by payment corridor. While some corridors are more cost-effective, for example, payments within the EU, other regions still suffer from very high costs. Some of the highest-cost remittance Thailand to Indonesia; Thailand to Vietnam; Thailand to Lao PDR and Thailand to China. In all of those corridors, remittance fees exceeded 10% in 2018.
At the moment companies are required to hold pre-funded accounts in destination currencies and go through a number of intermediaries before the payment reaches its destination, resulting in high costs and longer times.
The solution can be in blockchain technology. Old infrastructure can be replaced with a seamless experience for global payments companies and their customers, complete with the speed, transparency, reliability and most importantly low fees for all parties involved.
Image source: Wikimedia