The value of the global remittance market in 2019 was $554 billion and is expected to fall to $470billion in 2021 as a result of the impact from COVID-19. Nevertheless, it is still a huge quantity of money being transferred around the world, and often by some of the lowest paid workers. The World Bank claims: “If the cost of sending remittances could be reduced by 5 percentage points relative to the value sent, remittance recipients in developing countries would receive over $16 billion dollars more each year than they do now.”
It should come of no surprise, therefore, that there are a number of firms targeting the global remittance market, with some being less successful than others. Humaniq, which burst onto the crypto market with its ICO in 2017 (at one stage being valued at $95million, only to crash to its current $2million level) has almost disappeared, despite its almost evangelical supporters in the past. Others have been more successful, such as Electroneum which is in rude health and available to use in over 160 countries. It, too, carried out an ICO in 2017 and in early 2018 was worth almost $950million, now with a market capitalisation of $390million.
More recently, the Celo Blockchain has been designed to allow the transfer of money internationally via a mobile phone at a fraction of the cost of usual global money transfers and offers the Valora app. In February 2021, Celo announced it had raised $20million, positioning itself as a way to expand and enable financial inclusion and even managing to attract Andreessen Horowitz as an investor. Then, in April 2021, Deutche Telecom announced it had joined the 130 other firms which were part of the Celo Alliance, as well as purchasing an unspecified number of Celo’s tokens. Interestingly, when making this latest announcement, Celo also reminded readers that “the resources used to run the Celo network are carbon-neutral”, once again demonstrating the importance organisations place on proving their ESG credentials.
In June 2019, Facebook grabbed the attention of not just the crypto market but central bankers when it announced that it, too, was looking to create its own digital coin (subsequently re-named Diem) to enable people to send money faster and cheaper than by using a bank. Facebook, with its 2.6 billion active monthly clients (more than three times the total population of the G7 economies), has the scale and the balance sheet to sponsor a digital coin. It is of no surprise that Diem has yet to obtain authorisation, and central banks the world over have been frantically researching how they could also have their own CBDC. Meanwhile, Diem has decided to relocate from Switzerland and move back to the US and set up a JV with the US bank Silvergate, which has agreed to start using Diem. If Diem were able to launch and tap into the Facebook users and firms which advertise on its platform, this could have the potential to seriously undermine the use of many other national currencies. So how long might it be before Facebook starts offering Diem as a payment method to its 2.6 billion customers?
The Facebook-backed Diem coin
Source: Finance Magnates
In the past, money transfer services were traditionally carried out by banks but these days there now exist a range of other money transfer firms. Of interest, included here is just a small selection. Competition from companies such as Electroneum or Celo, which charge as little as $0.01 per transaction, means that businesses need to use technology and automate as much as possible to stay competitive - hence the attraction of Blockchain technology and the use of digital currencies with their smart contracts. The elimination of much of the paper-based documentation and manual checking is replaced by almost real-time record keeping on an immutable ledger, available for all those who are authorised to check, if so required.
(*disclosure: J Fry, CEO of TeamBlockchain Ltd, holds Celo tokens)