Remittances Are Ripe For Change

Blockchain-based Payments Are Faster, Cheaper, and Safer Than Traditional Money Transfer Services

Article by Craig Schuster | Edited by Hiro Kennelly and Trewkat | Cover Art by Tonytad

On Christmas Day, 2022, I stepped off the tram in Hong Kong’s Central District. My hands shivered in the cold morning air as I set my coffee down next to the 100-year-old bronze lion statues that adorn the entrance of the HSBC building, its walls holding more money and power than some nation states. But this story isn’t about a building; it’s about the migrant workers who stay beneath it.

Filipino migrant workers celebrate Christmas just like any other Christian community. The difference is that most people are celebrating somewhere warm, surrounded by family, presents, and home-cooked foods, whereas migrant workers are separated from their families to earn a living. In Hong Kong, they celebrate by gathering outside, using whatever they can to protect themselves from the elements. The HSBC building is a top choice, since it provides cover from rain as well as free Wi-Fi.

That day, the sounds of Christmas carols, sung through battery-operated karaoke speakers, filled the air. I stopped to visit with different groups. It had been three years since COVID-19 lockdowns decimated Hong Kong’s economy. These helpers hadn’t left the city in at least that long.

I couldn’t help but notice the irony. Due to debt, a lack of social credit, or poverty, most migrant workers are completely ignored by financial institutions like HSBC. Yet these workers, 400,000 strong and mainly women, are the backbone of Hong Kong’s economy. If they vanished tomorrow, the city would come to a screeching halt.

Sunday is typically the only day off work for these migrant workers. Every Sunday, the parks, pedestrian walkways, and streets of Hong Kong explode. By early morning, they are full of people, mostly workers from the Philippines and Indonesia, all seeking peace in the hectic city. Deemed essential by the economy but overlooked and mistreated in practice, they often spend their only day off work standing in line at remittance centers, waiting to send a portion of their hard-earned wages back home.

Traditional Remittances, Modern Solutions

Oftentimes, migrant workers must use archaic remittance providers like Western Union, which charge the highest transaction fees, and force both parties to visit a brick and mortar location during ‘business hours’ to complete the transaction. Traditional remittance services are slow, expensive, and unreliable. However, sending money back home is the entire reason they’re here — to provide a financial lifeline to their families — and historically there have been very few alternatives to the likes of Western Union and MoneyGram.

I let curiosity lead the way. While it can be difficult interacting with people from a different culture, I genuinely wanted to hear their stories. And, despite my anxiety, these migrant workers were the most genuinely welcoming folks I’ve ever met. They never missed a chance to act with kindness and generosity, which left me feeling grateful.

I met with Ana, a proud Filipina who told me she had left her daughter behind for her current position as an in-home nanny. She volunteered to help make a video showing Filipinas how to remit without banking services. In the video that we made, we took a Hong Kong 100 dollar bill (~13 USD) to a 7-Eleven to onramp it, and, within 10 minutes, turned it into food in the mouth of Ana’s daughter, who was thousands of miles away in the Philippines. All without using a bank.

The app we used doesn’t require an offramp to fiat. Instead, funds can be used to pay directly at more than 300,000 stores in the Philippines and can be sent peer-to-peer. While this app is not a web3-native solution, it does support crypto remittances and it helped us achieve the overall goal: to enable international workers to send digital remittances to their loved ones who can then spend directly from the app.

Digital remittance solutions such as this, dubbed ‘remtechs’ by this International Monetary Fund (IMF) report, are fast growing and, although not managing to disrupt existing players to the extent predicted, have contributed to innovation in the industry as well as slightly lowering average fees. The IMF report, titled ‘Curb Your Enthusiasm’, asserts that the impact both of remtechs and blockchain on remittances has been overhyped, yet curiously for a report published in 2022, it only discusses the limitations of Bitcoin in the examination of whether blockchain is a viable alternative. Maybe the IMF authors missed this World Bank blog post from 2021 which expounds the benefits of Bitcoin’s Lightning payments network for El Salvador, not to mention the development activity occurring in the Ethereum ecosystem and other Layer 1 blockchains such as Celo.

Blockchain Is an Ideal Remittance Solution

What started on that cold Christmas morning began to snowball. I continued to engage with groups of migrant workers, asking them questions and listening to their stories. I realized that many complex barriers exist for unbanked overseas workers, but that blockchain-based remittance services could provide access for people who cannot use traditional banking services, including those living in remote or underbanked areas. All people need is access to a smartphone to use an app-based web3 wallet to send money to any other compatible wallet address in seconds, and this can be done with almost no fees.

Ana is not alone. There are approximately 170 million migrant workers and refugees worldwide. According to the World Bank, remittances to low and middle-income nations grew to $626 billion in 2022. This contributes a considerable amount to each country’s GDP — “sometimes reaching levels above 30 percent of GDP” according to a 2018 International Monetary Fund report.

Despite the prevalent need for inclusive services, many people who are unbanked or underbanked remain so willingly, due to the lack of trust in the traditional financial system because of a history of corruption, hidden fees, and lost funds. Blockchain technology enables transparent, secure, and censorship-resistant remittances. This can reduce the risk of fraud and other security threats associated with traditional remittance services.

A preliminary report for the European Union (2018) notes that blockchain has the potential to disrupt the remittances industry:

Transactions are also fully traceable, giving customers the possibility of knowing where their money is and if it has been successfully received, in sharp contrast with current systems, where money seemingly disappears for few days after it has been sent. Blockchain technology is still in its youth, but disruption is inevitable, so gearing up to the knowledge and adapting quickly is the only way out, as the question is not if it will happen, but when and what it will look like.

The Future Is Ours to Determine

As Hong Kong’s political and business class rush towards the opportunities sure to be afforded by an embrace of blockchain technology, it’s important that they —  and also that we —  stay focused on how blockchain can help the people for whom crypto was designed: those seeking freedom from oppressive governments and rent extractors.

This story is still being written; the future of international remittance is unclear. Is the traditional remittance service industry ripe for disruption? Will Western Union and other providers continue to make money from people who have been financially excluded? Will a Central Bank Digital Currency swoop in and onboard migrant workers and asylum seekers into a private blockchain? Will web3 leaders realize the potential for social impact and reach out to these forgotten communities?

Perhaps the final word can go to the United Nations, which has recognized the importance of remittances at a household, community, and national level across a number of the Sustainable Development Goals. Accordingly, the United Nations General Assembly has designated an International Day of Family Remittances (IDFR) which is celebrated every year on 16 June, calling upon us to maximize the impact of remittances through individual, and/or collective actions.

Author Bio

Craig Schuster is a licensed teacher in the U.S. and has been teaching in Hong Kong for 10 years. He extends his teaching practice by providing support for MetaMask and ConsenSys software. A humanitarian at heart, Craig founded RemittDAO with the intention of educating migrant workers on the benefits of digital remittance tools. Craig enjoys an active lifestyle and international travel.

Editor Bios

Hiro Kennelly is a writer, editor, and coordinator at BanklessDAO, an Associate at Bankless Consulting, and is still a DAOpunk.

Trewkat is a writer, editor, and designer at BanklessDAO. She’s interested in learning about crypto and NFTs, with a particular focus on how best to communicate this knowledge to others.

Designer Bio

Tonytad is a graphic designer who has worked locally and internationally with organisations and firms on over 200 projects, which includes branding, logo, flyers, cards, and covers.

BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.

This post does not contain financial advice, only educational information. By reading this article, you agree and affirm the above, as well as that you are not being solicited to make a financial decision, and that you in no way are receiving any fiduciary projection, promise, or tacit inference of your ability to achieve financial gains.

Bankless Publishing is always accepting submissions for publication. We’d love to read your work, so please submit your article here!

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