Migrants hit by high fees to send money home
Migrants hit by high fees to send money home
Sending money across borders, particularly in Africa, can still be expensive.
One target of the UN Sustainable Development Goals is that by 2030, remittance fees should be less than 3%, and total fees to send and receive money between a pair of countries should be no more than 5%. Some researchers believe that to be truly affordable, the first goal should be even less than 3%.
The International Monetary Fund has estimated that reaching this target could generate $32bn (£26bn), even apart from the direct-cost savings.
This is because remittances have such powerful knock-on effects for the economy, and people tend to send more in remittances when fees are lower.
Yet the world is far off this target. According to the World Bank, the global average is 6.2%, over double the target.
Having a good crypto exchange locally solves this. I sent a few thousand dollars to a cousin via a ethereum layer2 and it cost literally cents to send. Also helps with the legal hassle as exchanges need to know their customers.
I had similar thoughts when reading the article. Fees of 3 or even 5 percent should be a joke in 2024.
Monero is the way to handle this. The fees are stupid low and it settles within 20 minutes anywhere on planet earth. Oh, and at least as of now, it is totally untraceable, and only the sender and receiver ever know the payment even occurred.
This could work if there are reliable exchanges already available in local currency on both sides, and if both sides have bank accounts and the technical know-how to use exchanges. However, if Monero were to become a large scale method of remittance transfers, then Monero could be overvalued in exchanges in source countries and undervalued in exchanges in destination countries, especially in situations where the currencies are not freely convertible. With P2P exchanges this situation may become even more exaggerated.
Eventually HFT traders may catch on and level the market, but this would essentially mean a transfer of wealth from the masses sending remittances to a few HFT traders.
My point is, though sure it works fine in limited situations in strong economies (where there are liquid, freely exchangable fiat currencies and fair exchanges with low fees), it is a lot more complicated than it seems to use it at such a scale or in countries with underdeveloped economies.
this would essentially mean a transfer of wealth from the masses sending remittances to a few HFT traders.
Compared to a frictionless world, this is sub optimal. But as you and the article established, there are frictions that currently result in a tranfer of wealth at a 6% rate of transfer volume which could very well be greater than the future equilibrium you posit.
I think that there are options that could be implemented at scale faster and simpler compared to crypto token exchanges. But any individual current getting hit with high transfer fees could benefit immediately if they know about and learn how to use something like monero.
There's at least a decent chance that Monero may actually be a better store of value than the destination currency would be and the receiver might just choose to keep it in Monero instead of converting it to their local currency. I'm thinking places like Zambia or Zimbabwe might be some examples. Perhaps Argentina and Venezuela as well. I think a peer-to-peer exchange on both ends would be the better option since then you don't have to go through all that KYC crap and be asked tons of questions and treated like a criminal for just wanting to send money to your family members. So you would purchase Monero peer-to-peer in your country send it to them and if they need to exchange it when they get it they can choose when to do so and how much to convert.
What about the on-ramp and off-ramp fees? Wouldn't it be higher than the traditional transfer fee?
Generally, the peer-to-peer rate is about 10% higher than the KYC rate. So if you buy Monero with KYC in your country and then send it to whoever and they sell it peer-to-peer, they will generally get about 10% above the market price. Cash by mail or cash in person are going to be the cheapest ways simply because there aren't online platforms involved that can reverse the transaction.