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- A new report by Capgemini estimates that around 45% of users will be using cryptocurrencies to make payments by 2023.
- The use of solutions like
Ripple ’sXRP protocol makes sending money to other countries faster and cheaper. - Nigeria, Vietnam, the Philippines, and other developing nations with nationals living abroad are already using cryptocurrency to send
remittances back home in order to avoid high transaction fees.
Cryptocurrencies aren’t a mainstream method of making payments — yet. In another year or two, it may be the standard method of sending money overseas, potentially replacing the likes of
Capgemini’s World of Payments 2021 report estimates that 45% of customers will be using cryptocurrency payments, especially with more people looking to send money overseas by 2023.
Cryptocurrency payments are becoming an increasingly popular alternative payment option among many businesses, even though current adoption is nascent.
Capgemini World of Payments 2021 report
Companies like Ripple and its XRP protocol are already being touted as the next phase of transformation in the global remittance service market. “Platforms like Ripple have the potential to reduce settlement times (from days to seconds) and provide savings,” noted global financial services behemoth
Credit Suisse.
Evidence of this was already seen during the pandemic. According to the Asian Development Bank (
ADB), the use of services like Ripple, Mobile Money and bKash helped deliver faster settlement, greater operational efficiencies and more competitive foreign exchange rates during the COVID-19 pandemic.
El Salvador betting on Bitcoin adoption to solve its remittance woes
The advantages of using cryptocurrencies like Bitcoin to make remittances is one of the primary reasons that El Salvador’s President, Nayib Bukele, has been a propagator. The island nation received nearly $6 million in remittances in 2020, which accounted for a quarter of its gross domestic product (GDP).
With that kind of volume, Bukele
estimates money services providers like Western Union and MoneyGram stand to lose $400 million a year in commissions as a result of the country’s Bitcoin Law, which acknowledges the cryptocurrency as legal tender.
And, El Salvador is only one of the many countries around the world facing extraordinarily high fees leveled at a population where every penny counts. Nigeria, Vietnam, and the Philippines are other developing nations with nationals living abroad using cryptocurrency to send remittances back home in order to avoid high transaction fees.
Why are cryptocurrencies becoming popular for global payments?
The popularity of cryptocurrencies in the global payments space is being spurred by high transaction fees, predicted to increase with time, and the lack of standardisation in global payments, according to Capgemini.
There’s also a wide gap between what customers expect and what bank and payments firms prioritise when it comes to cheaper and faster cross-border payments. “Uncertainties and fulfillment gaps stoke transformation urgency,” said the report.
In El Salvador, for instance, the issue isn’t just paying high fees — the issue is also security. Jamie Garcia, an El Salvadorian who sends money from Canada, told
CNBC that global payments offices are targeted by gangs. They know what people are going there for and wait outside to rob them once they have collected the money.
Blockchain-enabled remittance services are also helping address ID concerns, specifically between Malaysia and Pakistan, according to ADB.
However, this does not mean that the cryptocurrency market is ripe for its awakening. The volatility in prices still indicates a lack of maturity, as seen during the rollercoaster of September. A study published in
Empirical Economics in January 2021 pegs Bitcoin to be ten times more volatile than fiat currencies.
For the everyday user, the fact that Visa and Mastercard are now jumping on the bandwagon is helping lend authenticity to the crypto-payments ecosystem.
For a more in-depth discussion, come on over to Business Insider Cryptosphere
— a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
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