Rebit, one of the verticals under Bitcoin umbrella company Satoshi Citadel Industries (SCI), has booked an average 150 percent growth in value of transactions month-on-month since October. That’s a big jump from the usual 80 percent growth it registered during the first few months from its launch in July. The company declined to give amounts when asked.
The reason for the spike is obvious: remittances from overseas Filipinos usually peak in the run-up to Christmas because of holiday spending, and Rebit has been able to capture a portion of that market.
Rebit, together with partner Bitspark, piloted a remittance corridor in Hong Kong, where there are over 130,000 working Filipinos who send back to the Philippines about half a billion US dollars in remittances based on the latest government data.
“To put things into perspective, we’re working to build a Bitcoin remittance business during a year in which the Bitcoin price has steadily declined, and we’ve chosen one of the top five most competitively-priced remittance corridors in the world – Hong Kong to the Philippines – to pilot our service. The fact that we’re still able to show growth is a hugely positive sign that Rebit and the whole concept of Bitcoin-based remittances is both sustainable and potentially extremely profitable,” says Luis Buenaventura II, head of product at SCI.
For the Bitcoin community in the Philippines, the triple-digit growth in transaction value, no matter how small a portion of the remittance pie it may be, is a huge improvement considering that Bitcoin adoption is still in nascent stages and the business concept is new: the very first Bitcoin-powered remittances were sent only in the third quarter this year, Buenaventura notes.
It’s true that Rebit has Filipino culture to thank for its strong numbers the past couple of weeks – the Philippines is known to have the world’s longest Christmas season, which starts as soon as the “ber” months kick in, and many Filipino families rely on remittances to fund their lavish celebrations.
But Buenaventura also attributes their growth to the perks Bitcoin remittance offers both individuals and businesses.
He says one other reason their transactions spiked is because tech startups have started to use Bitcoin for payroll. “We’re seeing a bit of enterprise use, instead of just personal remittance, by employers in the US with staff in the Philippines.”
While the cryptocurrency is considered very volatile as an investment asset because its price fluctuates wildly, the Bitcoin community says it has real utility for money transfer and payment. Why? Two main reasons: it’s quick and cheap.
Settlements using Bitcoin are almost instant, versus about an hour through, say, Western Union, and two to three days through banks. But Western Union is only able to do it that fast because it uses a “pre-fund” remittance model, where the receiving end of the remittance has a very large cash reserve it uses to fund the payouts immediately, explains Buenaventura. The actual remittance takes days to pass through the so-called automated clearing house network. He says the large capital requirement is the biggest barrier to entry in the money transfer industry.
But there’s no such problem with Bitcoin. “The receiving entity on the Philippine side can immediately sell that Bitcoin in exchange for local currency. Money has literally moved across the planet, disintermediating correspondent banks and clearing houses and replacing them with a handful of blockchain confirmations,” he says.
Bitcoin allows for an even faster transaction in its purest form: when it’s peer-to-peer. A Bitcoin user may send or receive money from another user directly through his digital wallet.
Bitcoin, therefore, is the more efficient and advanced technology in transferring money, says Miguel Cuneta, chief community officer of SCI. “Bitcoin allows us to think outside the box in terms of how we send money securely, efficiently, and without the need for multiple third-parties.”
He adds: “A really good analogy to better understand this is how the internet emerged as a far more superior way to communicate and transmit information compared to any traditional method available in the ‘90s. As soon as people understood that email, internet messaging, and VOIP was faster, easier, and vastly cheaper than snail mail or long distance telephone calls, adoption of the technology exponentially grew and made the old methods obsolete.”
More important than speed is affordability. As Bitcoin eliminates the “numerous hops” in the global transfer of money, it’s able to offer a significant discount to traditional providers, says John Bailon, SCI’s CEO.
“Each partner bank your wire goes through takes a cut from the service. Through Bitcoin, the scenario would only entail a business on the sender’s side to exchange fiat for Bitcoin and send those bitcoins to another business that will convert it back to the recipient’s currency,” which is Rebit’s role, Bailon explains.
In the Philippines, relatives of overseas Filipinos may get the money via bank deposit, door-to-door delivery, or via pick-up at one of Rebit’s partner retail locations. Rebit charges only one percent of the amount remitted plus delivery fee, depending on the mode the customer chooses. This is much lower than what the banks or money transfer firms charge, which can reach between five and eight percent.
According to the data from the Philippine central bank, overseas Filipinos sent home nearly US$23 billion in 2013, making the Philippines the third-highest recipient of remittances in the world, trailing behind only China and India.
Get five to eight percent of that amount – that’s what was spent for remittance fees. Imagine, if you can recover even a portion of that for families to spend in the Philippines, it will give the economy a boost.
For the families – a lot of them poor – it would make a huge difference. There’s more money to spend for food, healthcare, and school.
Of course, it’s only logical to ask why money wiring service Western Union and banks are more expensive to use. The usual explanation is that Bitcoin companies save on costs due to lack of regulatory compliance.
Traditional remittance services have to comply with regulations such as “Know Your Customer” and anti-money laundering rules.
On the contrary, Bitcoin is unregulated in the Philippines. The Philippine central bank has done nothing except issue an advisory against the use of Bitcoin. It warned of the possibilities of your digital wallet getting stolen, the value of Bitcoin changing quickly, and Bitcoin being used for laundering and other illicit activities.
Regulation is a real possibility in the future especially when Bitcoin trades reach volumes large enough to get attention. Bitcoin startups are unfazed nevertheless. “Although it may be true that regulatory compliance will eventually increase the cost of Bitcoin-based remittance, lowering the number of ‘hops’ to just the on-ramps and off-ramps will still keep the total costs below those of the incumbents,” concludes Buenaventura.