India received an estimated $69 bln in remittances in 2015. What would be the best way for Indians to receive this money?

World’s largest receiver of remittances

Economic migrants send home a significant amount of remittances every year. According to the World Bank, India was the largest recipient of remittances in 2015 – estimated at $69 bln. Other large recipients of remittances include China - $64 bln - and the Philippines - $28 bln. Indians working in developed countries in the Middle East, America and Canada send significant amounts of money to support their families in India.

Expensive middle men

The money transmission industry is a flourishing industry, thanks to the huge volume of remittances and the prevalence of low competition levels. According to a World Bank report, the global average cost for sending remittances was 7.42 percent in the third quarter of 2016. While the cost has been on a declining trend, it still remains significantly high. Money transfer agents usually charge a flat fee as well as a margin on the exchange rate, which often leads to the layman being unaware of the total cost of remitting money.

More bang for your Bitcoin

The potential of Bitcoin in reducing transaction costs, especially in cross border payments, has been acknowledged for some time.

Startups like Rebit.ph and Bitpesa, which use Bitcoin as the backbone for international transfers, are present within the space of remittances.

However, the increased demand for Bitcoin in India presents a unique opportunity.

There is a 15 percent premium on selling Bitcoin in India, post the demonetization of large denomination notes by the government.

People wishing to send money to India can instead purchase Bitcoins and send them across to their loved ones.

These Bitcoins can then be sold on exchanges, resulting in a 15 percent profit in rupee terms.

Not a foolproof solution

While using Bitcoins to send remittances has its advantages, it is not a foolproof solution.

The primary reason for this is Bitcoin’s volatility. Bitcoins sent across have to be sold at exchanges in real time to ensure that there is no loss in value.

While Bitcoins can currently be sold at a premium in India, this may not always be the case. The recipients of these Bitcoins would also need to complete “Know Your Customer” norms at both a Bitcoin exchange as well as a bank.

People would gladly make this extra effort if it means that they receive more money in the end.