Recently, a dear world champion friend (French) had to make an international transfer to her home country for $ XXXXX pesos. The reason did not specify it, it could have been a family emergency, the purchase of 10 bottles of the best red wine or simply on the initiative of saving some euros.
I sat next to him during the process, in what turned out to be a terrible experience.
Your commercial bank here in Mexico, which we will omit the name, quoted and charged $ 35 (fixed amount) for sending money to your European receiving bank. The latter, charged 22 euros for the receipt of the funds, this without considering the totally unfavorable exchange rate imposed on the transaction. Without considering the currency exchange, the sending of pesos and transformation to euros from Mexico to France cost about $ 1,150 pesos…My reaction as a financial man, was none other than hey and will it be business?
In an international transfer, there is the shipping commission, the reception fee and an unfavorable exchange rate.
Before continuing, I would not like to be a liar. It is not true, in fact I was not sitting during the whole process at his side, had it been so, I would have been sitting 3 days; time it took to complete the transaction at 100%.
It would seem a lot of money $ 1,150 pesos considering that there was no real work in the process. Finally, the only thing that happened in this one that seemed a very complex transaction was the withdrawal of digits in a bank account, the increase of digits in the other and a process of currency exchange.
Some time later, my friend had to send money once more to France for the same amount, so we repeated the operation, but changing the process. This time, we performed the transfer using cripto divisas specifically XRPs or Ripples. The process consisted of 5 stages.
- Sending bank account weights to Bitso through SPEI. Cost: 0 commission pesos, 24 hours by local regulation.
2. Purchase XRP with anchor weights. Cost: 0.65% commission, 10 seconds for the time in which your purchase position was tied with one of sales.
3. Sending XRP to the European Exchange wallet account. Cost: 0.0000 1 XRP commission, less than 1 minute in which the transfer was reflected.
4. Sale of XRP in European exchange. Cost: 0.26% commission, 10 seconds in which your sales position was tied with a purchase.
5. Withdrawal of euros to French bank account. Cost: 0 euros commission, 24 hours to reflect your euros in your bank account.
* This operation could be done with any of the currencies listed in Bitso, we chose XRP for the transaction speed *
Let’s make a comparison. Through the traditional method of international transfer, by sending this amount lost 3.59% of the amount transferred. With the sending of money through XRP, considering from the “very first” step that is to transfer money to Bitso through SPEI, he lost 0.91% of the amount to be transferred. The aspect of time is a bit misleading, since by the traditional process it took 3 days, and by crypto it took 2 days and a few minutes. However, it is necessary to consider that of the previous figure, the two days of time are due to processes of banking institutions, being the transfer from Bank to Bitso and withdrawal of funds from the European exchange to a European bank account. Those “few minutes” that I mentioned, are the time it took for the real money transaction through XRP.
Maybe 3.59% vs. 0.91% of the amount sent is not as impressive, so we calculate with smaller amounts sent. This same operation, but for $ 10,000 pesos through a traditional process, would cost $ 1,150 pesos or 11.5% of the amount to be transferred. While through crypto the operation would have cost $ 100,805 pesos equivalent to 1.01% of the amount to be transferred. This becomes even more evident with a transfer of $ 5,000 pesos in which by crypto it would cost 1,008% of the amount to be transferred, while by international transfer it would have cost 23% of the amount sent. Let’s understand that in both cases the rates were fixed (traditional and crypto) so that the lower the amount to be sent, the greater the percentage loss per shipment in the traditional format related to sending with cryptos.
People do not use crypto yet to send abroad because it is still relatively complicated (user experience). Those 5 steps can become one with developments focused on making it easier and faster. Same that would eliminate those 2 days of waiting time. Developments such as xRapid, which allows banking institutions to accelerate international transfers by converting fiat (fiduciary) money to XRP through an affiliated Exchange (in a matter of seconds and in a single step) and Bitso Nvio, which allows converting pesos to dollars and make transfers to US banks, are some of them. Both services available in Bitso.
On this occasion we focus the analysis on an America-Europe transfer, but this applies to any part of the world. In 2018, there is an international flow of remittances of 689 billion dollars. Same that work in a scheme far from being efficient. Let’s think about sending remittances from the United States to Mexico. Mexico is the fourth most important country in terms of receiving remittances, only below India, China and the Philippines. About 3% of Mexican GDP is made up of this income. How much capital would you stop losing by optimizing the sending of money abroad using cryptos?
My friend has already understood and is doing it, she is just waiting for the process to become easier and more integrated. Luckily Uncle Bitso and cryptocurrencies provide us with the mechanisms to achieve it.