The recent Knomad Migration & Development Brief stated that the global average cost of sending global remittances worth $200 was 7.1% in the first quarter of 2018. The most expensive average cost of 9.4% was in Sub-Saharan Africa, the lowest at 5.2% in South Asia. The Migration and Development Brief reports global trends in migration and remittance flows.
Dilip Rao, Global Head of Infrastructure Innovation at Ripple in his blog which was published on June 28th, said that the constant decline in the banking relationships has led to the use of remittance service providers.
There are a lot of factors such as costs of collection and risk assessment, costs of transmission of funds, costs of foreign exchange conversion and delivery of liquidity, and costs of risk assessment and delivery of funds to the beneficiary that contribute to the high price of the remittance service providers.
Distributed Ledger Technology is considered as the ultimate answer to the increasing costs of the remittance service providers.
DLT’s effect can be seen in lower costs and brisk transference of funds across numerous actors and in the cross-border delivery of liquidity. This could be attained by systemized coordination across different ledgers and networks, in such a way that the debit to the sender is always partnered by a credit to the beneficiary. The open Interledger Protocol acknowledges this requirement with smooth coordination of payments across disparate networks and ledgers.
According to a statement issued on the official website of Banco Santander, the service will provide more certainty and transparency regarding the source of the money. Santander had launched an app called OnePayFX, based on Ripple’s blockchain technology which is currently available in Spain, Poland, Brazil and the United Kingdom.
In an interview with Head of Innovation Ed Metzger at Santander U.K., in tandem with the One Pay FX rollout, he said:
“The motivation to bring One Pay FX to market comes as the firm has taken note of the growing expectation from consumers that sending international payments to be easier and less friction-filled than it has been seen in the past. Blockchain stood out as a way to alleviate some of those frictions, said the executive, and after a pilot with Ripple two years ago, the firms began rolling out this service to Santander’s customers.”
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