Philippines as a springboard for Remittances in SE Asia
The Philippines comes in as the world’s third largest remittance market receiving a total of US$28 billion in 2014, only preceded by India receiving US$70 billion and China receiving US$64 billion. Remittances sent to the Philippines made up 8.5% of the country’s GDP in 2014, which has become the single most important source of foreign exchange to the economy and a significant source of income for recipient families.
In a 2009 study conducted by the Asian Development Bank (http://www.adb.org/sites/default/files/publication/28401/economics-wp188.pdf ), “out of the households that received remittances in third quarter of 2009, 93% spent part of it for food and other household needs, 72% for education, and 63% for medical expenses.” Similarly, in a 2013 survey, conducted by the Central Bank of Philippines (http://www.ifad.org/remittances/events/2013/globalforum/resources/Nicolas%2081.pdf ), reports that in the “First Quarter of 2013, remittances were allocated in the following manner: food (96.6%), education (67.2%), medical expenses (59.1%) and for debt payments (42.1%).” This suggests that money sent from migrant Filipinos back home goes almost directly into living expenses, and thus keeping recipient families out of poverty.
According to a 2014 World Bank (http://cnnphilippines.com/business/2015/04/17/majority-of-Filipinos-without-bank-accounts-study.html ), about three-quarters of adults who reported sending or receiving remittances are more likely to use a money transfer operator as there are more counters than banks have branches. As money transfer service options are limited, customers funnel into the few accessible locations, which is most likely controlled by a money transfer operator, i.e. Western Union. This leads to the Philippines having some of the highest average transfer costs in the Asian region as the remittance market there is predominantly controlled by money transfer operators (MTOs). This suggests that the time you save going to an accessible location is more valuable than the price you pay for the transfer fees.
By now you probably guessed that this is the part where I talk about the benefits of using bitcoin and how it could solve many problems remittances face with the current system, but that would be too boring. Instead of telling you that using bitcoin is cheaper because it doesn’t need to go through a third party for verification, thus reducing transfer fees to essentially zero or to 0.0001 bitcoin per transaction, here are some seemingly unrelated, but totally related, reasons:
As of 2014, there are over 10 million Filipinos living outside of the Philippines
With the average Filipino remittance amount at US$250 and with an average remittance cost of 5-8%, about US$12.50-$20 is “lost” per transaction
Bitcoin could make a huge difference even if a portion of that was recovered for families to use 90% of Filipino households subsist on US$10 or less per day (http://www.coindesk.com/bitcoin-philippines-numbers/).
By exchanging to bitcoin, transfer costs are reduced to minimal value thus more money can go into their pockets and to say that every dollar helps is an understatement. Bitcoin also makes receiving that money easier as well.
In January 2015, a study records 44.2 million are active internet users.
On average, Filipinos send 6 hours per day online, either through use of a computer or through a mobile device. There are 114.6 million mobile connections versus the total population of 100.8 million, which, more or less, suggests that everyone is, in some way, connected to the Internet
Settlements using Bitcoin are almost instant. This ultimately leads to the fact that the receiving entity on the Philippine side can immediately sell that Bitcoin in exchange for local currency. Bitcoin allows for an even faster transaction when it’s peer-to-peer, so with the number of mobile connections outnumbering the population means that more people have access to receive Bitcoin via online that goes directly into their digital wallet. Being able to provide access to people picking up cash at the other end is another important part of the equation and there are providers all around the world now accepting and using Bitcoin as a means of payment or conversion into the local currency.
Overall there are many other benefits when using bitcoin for remittances, but for the Filipinos the most important factor is accessibility then money saving. They will no longer have to wait a few days or a few hours before they go to their nearest money transfer location to receive their money, instead they can go when it is most convenient for them because bitcoin transfers are almost instant. Not only are they saving time, but as byproduct they are also saving money as transaction costs are relatively zero.
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. However, what makes it any different than wiring money through the bank or any other service? It could take days to process, and in that time frame making it exposed to being stolen, subjected to the value of the currency changing quickly, or being laundered.
Regulation is a real possibility in the future especially when Bitcoin trades reach volumes large enough to get attention. Just remember, it should always in the best interest to satisfy the people, and bitcoin remittances are doing what banks and current MTOs are not: benefiting their customers.