Blockchain and Bitcoin in Global Remittance: Disruptor or

Facilitator?

Executive Summary • Global remittance is becoming cheaper and faster, although the rate is still high • There is no major price difference between startup and incumbent MTOs in general• Blockchain can drive down cost further by lowering bank fees through public ledger,

and fraud prevention fees through its anti-fraud feature• Blockchain will facilitate the incumbents rather than become a disrupter• Bitcoin is less likely to provide cost savings due to double exchange issue and higher

spread contributed to higher currency volatility

Why Important?$650 billion / year

$450 billion to developing countries

Average $200 - $300 / transaction

30% - 50% of household income

8% transaction fees

G-20 5*5 objective: reduce cost to 3% by 2020 ($20 billion)

Current System $650 billion

MTOs Banks

53%24%

Bank accountTransaction

Cash Account or Cash

Industrial Trend

2. Lower Fees and Duration1. Offline-Online shift 3. Increasing Regulation

• Anti-money laundry, anti-terrorist activity, customer protection

• 2001: US Patriot Act• 2008: “violent acts or

acts danger to human life”

1-2% annually

Transaction Fees % and Duration

1001341682022362703043383724064404745085425766106446787127467808148488829169509840.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Average Transaction Fees % ($100-1,000)

MTOs Banks

MTOs Banks0

50

100

150

200

250

Duration Range (hrs)

Fee Structure Comparison

Banks MTOs• fixed amount• Outgoing fees + incoming fees + FX spread

• Increase with the amount, varies with destination• Transaction fee + FX spread

Duration Comparison

Banks MTOs• Messaging system: SWIFT• Settlement system: ACH, correspondent banks

• Local Money Agents

+

Why Banks Charge High Rate?Global Remittances is too small 1 2 Compliance cost is too high

• 2001: US Patriot Act

• 2008: “violent acts or acts danger to human life”

Why Bank Account Transfer is Slow?

MTOs LandscapeBig 3

Upcoming

Startup

500,000 agents, 200+ countries 350,000 agents, 200+ countries 290,000 agents, 150+ countries

Incumbent vs UpcomingIncumbent

• Online + offline• Cash + bank account• Direct relationship with banks• Possess license worldwide• Transaction fee + FX spread

Upcoming• Online only• Account only• Third party payment network provider • Acquire license in multiple regions • Transaction fee + FX spread

Who’s cheaper?No Difference!!

MTO cost structure comparison

Agent com-missions

50%

Bank fees25%

SG&A25%

Cost Structure of Western Union

Cost of Revenue

34%

SG&A66%

Cost Structure of XOOM

Within SG&A, High cost related to compliance, license, Fraud Prevention

Blockchain can save cost in…Blockchain Can Save….

Commission

bank fees public ledger

lisence

fraud anti-fraud

cyber security

compliance

Self vs third party payment network

PAYMENT NETWORKWestern Union direct

MoneyGram direct

Ria direct

Transfast direct

XOOM Earthport

Transferwise Currency Cloud

Worldremit Earthport

Azimo Earthport

Viamericas Earthport based on Blockchain technology

Blockchain

EarthPort

XOOM WorldRemit Azimo

Apps

Infrastructure

Technology

Bitcoin is unlikely to save cost and time…

1. Double exchange issueBefore:

After:

$￥

$￥

2. High spread due to higher volatility

Conclusion• Global remittance is becoming cheaper and faster, although the rate remains high• There is no major price difference between startup and incumbent MTOs in genral• Blockchain can drive down cost further by lowering bank fees through public ledger,

and fraud prevention fees through its anti-fraud feature• Blockchain will facilitate the incumbents rather than become a disrupter• Bitcoin is less likely to provide cost savings due to double exchange issue and higher

spread contributed to higher currency volatility