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The latest World Bank study shows that the 4.98% average cost to remit funds to South Asia makes it the least expensive region while Sub-Saharan Africa is the most expensive with an average cost of 8.47 %. The quarterly study also finds that it is more expensive to remit funds when using service providers such as banks which charge an average of 10.89%.
Marginal decline
Mobile operators are the cheapest as their sending costs were on average 3% and lower during the period under review. However, the study, which predictably excludes cryptocurrencies, shows a marginal reduction in the global weighted average (GWA) from 5.03% in the second quarter to 5.0% in the third quarter of 2020.
The World Bank report, aptly named Remittance Price Worldwide (RPW), monitors the cost of remittances across all regions. The report’s data shows that the global average cost of remittances fell from 9.67% in the first quarter of 2009 to the last 6.75%. This represents a 2.92% decline during this period.
Meanwhile, the global financial institution says that in addition to monitoring the global average, “another average total cost is introduced to monitor the average price of digital remittances in the RPW database.” Following this cost metric, the study finds that:
In the third quarter of 2020, the global average of digital remittances was recorded at 5.29%, while the global average of non-digital remittances was 7.24%. “Furthermore, the report data shows that remittance costs are decreasing. gradually in all dispatch corridors since 2008.
Meanwhile, despite their absence from the World Bank RPW, cryptocurrencies appear to be cheaper and faster methods of payment.
Cryptocurrencies are a cheaper option
To illustrate, on the Bitcoin network, transaction costs for coins like bitcoin cash and dash remain insignificant compared to the cost of sending funds through the Money Transfer Organization (MTO). For example, during the third quarter of 2020, the average fee for sending or paying $ 100 with bitcoin cash was less than one cent. The same was true of Dash and Ripple’s XRP token. However, on the other hand, sending funds between two southern African countries could cost 10% or more.
Remitting funds via bitcoin and ethereum is also faster and sometimes cheaper than traditional remittance corridors. As Bitinfocharts data shows, at the start of Q3 2020 on July 1, transaction fees on the Bitcoin and Ethereum networks averaged $ 1.51 and $ 0.70 respectively. Since then, fees on the two networks have fluctuated wildly, but still rose to an average of $ 5 or less for much of the third quarter. An average commission of $ 5 per transaction translates to 5% if the amount sent is $ 100.
Achieving UN SDG 10.c with cryptocurrencies
With transaction costs that are a tiny fraction of a percent, cryptocurrencies like bitcoin cash and XRP, which the World Bank and others refuse to acknowledge, appear to have already achieved one of the United Nations Sustainable Development Goals (SDGs).
Under the global body’s SDGs 10.c, the United Nations and others are pledging to reduce “migrant remittance transaction costs to less than 3% and eliminate remittance corridors costing more than 5%” .
The United Nations aims to achieve this by 2030, but more migrants are already using cryptocurrencies because they are a much cheaper and more convenient option.
Do you agree that cryptocurrencies are cheaper to pay than traditional methods? Tell us what you think in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
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