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Monday, June 5, 2017

Remittance agents can advance with Blockchain technology

Remittance agents can advance with Blockchain technology

Traditional business models are being challenged by new disruptive technologies whose speed of development makes the "catch-up" act very difficult. However, if something can provide solutions to problems encountered by businesses and individuals, it is most certainly welcome. One of the biggest problems is faced by the large expat population in the region, which relies on remittances to transfer cash across borders. For an industry worth nearly US$100 billion in the GCC, and $19bn in the UAE alone, the process is quite time-consuming and expensive, with the banks, exchange companies and central banks functioning as intermediaries.

The remittance process is carried out through certain models – pre-fund models, post-fund models and subsidy models. The pre-fund model works on a corridor basis, for example, India-UAE, UAE-Pakistan, UAE-China etc, the pre-fund model allows the sending agent to quickly be able to settle the net amount with the beneficiary agent or bank, so that their customers can get the money quickly. In the post-fund model, the beneficiary bank advances the amount to the beneficiary and as a result they have to absorb the loss if the sending bank defaults.

All of these models add to the cost which is borne by either parties. For instance, in the pre-fund model, the transfer agent has to keep a certain sum of money as deposit with the receiving bank, in most cases, without interest to speedily complete the transaction. It also needs to have physical cash of the equivalent amount being sent to be present at their centres to settle the transaction, which again does not pay any interest.

Typically, the remittance process takes one to two days, involves a lengthy digital trail and has to go through the clearing process of central banks.

Full story at http://bit.ly/2qPceha

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