Written by Eiland Glover, Co-founder and CEO of Kowala
This month the greater crypto community rejoiced in what many described as a monumental win for the future of cryptocurrencies when PayPal (owner of Xoom and Venmo) announced it would introduce a flat fee of $4.99 USD on most cross-border transactions. Such an exorbitant price hike from one of the most prominent centralized payment platforms, crypto experts argued, could finally expose the fatal flaws in the traditional remittance infrastructure and precipitate the replacement of PayPal and its ilk by Bitcoin transfers.
The price hike is indeed significant: at present, the average Bitcoin transaction fee is $1.06 USD — roughly a fifth of the cost of PayPal’s new fee. Bitcoin is now not only far cheaper to send, but it’s universal as well — the price you pay in Transylvania is exactly the same as the price you pay in Pennsylvania.
And the potential cost-savings aren’t restricted to Bitcoin alone; other cryptocurrencies offer even more attractive pricing. Litecoin, for example, recently announced that a $99 million USD transaction occurred on its network. The transaction fee: only forty cents.
Cryptocurrencies will certainly upend the remittance industry soon enough, but cost savings alone won’t trigger the exodus from the centralized incumbents. To effect the coming sea-change in remittances, we will need a few more technological innovations that make cryptocurrency more human-friendly as well as something that most blockchain teams have thus far overlooked: professional, world-class marketing.
The first innovation needed to make crypto more palatable to regular consumers relates to volatility. Let’s face it: most remitters sending precious funds to cash-strapped relatives back home simply won’t take the risk of losing 30% of their hard-won value overnight in one of the all-too-typical cryptocurrency price swings. Several projects are working to address this need now, and a few stable cryptocurrencies like USDT, Dai, and TrueUSD are already in the marketplace.
Next, consider that, before the masses can be drawn into crypto economy, a robust and fast blockchain will be necessary to handle the transactional throughput required to service these new participants. One way to do this is to move from the proof-of-work consensus algorithms offered by Bitcoin and Ethereum to a proof-of-stake algorithm based on Byzantine Fault Tolerance, such as that created by the Tendermint project. Our company, Kowala, is launching a stablecoin, kUSD, whose consensus protocol is derived from Tendermint, resulting in a blockchain that can process thousands of transactions per block with one second block times.
Finally, it’s worth noting that PayPal’s position, as one of the top remittance industry companies, is based in large part on its products’ streamlined user experiences. These products offer clean, fast, and accessible user interfaces and, more importantly, a fully functional ecosystem complete with thousands of integrated banks and merchants. To compete with the likes of PayPal, a blockchain-based remittance challenger must meet the high expectations of current remittance users by offering a user experience that is equal to or better than PayPal’s.
But even if a blockchain-based remittance product has every technological advantage, it still needs distribution. This distribution problem comes down to two things: it’s still hard for regular people to get their hands on cryptocurrency, and no one is giving them compelling reasons to push through the friction and start using crypto. This means a stablecoin must be paired with an extremely compelling go-to-market strategy that motivates consumers to take action. Simultaneously, the annoyances and obstacles inherent to buying crypto today — onerous sign-up processes and poor customer service — must be addressed to make the onboarding process as seamless and intuitive as possible.
To achieve this distribution, the industry needs experienced people doing good old-fashioned, world-class marketing: listen to customers’ needs, give them the tools and information they need, and support them on their journey. The winners in this race will need to marry brand-new technology with this familiar but crucial marketing expertise to trigger mass adoption of cryptocurrency and unseat PayPal and other remittance heavyweights.