Most remittances move from high-income countries to lower and middle-income countries. Fees for the typical remittance can range from 5% to 10% with costs either as upfront fees or above-market exchange rates. Pull back the cover on the transaction and there are multiple manual and outdated steps that are overdue for a refresh.
The service is part of an ongoing push by fintechs to leverage new technologies to boost financial inclusion. By reducing fees and improving access, these new services and the back-end technologies that make them possible can provide a meaningful increase in incomes to the poor in many parts of the world — even dwarfing existing international aid efforts. Kyle Powers, Cofounder of LibertyPay, discusses how LibertyPay works, the potential for blockchain in financial inclusion, and cross-border payments.
Q: Please explain how LibertyPay works and what it does.
Kyle: There are two primary things Bitcoin does well — it is a speculative store of value, and it transfers value across borders. LibertyPay focuses on Bitcoin as a way to more efficiently move money across borders at a lower cost. For remittances, it can replace multiple layers.
Q: I would think this is a solved problem.
Kyle: Not at all. Right now, sending a remittance requires traditional settlement rails developed in the 1970s and a trip to a money transfer agent. Modern blockchain settlement is more efficient, and one out of every six points of sale globally are NCRs. There is no reason we cannot allow people to send remittances from a POS — or even from an NCR ATM. Then customers can send money at a fraction of the cost in half the time and at an order of magnitude at more convenient locations. Verified customers in person with their phones is a very strong proof of identity from a compliance standpoint. There are a lot of details to work out, but it’s possible and would be much better for customers.
Q: Where is LibertyPay right now?
Kyle: We have hundreds of locations in the U.S. that primarily send to Brazil. We hope to expand to thousands of U.S. locations that send to a number of other countries in the near future. We are moving money primarily to Latin America right now, but there are no real limitations to going elsewhere. That just happens to be a large market that mostly uses physical locations for origination.
Q: How does the system work right now?
Kyle: Right now, LibertyPay looks similar to Western Union as a customer experience. There is an agent in a storefront who has a computer with a LibertyPay portal that inputs the transactions, collects compliance information and issues a receipt. They have a remittance agent license. On the backend, we use Bitcoin for cross-border settlement. Using Bitcoin as a treasury management tool replaces a couple inefficient steps between the initial request and the payout at the destination. This allows people to benefit from bitcoin technology without having to learn about it or even know it exists.
We use Bitcoin for cross-border settlement. Using Bitcoin as a treasury management tool replaces a couple inefficient steps between the initial request and the payout at the destination. This allows people to benefit from bitcoin technology without having to learn about it or even know it exists.
Q: Who are your customers?
Kyle: People that use us to send remittances are generally underbanked, not unbanked. They might be waiters, contractors, or small business owners. They like paying less in fees, speaking their native language with a trusted member of their community, saving time, and often get paid in cash.
Q: What will be the second- and third-order effects of the technology emergence of blockchain for financial plumbing?
Kyle: The data suggests that key parts of the world’s financial plumbing get moved onto the blockchain and off of the 1970s-era rails. Ultimately, that could mean people get to keep more of their money in countries where they need it the most.
Q: Right now, fintechs and blockchain for financial inclusion focuses on the unbanked and underbanked. Will the tech work for the middle class — people that have bank accounts and credit?
Kyle: Products for customers higher up the socioeconomic ladder built on blockchain technology are already out there, and LibertyPay will do that as well in the near future. NCR has a lot of payment tech to enable that. Then down the line, we can think about offering an international transfer white-label product for banks and neo-banks. For now, we’re just focused on the remittance customer that goes into a retail location. That is a multi-billion-dollar market which remains highly inefficient with high fees. That is where we are making a meaningful difference by helping people save when they send.
