There is a four-letter problem with the stream remittance market: fees.
The World Bank estimates that in 2016 migrant workers sent $575 billion in remittances, $429 billion of which went to building countries. On average, these workers paid 7% in remittance fees. Those over $40 billion in fees went true into the pockets of remittance use providers such as Western Union and MoneyGram. In some tools of the world, like South Africa, remittance fees can be as high as 15.76%.
SendFriend is looking to reduce the cost of high remittance fees.
Started by David Lighton, a former World Bank employee, SendFriend is a remittance use that aims to broach solutions that are 65% cheaper than the attention average. The startup announced Monday it lifted $1.7 million in collateral from MIT Media Lab, MasterCard Foundation, Barclays and Ripple.
SendFriend is removing started in the Philippines, enabling Filipino users to quick send and accept remittance transfers. The startup is set to go live in 4 to 6 weeks, as it waits for a income send permit from the state of New Jersey. Lighton pronounced the organisation is kicking things off in the Philippines because it offers a accessible regulatory environment, a vast remittance market, and most importantly the remuneration allotment companies SendFriend’s record smoke-stack provider, Ripple, has determined partnerships with.
Ripple, is a remuneration infrastructure and blockchain record solutions provider. The company’s flagship product is RippleNet, a tellurian remuneration rail joining banks, remuneration businesses, and exchanges to a singular cross-border payments network. When SendFriend goes live, it will spin the first U.S.-based consumer partner of RippleNet. In further to using RippleNet, SendFriend will also use xRapid, a liquidity resolution from Ripple, which will use XRP, the second largest cryptocurrency, as a overpass banking for settling payments.
To be sure, there are many companies, like TransferWise, that have been providing quick and inexpensive cross-border remuneration services but the need for blockchain solutions. Still, Lighton remarkable two categorical drawbacks of TransferWise: the remuneration send structure and the miss of support for the unbanked.
According to Lighton, TransferWise is means to yield low-cost use because of the ability to spin an general transaction into a internal transaction. When a TransferWise user wants to send remuneration internationally, instead of behaving that singular general transaction, TransferWise looks for two internal transfers and settles them on the platform. For example, if a proprietor of the Philippines were to send income to the U.S., TransferWise will compare that remuneration to a U.S. proprietor looking to send income to the Philippines. However, if the upsurge of income between countries is unbalanced, TransferWise would have to squeeze additional currencies at marketplace cost to settle payments, charging aloft send fees to the users. With SendFriend, a U.S. proprietor promulgation income to the Philippines will be means to precedence xRapid to now settle payments using XRP as a overpass banking between two payments. To be sure, while leveraging XRP does yield advantages to xRapid, it also comes with trade-offs, namely regulatory risks. That is because Ripple itself has grown an choice resolution called xCurrent which provides identical services that xRapid does, but utilizing XRP.
Lighton’s second evidence opposite TransferWise is the miss of support for the unbanked. According to a survey by the executive bank of the Philippines, 77% of Filipino adults do not have bank accounts. Users of TransferWise will need bank accounts. SendFriend, however, doesn’t have that requirement. It has shaped partnerships with what it calls “cash partners” in the Philippines to compensate out money to remittance receivers. The routine works as follows:
- A U.S. proprietor signs up for SendFriend and goes through a KYC process.
- The U.S. proprietor sends $100 to a Filipino target along with pin formula to determine the payment.
- The Filipino target brings this pin formula to a SendFriend money partner, which could be a preference store or guaranty shop, to accept their remuneration in cash.
- The money partner pays out money to the Filipino target and settles the remuneration with SendFriend.
While SendFriend might be using XRP and xRapid for the record stack, Lighton tells The Block that SendFriend is “not a cryptocurrency company.”
Lighton’s idea is for SendFriend users to never correlate with cryptocurrencies when using the services.
This square has been updated to explain the attribute between XRP and xRapid