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Migrants hit by high fees to send money home (www.bbc.com)

submitted 4 months ago by tardigrada@beehaw.org to c/finance@beehaw.org

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One target of the UN Sustainable Development Goals is that by 2030, remittance fees should be less than 3%, and total fees to send and receive money between a pair of countries should be no more than 5%. Some researchers believe that to be truly affordable, the first goal should be even less than 3%.

The International Monetary Fund has estimated that reaching this target could generate $32bn (£26bn), even apart from the direct-cost savings.

This is because remittances have such powerful knock-on effects for the economy, and people tend to send more in remittances when fees are lower.

Yet the world is far off this target. According to the World Bank, the global average is 6.2%, over double the target.

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[–] ABluManOnLemmy@feddit.nl 5 points 4 months ago (5 children)

This could work if there are reliable exchanges already available in local currency on both sides, and if both sides have bank accounts and the technical know-how to use exchanges. However, if Monero were to become a large scale method of remittance transfers, then Monero could be overvalued in exchanges in source countries and undervalued in exchanges in destination countries, especially in situations where the currencies are not freely convertible. With P2P exchanges this situation may become even more exaggerated.

Eventually HFT traders may catch on and level the market, but this would essentially mean a transfer of wealth from the masses sending remittances to a few HFT traders.

My point is, though sure it works fine in limited situations in strong economies (where there are liquid, freely exchangable fiat currencies and fair exchanges with low fees), it is a lot more complicated than it seems to use it at such a scale or in countries with underdeveloped economies.

[–] ericjmorey@beehaw.org 1 points 4 months ago* (last edited 4 months ago) (2 children)

this would essentially mean a transfer of wealth from the masses sending remittances to a few HFT traders.

Compared to a frictionless world, this is sub optimal. But as you and the article established, there are frictions that currently result in a tranfer of wealth at a 6% rate of transfer volume which could very well be greater than the future equilibrium you posit.

I think that there are options that could be implemented at scale faster and simpler compared to crypto token exchanges. But any individual current getting hit with high transfer fees could benefit immediately if they know about and learn how to use something like monero.

[–] ABluManOnLemmy@feddit.nl 2 points 4 months ago (1 children)

There may be some situations where this makes a lot of sense, particularly involving currency manipulation. For example, in Argentina, the official exchange rate was much less favorable than the actual (black market) exchange rate. Monero could enable someone to sell at the more favorable exchange rate locally, rather than relying the transfer provider in the source country to do it.

However, it's important to consider potential market effects if this is done at scale. For some people, it could work, but probably not yet on such a large scale.

[–] ericjmorey@beehaw.org 1 points 4 months ago

The point is not to be the "rational economist" who doesn't pick up money off the ground because someone else would have picked it up if it was really there.

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