Why Haven’t Remittance Companies Started Using Stablecoins?
As Steve Jobs stood on stage on October 23rd, 2001, he held a small metal box in his hands known as the iPhone. Almost 20 years later, the music industry has never been the same. Gone are the days of CD’s and mp3’s, but also with them thousands of music labels and providers you’ve never heard of. Even the ones deemed too big to fail such as Universal or Sony had to rapidly adjust to new market players like Spotify in recent years to stay relevant.
This changing of the guard is normal, it is part of our evolution — and it’s the reason why remittance companies haven’t started using stablecoins… yet.
For starters, remittance companies ranging from UnionPay to MoneyGram have sunk in decades of legacy systems and with it — sunk costs & technical debt. Why fix something that isn’t broken? As the global economy only spurred further along, with more people working away from their native lands, being able to send money across borders has never been more in demand. We can therefore make the assumption that for remittance companies, the bottom line has never been greener than it has been the last decade or so. On top of that, they haven’t had the need to innovate much further than what was already built. Receiving your USD in San Francisco, verifying it, and storing it there while releasing Thai Bhat in Bangkok to your family member has been (and will continue to be) a very successful business. The fees that these remittance companies have accrued most likely have grown exponentially in recent years (along with massive migrations of laborers and general workers).
Companies that rely on physical infrastructures like these, where high barriers of entries used to be present, tend to rest on their laurels instead of catching the newest waves of innovation. Setting up a Western Union in a country like Somalia seemed like a monumental achievement and a globalized milestone 20 years ago, similar to being the first franchised McDonalds to open there. But today, it is simply much easier and frictionless to send bitcoin to your Somalian relatives instead. Hubris, as well as sunk costs and a lacking sense of urgency have combined to deter remittance companies jumping head first into stablecoins.
But, this may soon change. They may follow the trend set by large banks and cryptocurrencies in general. When Bitcoin and Ethereum first exploded onto the scene in the mid 2010’s, traditional banking and financial institutions also balked at upending their technical infrastructure and personnel to catch the new wave. Not even a year into the 2020’s though, and this tune has changed drastically as banks such as JP Morgan are not only embracing cryptocurrencies, but are diligently working at issuing their own – which is apparently ‘live’ accordingly to their execs.
Perhaps one day soon, we will see someone like Western Union issue their own stablecoin, pegged against the USD or asset of their choice. With their brand name and historical prestige, this may quickly attract millions of early adopters — further boosting not just their stablecoin value, but the industry altogether. But perhaps, they will do what the music industry did and stay idle, giving the opportunity instead to new market players, like Stably.
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