Recently we had a couple of interviews with Juliette Boulay from Daxue Consulting (link) and the guys from LNP China (link) when we chatted about how Remitsy was started and how we work. We thought it’d be a good idea to share some of the highlights on our blog!
Why Remitsy payments are powered by the blockchain
Everywhere we go, people are asking us about blockchain and what it is. You have surely heard about blockchain as well, but might wonder how it really works and how it helps Remitsy to transfer your money to China. We are lucky to have Richard and Neil on the team, as they are some of the few blockchain experts in China.
A blockchain system can give businesses a lot more confidence when making transactions. The blockchain is essentially a ledger – which is distributed across all users of the system. If someone makes a transaction, everyone’s version of the ledger is updated. And each user is automatically checking all others to make sure a mistake hasn’t been made. Every transaction is time stamped so nothing can be changed subsequently. This results in a very transparent and secure payment system, that no longer requires a centralized third-party to verify each transaction.
What we do is take advantage of blockchain technology’s ability to digitize value across a decentralized network, and thus make funds accessible almost instantaneously anywhere around the world. In other words, this allows us to convert from one currency into another via a record on the blockchain – for example making GBP in the UK available to us as CNY in China within seconds. This method is so efficient that it allows us to convert currencies at the real exchange rate (the mid-market rate used across the financial sector).
Bank fees and costs of other payments solutions
When we started Remitsy, our original aim was only to disrupt the traditional banking sector’s dominance in the business payment market. But we quickly realized that a lot of small business were using PayPal and other online platforms to complete their international payments. Even though the processing fees, exchange rate spread, and withdrawal fees adding up to 9% of the total invoice value! And we thought banks were charging a lot! The fact that businesses are forced to choose these payment options is evidence of the huge inefficiencies of modern international payments, and we want to solve it.
As Richard says:
The most important thing is that companies have got to understand their costs. Companies will just accept charges that are given to them by their banks, but if you look at exactly what you are being charged, you will realize you can usually save a fair amount. Also, foreign companies don’t realize that when Chinese companies receive foreign currency they will be hedging their currency risk. Usually, they will add 5% to the price of their invoices in order to cover potential exchange rate fluctuations.