I get asked pretty frequently about when the inevitable crypto domination of remittances will happen. I don't see it being inevitable, at all, so in case I'm right I thought I'd share it here so I can be right in perpetuity :). And if I'm wrong, it will hopefully be useful to look back at why.
At its core, a remittance is the transfer of ownership of a defined amount of money from one person to another. There are a lot of ways to do this: I can hand the money to a person that gets on a plane or a bus and delivers it to you; I can go online and tell some intermediary that I want to send money to you and have them do it on my behalf; I can simply think that I would like you to have $10 and it is incepted into your pocket (still working on this, not much progress since the Willy Wonka and Mike Teavee incident).
If we think of crypto (or some crypto) as money, then crypto is pretty good at this core function of transfer of ownership. Assuming I have some crypto, and you have a crypto wallet, I can pretty quickly and cheaply transfer ownership of that crypto from me to you. Plus, Elon might even solve my inception problem.
However! Transferring ownership is not where most of the cost of a remittance comes from, nor most of the value. This is a key misunderstanding of the "crypto is coming for remittances" line of thought.
The cost of remittances are high because:
It's expensive to take payment from the person who is sending money, especially by debit/credit card
It's expensive to meet local know your customer/anti-money laundering regulations
It's expensive to exchange one currency for another, particularly in parts of Africa, Asia and Central/South America
It's expensive to deliver money to the preferred receiving method of the recipient (methods of receiving are not generally fungible, I'm talking here about bank accounts, mobile money, cash)
On a remittance of £300, these costs in aggregate might be anywhere from £3-£10.
There are some clear ways that crypto could address each of these:
Create an inexpensive way to pay for crypto (circumvent the card companies), or, eventually, salary payments, disbursements, etc are paid in crypto and no payment from fiat is required
Centralize/digitize/tokenize identity (Tim Berners-Lee is working on this)
We all agree to use the same cryptocurrency, which becomes completely fungible for any purpose, or, short of that, a crypto FX market is created that trades at effectively zero spread
The crypto ecosystem evolves to the point where the crypto that you receive can be used for any purpose: buying things, paying other people, making investments, saving, etc.
Some of these are more likely to be solved for than others. Someone could significantly undercut the card providers to provide a cheaper way of paying for crypto, though this is getting less likely in at least some markets where interchange is capped (eg. the EU). The card companies also have a great moat. Centralized, digitized identity is likely to happen in some way (or at least I hope). Right now it feels extremely unlikely that a very fragmented market for crypto will centralize around one token (it probably shouldn't), and I don't see where a zero-spread crypto FX market will come from. I do think it's highly likely we'll see crypto become a better means of exchange, unit of account and store of value going forward.
If I could pick one reason that crypto won't come to dominate remittances it would be that we have a bunch of "good enough" solutions right now that keep the market extremely fragmented (I see a corollary here in why Facebook wasn't able to create a WeChat-style super app; we already had enough "good enough" solutions from prior technology, whereas China did not). By "good enough" I mean that they get the job done, not that the cost or other elements are necessarily acceptable.
I do not expect that we'll see the cost of remittances continue to stagnate. There is too much competition and too many parties with very large, software enabled networks that are interested. But my default is that it won't be crypto that tips it, at least until some of these challenges are addressed.