Blockchain Revolution

REMITTANCES: THE STORY OF ANALIE DOMINGO
Analie Domingo
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has been working as a nanny and housekeeper for twenty-five
years. One of more than 200,000 Filipino-born people living in Toronto,
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her story is
fairly typical: She left the Philippines as a young woman to settle in Canada with no
savings, no formal education, and very little knowledge of her adoptive country.
Analie has worked very hard and has carved out a life for herself and her family. Ten
years ago, she used her savings to put a down payment on a house, a remarkable feat
as she had been dutifully sending money to her family in the Philippines for the
previous three hundred months. Analie sent home so much money that her mother,
now in her seventies, was able to purchase a home of her own in Manila.
Analie graciously agreed to let us join her on payday to document her experience.
On Friday afternoon, Analie got her paycheck, handwritten by her employer, and
walked it to the local bank. This took fifteen minutes; twenty minutes if you include
the lineup at the teller. After she deposited it, she withdrew $200 Canadian. Cold hard
cash in hand, she walked a block to catch a local bus. Instead of heading toward her
home, she went two miles in the opposite direction and got dropped off at what can
only be described as a bad neighborhood. She walked for another four blocks and
finally arrived at the “financial institution” from which she would send the money: an
iRemit counter at the bottom of a housing block in Toronto’s St. James Town—one of
the poorest and most notoriously dangerous neighborhoods in Canada. Because many
people who use iRemit’s services are unbanked, the company has begun offering
other financial services, such as check cashing. Analie filled out a paper form, as she
has done hundreds of times before, and handed over her hard-earned money. For a
$200 wire, Analie paid a flat fee of $10. On the receiving end, her seventy-year-old
mother endured a similarly taxing (and equally ridiculous) trek to receive the money.
Of course, she had to wait three to four days before going to the bank, the average
time these payments take to get processed. Analie walked back to the bus stop,
boarded the bus, a subway, and another bus, and eventually, one hour later, reached
her home.
The cost of sending that remittance, $10, is equal to 5 percent of the total value. In
addition, there is typically a spread on the exchange rate of around 1 to 2 percent. At
around 7 percent this is a slight discount to the international average of 7.68 percent.
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That they are both “banked” and still have to go through this process makes the whole
farcical routine more egregious. The hard cost fails to capture the all-in cost. For

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example, the time value of the two hours Analie wasted doing this is equal to another
$40, based on her wages. Moreover, she had to leave work early because she feels
unsafe going to the neighborhood when it’s dark. For her mother, a septuagenarian
living in Manila, the physical toll on her body of making the journey to pick up the
money is equally significant. The purchasing power of the $10 Analie forwent to
make the transaction happen is certainly material to her, but far more for her mother.
Whereas in Canada $10 is the cost of a meal and bus fare, in Manila it could buy food
for a week. Over her lifetime, Analie has paid thousands of dollars to intermediaries
such as Western Union to send money home. Each monthly fee contributes to a global
honeypot of $38 billion in fees paid annually on remittances.
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Remittances of funds sent back to their homelands by people living in distant
locations connect diasporas globally. Diasporas are global communities formed by
people dispersed from their ancestral lands but who share a common culture and
strong identity with their homeland.
One of the functions of many of today’s diasporas is to address and help solve
common, global problems. Remittances represent one of the largest flows of capital to
developing countries and can have an enormously positive impact on the quality of
the lives of some of the world’s most vulnerable people. In some countries,
remittances are a huge and vital component of the economy. In Haiti, for example,
remittances account for 20 percent of GDP. The Philippines receives $24 billion every
year in remittances, or 10 percent of GDP.
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According to the International Monetary
Fund, recipients usually spend remittances on necessities—food, clothing, medicine,
and shelter, meaning remittances “help lift huge numbers of people out of poverty by
supporting a higher level of consumption than would otherwise be possible.”
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Remittance flows to developing nations are estimated to be three to four times as large
as foreign aid flows.
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The positive effects of remittances on the poor in developing
countries are well understood, yet despite this enormous economic injection,
remittance costs are still appallingly high. In some of the most expensive corridors
between nations, fees on remittances can run north of 20 percent.
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Canada is one of the largest net senders of remittances in the world. In Ontario,
Canada’s largest province by population and largest economy, 3.6 million people
identify as being foreign born and every year billions of dollars leave the province in
the form of remittances.
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Analie’s story is noteworthy because it is the norm in
Canada.
Consider the Dufferin Mall, also in Toronto. On most days the mall sees a steady
flow of traffic and could be mistaken for any other shopping center in Canada or the
United States. But every Thursday and Friday around five o’clock in the evening,
something entirely different happens. Paychecks in hand, thousands of foreign-born

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Canadians descend on the mall to send remittances from the mall’s various banks and
foreign exchange dealers to needy family members in their home countries. A cottage
industry of foreign exchange dealers and Western Union outposts has popped up in
convenience stores, bars, and restaurants in the surrounding area to deal with the
overflow.
Oftentimes traveling by bus, streetcar, or subway, with children in tow and
exhausted from a long day, Torontonians speaking Filipino, Cantonese, Spanish,
Punjabi, Tamil, Arabic, Polish, and other languages get to the mall, and then stand in
long lines waiting for the chance to send their hard-earned money home. These days,
most people pass the time on their smart phones, chatting over WhatsApp, Skyping
friends and family in Toronto and abroad, playing games, and watching videos. More
often than not, it takes upwards of a week for this money to arrive at its intended
destination, at which point someone on the receiving end needs to go through a
similarly tedious, time-consuming process.
What’s wrong with this scenario? Just about everything. Let’s tease out the bright
spots. Remember, most of the people waiting in line were using smart phones, a
technology that is pervasive in Canada and increasingly ubiquitous globally. Seventy-
three percent of Canadians own a smart phone, and in Toronto the number is almost
certainly higher. The country has a wireless network infrastructure among the best in
the world, which means that not only can most Canadians own a smart phone
(effectively a supercomputer), but they can also use it to harness the power of the
mobile Web in ways that would have seemed like science fiction two decades ago.
Why do those people wait in line to send money via a physical point of sale using
decades-old technology instead of what they have at their fingertips? Dollars are a lot
less data intensive than HD video. In fact, according to Skype, video calling consumes
500 kilobits per second.
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Sending one bitcoin takes about 500 bits, or roughly one
one-thousandth the data consumption of one second of video Skype!
By disintermediating traditional third parties and radically simplifying processes,
blockchain can finally enable instant, frictionless payments, so that people don’t wait
in line for an hour or more, travel great distances, or risk life and limb venturing into
dangerous neighborhoods at night just to send money. Today, a number of companies
and organizations are leveraging the bitcoin protocol to lower remittance costs. Their
goal is to put billions of dollars into the hands of the world’s poorest people. These
industries have been controlled by a handful of firms that have used their unique
positioning and legacy infrastructure to produce monopoly economics. But they too
see the risk from this technology and they’re scared. According to Eric Piscini, who
leads Deloitte’s cryptocurrency group, companies in the payment space today “are
really nervous about what the blockchain is actually doing to them. Western Union,
MoneyGram, iRemit, and others are very nervous about the disruption to their

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business model.”
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They should be, as there is an emerging industry of new and
disruptive companies that plan to take their place.