Technology is changing one of the most fundamental mediums that touch every person on the planet: money. Bitcoin’s rise showed us how much demand there is for a globally accepted digital currency.
However, all the things holding bitcoin back — merchant acceptance, instant transactions (bitcoin takes about an hour), and security — are actively being created by the world’s social network. This past March, Facebook rolled out free peer-to-peer payments and set the company down a path to becoming one of the world’s most powerful financial institutions.
Why It Makes Cents
Last year foreign workers sent $583 billion to individuals in their home countries, also known as remittances. Remittances are one of the largest financial inflows to the developing world. In some countries remittances are responsible for as much as 30 percent of GDP.
However, sending money is expensive. The market is controlled by two companies — Western Union and MoneyGram — which hold a duopoly over the global industry. The average transfer fee is more than 8 percent, but fees of up to 29 percent are still being charged on money transfers between some countries. In a recent report, The World Bank concluded: “Forcing migrant workers to pay as much as $50 to send $200 is wrong, especially when they are sending salaries they have earned in the hope of supporting their families back home.”
For its part, Facebook isn’t charging fees on transfers. While the company does incur charges from banks on the back end, Facebook says it will not pass these on to the consumer.
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