U.S. consumers sending international bank transfers pay more than $12 billion annually in remittance fees alone.
A recent blog post from cryptocurrency exchange Coinbase indicates the vast majority of U.S. remittance fees for international transfers wouldn’t apply to similar transactions conducted using cryptocurrency.
According to the exchange’s research, “The US average fee rate of 6.18%, means Americans’ average yearly spend is likely close to $12 billion on remittance fees.” The post goes on to state that the average transaction time for such remittances ranges from one to 10 days, while similar cryptocurrency transactions usually take around 10 minutes.
Remittance payments represent a sort of ‘double whammy’ for international transactions as, typically, they require both a sending fee and a conversion fee to exchange between currencies.
Cryptocurrency transactions, however, tend to cost significantly less. Per Coinbase, Bitcoin (BTC) transaction fees average approximately $1.50 and Ether (ETH) averages $0.75. Such fees are potentially much lower than traditional remittance fees, which, according to The World Bank, average 6.3%. By Coinbase’s estimates, sending money via BTC and ETH is 96.7% cheaper than traditional remittance methods.
While the report doesn’t appear to have the rigor of a scientific study, it does illuminate some of the difficulties faced by the more than 1 billion people who rely on remittances and how global cryptocurrency adoption could change the financial landscape. U.S. senders, for example, were responsible for 94.9% of all remittances sent to Mexico in 2022, according to Wilson Center, a D.C.-based research institute.
Related: 9 years after the first Bitcoin ATM, there are now 38,804 globally
It’s estimated that approximately 6% of U.S. adults currently hold some form of cryptocurrency with adoption rates continuing to rise since at least 2019 — with the exception of two quarters’ worth of downturn at the end of 2022. If these rates can increase or maintain the status quo, a trickling exodus from traditional remittances to cryptocurrency-based international transactions could eventually disrupt how the global financial industry handles associated fees.
