BBVA, Spain’s second-largest bank, announced a new mobile app that will let users send money to people in Mexico. These transfers are called remittances, and they’re a big business. In 2015, folks in the U.S. sent over $24 billion south of the border, according to the Pew Research Center.
Now many mobile apps claim they’ll perform the once-onerous task of transferring bucks across borders with the click of a button. But behind the scenes, sending cash to friends and family abroad is quite a bit more complicated than that.
Multiple apps exist for transferring money across borders, including some that use Bitcoin, according to Bloomberg BusinessWeek writer Drake Bennett. But he says Western Union, which has a well-established network and name recognition, is still the leader in the remittance business.
“The fact is that in lots of parts of the world, especially the developing world, where a lot of remittance flows go, it’s still a cash to cash business,” Bennett says.
Western Union has an app, but it hasn’t noticeably changed the remittance business. Bennett says it’s not likely BBVA’s will either. Money transferring apps are coming up against steep regulations, according to Bennett, that are slowing down development in this space.
“I mean, as we’ve gotten more and more concerned about terrorist financing and money laundering, it’s gotten more and more onerous and more and more complicated to verify that these systems aren’t being used by people who are using them to skirt laws,” he says.
“So even if you have the sweetest technology around, that’s still a big cost and that’s something where Western Union has a real head start and has invested a lot of money.”
The cost of complying with complicated international regulations is not only impeding the development of these apps, it’s being passed on to customers, according to Bennett.
“In the money transfer world, there are actually developmental economists who think we should chill out a little bit about this stuff, that basically all of these regulations that are put in place are increasing the cost of the financial life of these people who in most cases are not particularly well off,” he says.
This is how using Bitcoin most differs from transferring remittances through bank apps or Western Union. Bitcoin, unlike cash, is exempt from these regulations by nature of its design, according to Bennett.
“A lot of the appeal for the people who are Bitcoin enthusiasts is the fact that it’s anonymous. And that is sort of fundamentally opposed to the interests of intelligence and law enforcement agencies to keep track of who’s sending money to whom,” he says.
Written by Kate Groetzinger.