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Can blockchain technology reduce the cost of remittances?

Author

Listed:
  • Friederike Rühmann
  • Sai Aashirvad Konda
  • Paul Horrocks
  • Nina Taka

Abstract

The achievement of the Sustainable Development Goals (SDGs) demands unprecedented resources and efforts. Remittances as one of the largest development finance flows are an important source of income for millions of households in developing countries and offer tremendous potential to contribute towards the achievement of Agenda 2030. However, the high cost of sending remittances limits their full potential. The global average cost of sending USD 200 is 6.9% of the remittance. SDG 10 C aims to reduce the cost to less than 3% and to eliminate remittance corridors with cost higher than 5% by 2030. Blockchain technology promises to disintermediate banks, transform the financial landscape and drastically reduce the cost of cross-border transactions, yet there is a need for further evidence on this topic.The OECD Development Co-operation Directorate (DCD) has developed this paper to provide an overview of diverse perspectives on the intersection of blockchain technology and remittances by exploring the opportunities and challenges of this technology for reducing the cost of remittances. The paper identifies several limitations, such as data privacy risks, regulatory uncertainty and last-mile delivery, among others, while investigating whether blockchain technology is the solution to reduce the cost of remittances.

Suggested Citation

  • Friederike Rühmann & Sai Aashirvad Konda & Paul Horrocks & Nina Taka, 2020. "Can blockchain technology reduce the cost of remittances?," OECD Development Co-operation Working Papers 73, OECD Publishing.
    • Handle: RePEc:oec:dcdaaa:73-en
    DOI: 10.1787/d4d6ac8f-en
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    Cited by:

    1. Volker Brühl, 2021. "Decentralised Finance — wie die Tokenisierung die Finanzindustrie verändert [Decentralised Finance (DeFi) — How Tokenisation is Changing the Financial Industry]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(8), pages 629-637, August.
    2. Kevin Coutinho & NeerajKumari Khairwal & Pornpit Wongthongtham, 2023. "Towards a Truly Decentralized Blockchain Framework for Remittance," JRFM, MDPI, vol. 16(4), pages 1-18, April.
    3. Marco Schletz & Ana Cardoso & Gabriela Prata Dias & Søren Salomo, 2020. "How Can Blockchain Technology Accelerate Energy Efficiency Interventions? A Use Case Comparison," Energies, MDPI, vol. 13(22), pages 1-23, November.

    More about this item

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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