We conducted 17 different remittance experiments using both, cryptocurrencies and traditional methods using services like Western Union. Here’s what we found.
You work in a metro city, and receive salary in your bank account on the last day of every month. You got paid for the hard work. You want to send a part of that salary to your parents who live far away. What do you do? Possibly open one of the dozen Banking apps on your phone and within seconds your money is making its way to your parents’ bank account.
Now imagine that you are living in a different country. Say the United States of America, working hard to fulfill that American Dream. Every month, because you are a good son or daughter, you send money back home, to your family in India.
This is known as Inward Remittance. Money coming to India from a foreign country. Have you ever wondered what is the most efficient and profitable way to do this?
Inward Remittance Experiment
For decades inward remittances have been controlled by a handful of companies like Western Union, Transferwise and others. Remittances are also heavily scrutinized by regulators in India. The operational expenses in maintaining a remittance corridor leads to higher fees and increase in time taken to make the transfers from one country to another country, from one currency to another currency.
We wanted to test if remittance using Cryptocurrencies was a better alternative to the current model. So we decided to send USD, Bitcoin, XRP from US to India and redeem them here across multiple platforms. For this, I needed someone in the US to help me out.
Enter, Matt Ahlborg, the creator of UsefulTulips.org, a website that explores the use cases of cryptocurrencies, runs analytics and offers insightful charts and data on some of the most popular Peer to Peer cryptocurrency exchanges in the world.
Over the several weeks that we conducted our experiments, two primary market conditions affected our results:
- When Indian Crypto markets were at a premium compared to global markets.
- When Indian Crypto markets remained on par with global markets.
On the US side, we sent USD directly or BTC from several different platforms.
We sent USD via PayPal, Western Union and Transferwise. To send BTC, we used apps like Coinbase and CashApp.
On the India side, the USD sent from the US were directly credited to our bank account or platform accounts like Paypal. The BTC received were sold on several different Crypto exchanges like Paxful, WazirX and InstaCrypto. This gave us an oppotunity to understand P2P, Spot and Crypto Remittance services in the country.
What we found!
We took many notes from each of our 17 experiments, but here are some of most important key findings
- Best Case: Sending funds via BTC and selling on Paxful is more profitable than selling on a spot exchange.
- USD Transfers: Western Union is the fastest with competitive exchange rates and fees.
- Crypto Transfers: Lower Value transactions are more expensive on CoinBase. The fee is $1.49. Larger Transactions are overall a lot more profitable than USD transfers.
- Worst Case: We lost roughly ~150 INR in a transaction of $20 (~1500 INR) using PayPal.
Remitting Money to India when Indian markets have a BTC premium
Indian crypto markets are almost always sporting a minimum of 2% premium to USD based Crypto markets. At press time, the premium on Indian market is roughly 2.65%. You can check the premium anytime on our telegram bot.
Between April 30 and May 06, Indian markets remained at around 2-3% premium. Hence all of our crypto remittance transactions were profitable, despite very high fees on Coinbase for buying BTC.
By Buying $20 worth of BTC on Coinbase and selling them on Paxful immediately, we received an extra 255 INR, which is ~$3.4. This is a whopping 17% more. You can make more profit if you create an ad with a higher selling price on market places like Paxful.
USD transfers via incumbents is very expensive and time consuming. On the contrary, Crypto transactions are fast and not that expensive. Coinbase charges $1.49 flat for smaller value transactions. CashApp charges roughly 2%.
We did multiple transactions of $20 each to save on the costs, however a $200 transaction will not be affected much by expenses like fees on the exchange.
On Paxful, we used Bank transfers as the payment method mostly, such as IMPS and UPI. We also used PayTM wallet, which is generally more profitable but the money can only be used in the PayTM wallet ecosystem.
Remitting Money to India when Indian Crypto Markets Have no Premium
It rarely happens, but sometimes Indian markets do lose its premium. On those days, sending Crypto might not be the best idea unless its a large amount. At press time, the premium on Paxful with reference to USD-INR is ~2.33%.
For this experiment we removed Paypal as it was already the most expensive of all and it made no sense to lose any more of Matt’s money on such transactions.
Western Union is the clear winner with the least fees when it comes to transferring USD to India if other avenues like crypto are non profitable.
Buying BTC on Coinbase in small quantities is expensive due to the fee, hence Cashapp comes a close second to Western Union in terms of the least amount of loss when sold on Paxful P2P marketplace.
Spot Exchanges like WazirX lose out to P2P exchanges as rates on P2P can actually be managed/controlled on single ad based and different payment methods help get a better rate.
Especially, selling BTC on Paxful and accepting funds in PayTM wallet yields ~3% more premium.
Matt and I monitored the prices for several days after these tests, the premium was tending to zero for the month of May and June, but is back since July.
At press time, sending 20 USD worth BTC to India and selling it on Paxful gives an additional Rs. 100/- to the recipient if BTC is purchased via Cashapp. The BEST WAY to send Crypto to India is to buy BTC on CashApp, send it to Paxful and sell it to receive money on PayTM wallet.
Sending Large Amounts in BTC to India
Obviously an Indian living in US won’t be sending back $20 frequently. India receives close to $80 Billion or 600000 Crore INR in remittance every year.
So for our last experiment Matt and I decided to buy $200 worth of BTC using CashApp and sell it in India on Paxful.
On June 06, 2020 when premium on Indian market was less than 1%, Matt purchased 0.02027186 BTC on Cashapp and sent it to my Paxful wallet. Matt paid $4 in fees on Cashapp (2%).
When I sold it in India, I received INR 14868. According to the USD-INR exchange rate then, 200 USD is equal to 15118 INR. 14868 INR would be equal to 196.7 USD.
Sending BTC to India instead of USD is profitable if the BTC can be purchased for lower fees in the US. If not, sending BTC will be profitable if Indian markets are at premium as they are right now.
Matt Ahlborg regularly conducts such experiments with other countries, or on other features and publishes his reports on UsefulTulips.
Share your story of inward remittance to India in the comments below.