Digital Currency Foundation: UK Small Businesses Could Save £800 Million per Year on International Transfers if They Switched to Digital Currencies
LONDON, January 15, 2019 /PRNewswire/ --
Research released today on behalf of the Digital Currency Foundation has shown that UK SMEs could save £800 million a year if they switched from existing financial institutions to instead use digital currencies for their international money transfers. The DCF will be driving a Digi-van advertising this fact to the major UK commercial banks' headquarters in the City of London today.
The research also found that those living in the UK sending money to loved ones abroad are losing as much as £427 million per year because they continue to use conventional financial services for their international transfers.
Digital Currencies offer a quick and low cost payment method for consumers and businesses by removing the need for traditional intermediaries, which can in the case of international transfers cost up to 10% of the total payment amount in fees, and take several days to arrive.
The data released today coincides with the 2nd Annual UK National Digital Currency Day. The day's highlights will include a roundtable event involving industry leaders and officials from Her Majesty's Treasury to discuss the need for appropriate regulation in the UK. The day will conclude with a reception in Parliament to celebrate the transformative potential of digital currencies and the benefits they currently offer to UK consumers and businesses.
Mihir Magudia, Managing Director of the Digital Currency Foundation, commented: "This research should act as a wakeup call to businesses across the country. Using Digital Currencies can save them significant sums. They offer a fast, cheap and secure alternative to traditional payment methods, an advantage that is magnified in the sphere of international payments. The raison d'être of the Digital Currency Foundation is to highlight the benefits digital currencies offer, and this research shows that today, on the 2nd annual UK National Digital Currency Day, this role has never been so important."
Notes to Editors:
Total achievable saving = potential savings for SMEs making payments abroad + potential savings for those sending money to friends and family abroad.
Remittances:
Under existing financial services:
Volume - 2017 UK remittance estimate[1]: 9.274 billion USD = 7.32 billion GBP[2]
Cost - Average of the cost of remitting[3] = 8.58%
Total cost = 7.32 billion * 0.0858 = £628 million
Crypto comparison:
Total Transaction fee percentage = GBP-BTC cost + BTC-BTC cost + BTC-FX(foreign currency) cost
BTC-BTC Transaction fee - 0.255 USD per transaction[4] = 0.2 GBP
Percentage for median BTC-BTC transaction = 0.2/120 = 0.1666%
GBP-BTC cost = BTC-FX cost = 1% + 1% =2%
Total cost for crypto = 7.32 billion * 0.0216 = £158 million
Total Saving:
£628 million - £18 million = £470 million
Small Business:
Under Existing financial services[5]:
Volume - For UK SMEs international trade is worth over £700bn, of which £365.3bn takes place within the EU, £162.92bn of which are outgoing payments (SEPA payments).
Cost: Average cost of SEPA Payments = 2.43%
Total transfer costs in 2014 = 162.92 * 0.0243 = £3.96bn in transfer costs in 2014
2019 cost[6] = 2014 cost * 1.25 = £4.95bn
Crypto comparison:
Total Transaction fee percentage = GBP-BTC cost + BTC-BTC cost + BTC-FX(foreign currency) cost
BTC-BTC Transaction fee - 0.255 USD per transaction = 0.2 GBP
Percentage for median BTC-BTC transaction = 0.2/50,000 = 0.0004%
GBP-BTC cost = BTC-FX cost = 1% + 1% =2%
Total crypto cost 2019 = crypto transaction fee percentage + SEPA payments value 2014 *1.25
= 0.0204*(162.92*1.25) = £4.15 billion
Total Saving:
£4.95 billion - £4.15 billion = £800 million
Total Annual Achievable saving for UK SMEs and ex-pats living within the UK = £470 million + £800 million = £1.27 billion
References:
[1] Latest World Bank Remittance estimates - (http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data)
[2] USD/GBP exchange rate at 1250 on 04/01/2019
[3] Assumptions: average cost of the top two financial remittance institutions - MoneyGram and Western Union - to the top 5 remittance destinations from the UK - Bangladesh, Nigeria, India, Poland and Pakistan. The calculation is based on the median amount remitted - 120 GBP. Source: https://remittanceprices.worldbank.org/sites/default/files/rpw_report_december_2015.pdf
[4] Based on the average Bitcoin Transaction Fee on 03/01/2019. Source: https://bitinfocharts.com/comparison/bitcoin-transactionfees.html#3m
[5] This is based on a 2014 study carried out by Oxford Economics and commissioned by Money Mover using a typical SME transfer of £50,000 into Euros. Source: https://www.moneymover.com/media/uploads/files/UK-SME-International-Payments-Analysis-Full-Report.pdf
[6]Based on research by Capital Economics which found the total amount extra taken by traditional financial institutions on Small Business SMEs had increased by 25% over a 5 year period: https://www.telegraph.co.uk/money/transferwise/international-business-payments-analysed/
SOURCE Digital Currency Foundation
Share this article