Cryptocurrencies – One way to eliminate international payments fees
Cryptocurrencies are gaining momentum and recognition, which means people, governments and organisations are finding different ways to benefit from this new way of paying. Bitcoin is the first and most well-known cryptocurrency and offers FinTechs a number of advantages.
Paying by Bitcoin allows money to move online from one person to another, without an intermediary such as a bank or credit agency. It’s like paying in cash, but it’s done digitally and there is no identity attached to the payment. However, because Bitcoin transactions are traceable, it makes it almost impossible to introduce fake, new money.
Merchants can avoid paying high transaction fees with cryptocurrency, because there are no banks or traditional financial institutions involved. Added to this, they don’t need to worry about fraudulent purchases and international payments don’t incur conversion fees because Bitcoin doesn’t have to be changed into local currency. It also opens up new markets, which may be banned by traditional payment providers due to increased risk of fraud or for political reasons.
The European Court of Justice recently proposed that Bitcoin operations should be exempt from Value Added Tax (VAT), as it is in the UK, removing even more costs for businesses and customers. Don’t get too excited though, as not all EU countries are champing at the Bitcoin to remove VAT. In December 2014, Estonia opted to apply VAT to the full amount of Bitcoin trades, not just the commission or the fee incurred by the transaction.
One of the latest places to turn to digital currency is the Greek island of Agistri, which agreed to trial Nautiluscoin, in July. This summer’s fears that the ATMs would be empty and the banks could close, was a major concern for the tourist industry in the region. Access to Nautiluscoin meant holidaymakers would still be able to spend during their summer getaways. However, Greek residents could still find it difficult to purchase Nautiluscoin, due to government restrictions, which also prevent them from buying Bitcoin.
This summer also saw Unicef launch its own cryptocurrency, Unicoin, which it describes as ‘the first currency designed to do good’. There is only one way to get hold of Unicoin. Children were invited to upload their drawing to unicoins.org, with some text explaining what they hope to achieve in life. In return, they received a Unicoin, which can only be spent on educational supplies for disadvantaged children for Unicef’s Early Childhood Development programmes.
Cryptocurrencies do present some risks, such as fluctuating values and the hassle of finding suppliers who are willing to take Bitcoin or an equivalent as payment. However, with charities and even governments looking at the possibilities cryptocurrencies offer, it’s no surprise that businesses are also considering the benefits of currencies like Bitcoin. But for those unwilling to venture into the world of digital currency, Banking Circle offers international payments with significantly lower fees than traditional banks, and money can be transferred instantly, just like an internal transfer.