Hong Kong-based Bitspark, a cryptocurrency startup that is today pitching with 10 other finalists in a Cyberport-organised event, earlier this week launched what it says is the ‘world’s first end-to-end’ remittance solution between Hong Kong and the Philippines via Bitcoin.
There are an estimated 140,000 Filipinos working in Hong Kong (nearly two per cent of the population) that on average send between HK$3,000 (US$387) and HK$4,000 (US$515) back to the Philippines in remittances each month.
That’s a large market opportunity for Bitspark to disrupt, simply by offering lower transaction fees (one per cent) than offered by banks and other remittance services (typically 2.5 per cent and over).
“We’re able to send cash in the form of Hong Kong dollars into Philippine Pesos that can be picked up at over 1,000 locations in the Philippines through banks, pawnbrokers, and remittance pick-up shops — and we’re able to send that money at half the price of the competition. We’ve had a good response,” George Harrap, Founder and CEO, Bitspark told e27.
Bitspark accomplishes the transaction from Hong Kong dollars to Philippine Pesos by using Bitcoin as the medium currency, so customers are essentially buying Bitcoin and cashing out in another currency at another location.
The potential for fluctuations in the cryptocurrency is not an issue as the transactions happen too quickly and customers are given an agreed rate ahead of time, which it is then up to Bitspark to fulfil.
“We do the conversion instantly, so there’s no risk of how much is going to arrive at the other end. Obviously there’s two markets involved: HK$-Bitcoin and Bitcoin-PHP. We look at both ends of the market to make sure prices are stable between them before making the transfer,” he said.
Certain locations in the Philippines can have the money available for pickup faster than others. For example, pawnbrokers may be a faster cash-out option than a traditional bank, Harrap explained.
Currently, many Filipinos in Hong Kong pay the higher remittance charges with banks in order for the money to be available for family to take out at an ATM on the other end, rather than having to go to a pawnbroker and provide ID.
Bitspark, however, is allowing money to be sent to regular bank accounts at lower rates, which is where it has the potential to disrupt existing models.
“Not only can you get a cheaper rate than the bank, but you can also have your money in your bank account as if you went into Metro Bank to do it yourself. We can do that within 24 hours and it’s over there ready to be picked up,” he said.
Of the 380,000 domestic helps in Hong Kong, roughly half are from the Philippines, with the other half made up of Indonesians and others from the region. Bitspark doesn’t charge a ‘flat cable rate’ on transfers, meaning if someone only wants to send a small amount, they will still just pay a relative percentage rather than a non-negotiable flat fee of say HK$20 (US$2.60) that may make them think twice.
Commenting on services that claim to offer a zero per cent remittance solution into the Philippines, Harrap said, “What it actually means is there’s not upfront charge… but then you get their exchange rate. So you can probably say there is no charge, but you are given an exchange rate that is not as good as the real rate, so effectively that’s the charge.”
Bitspark wants to make the service simple for everyone. No knowledge of Bitcoin is needed as that ‘just happens in the background’. Ultimately, Bitspark confirms a rate at the start and has to fulfil the exchange, no matter what fluctuations are going on with the cryptocurrency.
“Our longer strategy starting Q1 next year is to expand beyond the Philippines to countries like Indonesia and a number of others in Southeast Asia,” he concluded.
Bitspark held a trial day on Sunday, November 16, 2014, at the World-Wide House in Central, Hong Kong, and is currently exploring options for a permanent cash-in location to cater to Filipinos in the city looking to use its remittance service.