Cross-border remittance has been on the rise over the years with hundreds of platforms gunning for a share of the money transfer business. There is over $500 billion worth of digital assets transferred cross-border through personal remittance. Most of the monthly transfers are from people working abroad sending money to their families back home. Stellar, an open-source network for storing and sending money, has been on an upward trajectory in terms of growth as it attempts to overcome the inherent weaknesses of the traditional remittance platforms. As a decentralized platform, Stellar is built with a consensus protocol that reduces the time and cost of the transfers. So, why is Stellar a great option for sending remittances?
Before we dwell on why the advantages of Stellar for cross-border remittances, let us understand what the platform is, and how it works.
What is Stellar?
Stellar is a decentralized open network for peer-to-peer transfer of money. Through the Stellar platform, one can create, send, and trade all forms of digital money, including fiat currencies such as dollars and cryptocurrencies such as bitcoin. Developed by Stellar Development Foundation (SDF) in 2014, the Stellar protocol allows all financial systems of the world to work together under its network. Stellar is powered by its own cryptocurrency, Lumen (XLM).
What makes Stellar good for remittance?
One of the most challenging aspects of cross-border remittance is the slow speed of transactions. Using the traditional remittance means is slow as it often takes days for the transfer to be approved or confirmed. Stellar has been hailed for its fast transaction speed of 5 seconds on average, which makes it a preference for those transferring money cross-border to their families. Sometimes the monies sent are meant for emergencies, and the faster the recipient receives it the better. Stellar can achieve this speed because its consensus protocol is built to only allow only a select set of trustworthy nodes, unlike other platforms that require the entire network of nodes to approve transactions. The result is faster approval transactions and transfers.
Remittance through traditional money transfer services, such as bank transfers or Money Transfer Operators (MTO), is known to be costly. These money transfer services charge as much as 8 percent of the money remitted, and can run up to 15 percent when money is being transferred to developing countries. These high transaction fees are a disadvantage to many who can least afford them, considering that most users are the 1.7 billion unbanked individuals across the world.
Stellar manages the fast and cheap transfer of money across the world by eliminating the intermediaries that often delay remittances and increase transfer costs. The platform uses anchor services, instead of the more expensive and bureaucratic intermediaries like banks. The anchors accept deposits and withdrawals via traditional rails. These funds are converted to digital currencies, and vice versa. The anchors make stellar more efficient, as the platform can leverage the services of these anchors to provide cost-effective and faster cross-border remittance services. Some of the well-known anchors are Settle Network, Tempo, Cowrie, and Finclusive. Stellar partners with TransferTo to enable cross-border payments to more than 70 countries.
Best places to buy Stellar Lumens (XLM)
The best places to buy XLM are exchanges including Coinbase, Kraken, Binance, Bittrex, and Huobi among others. No matter where the money is being sent to, it will only take you a few seconds and a fraction of a penny to send money to another person living thousands of miles away in another country.