Can blockchain technology reduce the cost of remittances?
The achievement of the Sustainable Development Goals (SDGs) demands unprecedented
resources and efforts. Remittances as one of the largest development finance flows
are an important source of income for millions of households in developing countries
and offer tremendous potential to contribute towards the achievement of Agenda 2030.
However, the high cost of sending remittances limits their full potential. The global
average cost of sending USD 200 is 6.9% of the remittance. SDG 10 C aims to reduce
the cost to less than 3% and to eliminate remittance corridors with cost higher than
5% by 2030. Blockchain technology promises to disintermediate banks, transform the
financial landscape and drastically reduce the cost of cross-border transactions,
yet there is a need for further evidence on this topic.
The OECD Development Co-operation Directorate (DCD) has developed this paper to provide
an overview of diverse perspectives on the intersection of blockchain technology and
remittances by exploring the opportunities and challenges of this technology for reducing
the cost of remittances. The paper identifies several limitations, such as data privacy
risks, regulatory uncertainty and last-mile delivery, among others, while investigating
whether blockchain technology is the solution to reduce the cost of remittances.