Joseph Joel Bayaua is employed as a private driver by a family in Hong Kong. He has worked in the special administrative region for four years.
When Bayaua sends part of his earnings back to his family in Santiago, a city of 132,000 people in the Philippines' northern Isabela province, he selects either a Western Union money transfer or an inter-bank transfer. He usually ends up choosing Western Union.
"Both methods of sending money are basically the same. They just differ sometimes by the rate of their transfer fees, but I prefer Western Union over bank-to-bank transfer because it is more convenient for the recipient, for having numerous branches of Western Union back home."
Bayaua now has a new option for sending money home. A startup called Bitspark is aiming its bitcoin-enabled remittance service at people like Bayaua and the estimated 164,000 Filipino domestic workers in Hong Kong.
Cheap remittances and diverse pick-up points
Bitspark promises lower transaction fees than banks and money transfer services, using bitcoin to cut costs. It's charging a 1% commission, which is significantly lower than the 3.5% it costs to send money to the Philippines from Singapore, a comparable remittance corridor that is tracked by the World Bank. The World Bank doesn't track the cost of remittances from Hong Kong to the Philippines.
Bitcoins's potential for slashing remittance costs has been hampered by the fact that receivers often have no easy way to convert the funds into fiat. Bitspark attempts to solve this by letting senders pay in cash and offering a range of diverse collection options for recipients.
The service has struck a deal with a Philippines remittance provider, Rebit, which handles conversion of bitcoin funds to pesos. The Rebit partnership means that Bitspark customers can send their funds to one of 20 banks in the Philippines, in addition to other popular collection spots like the Palawan chain of pawnshops.
"We wanted to develop a system where people don't have to really know and understand bitcoin to use it," Bitspark's chief executive George Harrap said.
Harrap described a remittance process that largely keeps bitcoin hidden from the customer's view. Customers walk in to the Bitspark booth, on the first floor of World-Wide House, a popular hangout spot for Filipino workers on their days off. They hand over the Hong Kong dollars they want to send and fill in a form telling Bitspark where to send the money to. They then receive periodic text messages from Bitspark updating them on the movement of their money.
Bitcoin powers the transfers
What customers don't see is Bitspark monitoring bitcoin prices in Hong Kong dollars and pesos to find a favourable rate. When it finds a suitable price, it converts the cash it's been handed into bitcoin and sends it to Rebit, which in turn converts the coins into pesos for collection. The funds have to be ready for collection within 24 hours.
Harrap said Bitspark guarantees the amount a recipient would collect, so there is no risk of volatile bitcoin prices eating into customer transactions.
"With cash-in, cash-out remittances, you don't need to know about bitcoin to use it. It just so happens to be the best rate around [so] people will use it. You don't need to explain [bitcoin] to them," he said.
Harrap wouldn't reveal how many transactions Bitspark has performed, saying only that his service has completed transfers for amounts ranging from HK$500–HK$10,000.
Adding more remittance corridors
Bitspark was selected for a Hong Kong government incubation programme in July. It gets up to HK$530,000 for being part of the programme, which is run by an organisation called Cyberport.
Harrap said he is raising more funding to expand into other remittance corridors. Mainland China and Indonesia are on top of his wishlist. According to Harrap, there is pent-up demand in China for a way to move money overseas, potentially skirting renminbi currency controls. Indonesians make up the second-largest group of migrant domestic workers in Hong Kong, with more than 150,000 Indonesians employed in the sector.
While Harrap has big plans for Bitspark in the remittance business, workers like Bayaua remain cautious about turning their hard-earned dollars into cryptocurrencies. But Bayaua's curiosity has been piqued.
"I just didn't have an interest [in bitcoin] before, but now I am getting more and more curious about it ... it is a big help for us low-wage earners for providing us a cheaper means to send money back home," he said.
Philippines image via Shutterstock