One of the biggest threats to the money transfer industry is de-risking by financial institutions which affects senders and receivers of money, businesses that need banking relationships and even NGOs working in affected regions.
De-risking refers to banks denying services to businesses, market segments and at times entire countries that are deemed to present higher risks or lower profits. It’s a common response to the increasing regulatory burden which requires banks to assess the risk of doing business with customers who might be engaged in illicit activities such as money laundering, terrorism financing and tax evasion.
Failure to comply could cost banks serious penalties, but regulatory guidance on how to mitigate these risks is often vague. As a result, banks have become increasingly conservative and less discretionary when evaluating clients, disengaging from entire customer segments rather than judging risk levels on a case-by-case basis.
De-risking affects the economically vulnerable and the businesses that serve them. This includes migrant workers abroad and their families at home, small businesses that need access to working capital, and NGOs working in conflict countries or disaster situations.
Banks based in richer countries are increasingly withdrawing correspondent banking services in what they deem high-risk jurisdictions. The consequence for small to medium-sized businesses operating in the affected countries is the inability to apply for credit which often depends on the rating of local banks. These businesses are affected by de-risking as they fall outside of the bank’s narrow risk appetite.
Money transfer businesses are perhaps the most targeted by de-risking and are increasingly excluded from banking services. Several smaller and independent players in the industry have had to provide other means of transferring funds at higher transactional fees, become agents of larger businesses or even disguise the true nature of their services simply to maintain an active bank account. Those that didn’t adapt in time, have since had to close their shops.
Increasingly, businesses are looking to cryptocurrency-based solutions to address these problems. Cryptocurrencies provide small businesses with the means to change their fate by removing reliance on banks altogether, effectively eliminating the risk brought on by de-risking. While cryptocurrencies enable greater efficiency and low-cost transactions, the disadvantage for everyday business use are the volatile price fluctuations as speculators move in and out of positions fast and frequently to make a profit.
Stablecoins on the other hand maintain a stable value equivalent to that of the asset they are pegged against. They are ideal for ongoing business operations, cross-border money transfers and payment settlements. Moreover, they form an essential part of the Bitspark ecosystem – purpose-built to provide businesses with access to an alternative financial system without the need to invest in custom integration.
The Bitspark ecosystem makes it possible for every business to leverage cryptocurrencies and free itself from traditional banking, with a cash-in cash-out solution. While the technology behind blockchain and stablecoins is complex, joining our community and transacting on the platform is
a straightforward and easy process.
We have designed a transaction workflow that is compatible with existing systems, inclusive of any local currency, payment option or pay out method. Breaking away from solutions in the past, businesses can integrate their own payout and settlement methods with the Bitspark ecosystem which means there are no major upfront costs to clicking into our global network.
Funding or withdrawing the digital crypto balance can be done by exchanging cash for crypto directly. The exchange between cryptocurrencies is done through our decentralised exchange (DEX) which ensures the best rates at the lowest fees – and as a DEX, it provides greater security than a centralised exchange. Because we are able to create stablecoins through Bitshares for any of the world’s 180+ fiat currencies, cross-border settlements occur instantly with both parties able to transact in their own native currency.
Payments and exchanges between exotic currencies around the world are done quicker, cheaper and more securely without the risk of banks closing down your account.
Bitspark makes financial freedom an inclusive option for every business, removing reliance on banks entirely by using cryptocurrencies – and by doing so making de-risking inconsequential for our customers.
Get in touch to find out more about how you can secure your business by joining the Bitspark
Bitspark is a bankless money transfer ecosystem that enables businesses and people to cash in and cash out cryptocurrencies across Asia and Africa.