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Bitcoin Startups Challenging Big Banks Profits
By Kevin Helms
Big banks are increasingly worried about losing profits to fintech companies such as Bitcoin startups. Eighty-eight percent of banks’ executives believe that their businesses are at risk of losing revenues to these new entrants, according to a recent survey. This profit loss could be as high as 10 percent at Santander Bank, a leaked memo shows.
Also read: Mexico’s New Bill Could Be a Game Changer for Bitcoin
One of the “Big Four” audit firms, Pricewaterhousecoopers (Pwc), published “A Global Fintech Report 2017” early this month, showing that 88% of surveyed incumbents’ executives believe their businesses to be at risk of losing revenues to fintech startups. The firm wrote:
Many [banks’ executives] fear losing business to innovators, starting with payments, fund transfer and personal finance sectors. […] More consumers will adopt nontraditional financial services providers.
Last week, Guardian Money reported on a leaked internal memo of Santander Bank which reveals that 10% of the bank’s profits come from its international cash transfer business.
The documents detail how the bank charges six times more than its fintech 
rivals, making huge profits by giving customers poor exchange rates. Rather than charging them fees directly, big banks cash in on the difference between the money markets exchange rates and the rate they offer customers, which is known as the “FX margin”.
“Santander made €585m from money transfers – equal to nearly a tenth of its 2016 global profit of €6.2bn – and that it charges six times as much as rival Transferwise for sending £10,000 from the UK to Spain,” the publication wrote.
The memo informs Santander executives that new startups entering the money transfer business are “attacking the profitable slices” of the bank’s business, noting that:
10% of the group’s profits at risk when international transfers repricing takes place.
The Santander’s memo draws attention to money transfer service company Transferwise, stating that the service charges “€64 to move £10,000 from the 
UK to Spain” while “Santander charged €394 – six times as much”. If Santander were to charge the same as Transferwise, “its revenue would collapse from €585m to €95m, a fall of 84%,” Guardian Money wrote.
Launched in January 2011 and headquartered in London, Transferwise is a peer-to-peer money transfer service with eight offices worldwide. The company says it has more than a million customers and processes over $700 million in transactions every month. Unfortunately, the company states in its “Acceptable Use Policy” that it does not provide services to businesses involving bitcoin and other cryptocurrencies.
Many money transfer startups today use Bitcoin in their businesses. Most of them offer low rates and no transfer fees. Below are some examples.
Luis Buenaventura
Recently, Bitcoin.com interviewed Luis Buenaventura, Chief Technology Officer at Bitcoin remittance startup Bloom Solutions who has also written a book on remittances. He said that Bitcoin’s “strongest use case was probably remittances,” at least in his country, the Philippines. Bloom Solutions’ website claims to offer a solution for agents and resellers in the international remittance market a way to “reduce your international settlement and FX Costs by up to 50%.”
The Singapore-based Coinpip is an example of a Bitcoin remittance company which offers services in more than 40 countries worldwide. The company charges “no forex and other hidden charges”, its website states.
Another example is the Hong Kong-based Bitspark, which offers bitcoin-backed remittance service in five different currencies. The company told Bitcoin.com in an interview in February that “in competitive corridors, total costs can be as 
low as 2-3% with traditional providers on an average transaction size of $250 equivalent”.
Then there is Abra, which has a different business model. The startup uses Bitcoin, smart contracts, and a peer to peer human teller network to transfer money directly from a sender to the recipient globally without a middleman. The company’s recently-launched app charges no transfer fees and advertises “low exchange rates”, allowing users to add and withdraw funds in bitcoin as well.
William P. Eason
MarketHive Entrepreneur/ Contributor
