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"Bitcoin is positioned to disrupt the remittances industry in El Salvador, estimated at about $5 billion annually. Most families in towns like El Zonte do not h

"Bitcoin is positioned to disrupt the remittances industry in El Salvador, estimated at about $5 billion annually. Most families in towns like El Zonte do not have bank accounts, and rely on services such as Western Union WU +0.5%, which take 5-10% in fees. The closest Western Union is approximately one hour by bus, requiring the recipient of the cash transfer to take the bus back with cash on hand, creating a safety issue." [0] [0] https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-el-salvador-village-adopts-bitcoin-as-money/?sh=1c8a51bb2044 https://www.forbes.com/sites/tatianakoffman/2020/07/14/this-...

viraptor 5y ago
The WU fees are likely so high because they can be. If there's no competition, why not rake profits? I'm curious what the fees will be in a few weeks.
- 52-6F-62 5y ago
  If you are the only financial service for a large population, why not take them for all they're worth?
  - viraptor 5y ago
    Because you push the government to legislate an alternative on an immediate country-wide level. At their scale they could've been taking smaller profit for many years without poking the bear.
    - 52-6F-62 5y ago
      I think you misunderstand. I was rephrasing your statement "Why not take profits" to reflect the reality of WU's role in El Salvador.
- ccortes 5y ago
  Not only that, but handling cash is expensive
  - kristjansson 5y ago
    Yeah, operating a cash-heavy business _in El Salvador_ probably has some costs.
neither_color 5y ago
It's important to note that El Salvador's currency is the US dollar. WU doesn't even need to convert currency. They are simply taking up to 10% from a low-earning demographic group in the US just because they can. Even if bitcoinization itself "fails", if it forces WU to lower its fees it'll do net good. Among U.S. Hispanics and Salvadorans, the median annual personal earnings for those ages 16 and older was $25,000. Salvadoran Americans, even those who are poor, have an incentive to send money to family and friends in El Salvador because a U.S. dollar buys much more there than in the States. In all, they send approximately $800 million back home per year—close to $1000 per person 1000 bucks per person is not some exorbitant amount, it's some people's yearly starbucks budget. https://www.everyculture.com/multi/Pa-Sp/Salvadoran-Americans https://www.everyculture.com/multi/Pa-Sp/Salvadoran-American.... https://www.pewresearch.org/hispanic/fact-sheet/u-s-hispanics-facts-on-salvadoran-origin-latinos/ https://www.pewresearch.org/hispanic/fact-sheet/u-s-hispanic...
- booi 5y ago
  Interestingly Bitcoin can’t really “fail” in the conventional sense. It won’t go bankrupt and isn’t beholden to profits. It will be an interesting experiment
  - salamandersauce 5y ago
    I think if it plummeted to fractions of a dollar it would be considered a failure. Especially if they spent millions on something now worth a few dollars.
  - i_call_solo 5y ago
    Of course it can. The people maintaining the network can decide it's not profitable to do so and the value could drop to near worthless.
kragen 5y ago
I've had some experience with this myself, although I haven't gotten robbed outside a WU yet; I wrote a little about my Argentine experience in https://news.ycombinator.com/item?id=27448744 https://news.ycombinator.com/item?id=27448744. It's important to remember that WU's fees are so high in large part because WU is assuming risks (of identity fraud, of regulatory blockage, and of cash theft) that Bitcoin largely avoids.
- CapriciousCptl 5y ago
  WU incurred $41.3 million in "non-credit related losses," which includes fraud in 2020[1] which is only maybe 1% of their revenue. It had another ~$40 million in expected credit losses (primarily from agents), so I think ~2% of the fee goes to losses. Since their gross margins are consistently 40% and their operating margins are ~20% I think barriers to entry/international government regulations better explains the high fees. [1] 2020 10-k (ctrl-f for 41.3)
  - kragen 5y ago
    Thanks for digging that up. Yeah, I suspected that the "regulatory blockage" thing there might account for more of the risks than armed robbery :)
PragmaticPulp 5y ago
According to the article, the town didn't even want to use Bitcoin. An anonymous donor gifted them a large amount of Bitcoin on the condition that they must learn how to use Bitcoin and advocate for the use of Bitcoin: > After meeting with several philanthropies in the region, all of which wanted to take the funds and convert them into fiat to cover the community's immediate needs, the donor partnered with Michael Peterson, a San-Diego native that spends up to 9 months of the year volunteering in El Zonte. Michael was given the opportunity to administer the Bitcoin on one condition - he would not cash it out. Beneficiaries of the digital currency had to learn how to use the Bitcoin itself, creating a Bitcoin economy In other words, a wealthy Bitcoin holder gifted Bitcoin to one of the poorest towns he could find on the condition that they don't cash it out. They basically forced a poor town to use Bitcoin in exchange for free Bitcoin and now try to use it as an organic success story.
- slim 5y ago
  Seems legit to me. It worked. There was no reason for them to want to cash out apart from resistance to change.
  - loceng 5y ago
    Meanwhile whoever donated it is seemingly furthering adoption of it helping solidify the unnecessary increasingly large wealth transfer from later adopters to earlier adopters - a promise where the money is only worth the artificial price if enough of society adopt it to allow early adopters to be made whole again without crashing the price..
    - pinkybanana 5y ago
      So what. That guy helped the poor people, and helped himself even more. However on absolute terms, everyone involved is better off. If you are unhappy on how he did it, maybe you can donate your funds to poor people in a no-strings attached way. I don't see however why that would be much better for society.
      - 5y ago

viraptor 5y ago

The WU fees are likely so high because they can be. If there's no competition, why not rake profits? I'm curious what the fees will be in a few weeks.

52-6F-62 5y ago
If you are the only financial service for a large population, why not take them for all they're worth?
- viraptor 5y ago
  Because you push the government to legislate an alternative on an immediate country-wide level. At their scale they could've been taking smaller profit for many years without poking the bear.
  - 52-6F-62 5y ago
    I think you misunderstand. I was rephrasing your statement "Why not take profits" to reflect the reality of WU's role in El Salvador.
ccortes 5y ago
Not only that, but handling cash is expensive
- kristjansson 5y ago
  Yeah, operating a cash-heavy business _in El Salvador_ probably has some costs.

neither_color 5y ago

It's important to note that El Salvador's currency is the US dollar. WU doesn't even need to convert currency. They are simply taking up to 10% from a low-earning demographic group in the US just because they can. Even if bitcoinization itself "fails", if it forces WU to lower its fees it'll do net good. Among U.S. Hispanics and Salvadorans, the median annual personal earnings for those ages 16 and older was $25,000. Salvadoran Americans, even those who are poor, have an incentive to send money to family and friends in El Salvador because a U.S. dollar buys much more there than in the States. In all, they send approximately $800 million back home per year—close to $1000 per person 1000 bucks per person is not some exorbitant amount, it's some people's yearly starbucks budget. https://www.everyculture.com/multi/Pa-Sp/Salvadoran-Americans https://www.everyculture.com/multi/Pa-Sp/Salvadoran-American.... https://www.pewresearch.org/hispanic/fact-sheet/u-s-hispanics-facts-on-salvadoran-origin-latinos/ https://www.pewresearch.org/hispanic/fact-sheet/u-s-hispanic...

booi 5y ago
Interestingly Bitcoin can’t really “fail” in the conventional sense. It won’t go bankrupt and isn’t beholden to profits. It will be an interesting experiment
- salamandersauce 5y ago
  I think if it plummeted to fractions of a dollar it would be considered a failure. Especially if they spent millions on something now worth a few dollars.
- i_call_solo 5y ago
  Of course it can. The people maintaining the network can decide it's not profitable to do so and the value could drop to near worthless.

kragen 5y ago

I've had some experience with this myself, although I haven't gotten robbed outside a WU yet; I wrote a little about my Argentine experience in https://news.ycombinator.com/item?id=27448744 https://news.ycombinator.com/item?id=27448744. It's important to remember that WU's fees are so high in large part because WU is assuming risks (of identity fraud, of regulatory blockage, and of cash theft) that Bitcoin largely avoids.

CapriciousCptl 5y ago
WU incurred $41.3 million in "non-credit related losses," which includes fraud in 2020[1] which is only maybe 1% of their revenue. It had another ~$40 million in expected credit losses (primarily from agents), so I think ~2% of the fee goes to losses. Since their gross margins are consistently 40% and their operating margins are ~20% I think barriers to entry/international government regulations better explains the high fees. [1] 2020 10-k (ctrl-f for 41.3)
- kragen 5y ago
  Thanks for digging that up. Yeah, I suspected that the "regulatory blockage" thing there might account for more of the risks than armed robbery :)

PragmaticPulp 5y ago

According to the article, the town didn't even want to use Bitcoin. An anonymous donor gifted them a large amount of Bitcoin on the condition that they must learn how to use Bitcoin and advocate for the use of Bitcoin: > After meeting with several philanthropies in the region, all of which wanted to take the funds and convert them into fiat to cover the community's immediate needs, the donor partnered with Michael Peterson, a San-Diego native that spends up to 9 months of the year volunteering in El Zonte. Michael was given the opportunity to administer the Bitcoin on one condition - he would not cash it out. Beneficiaries of the digital currency had to learn how to use the Bitcoin itself, creating a Bitcoin economy In other words, a wealthy Bitcoin holder gifted Bitcoin to one of the poorest towns he could find on the condition that they don't cash it out. They basically forced a poor town to use Bitcoin in exchange for free Bitcoin and now try to use it as an organic success story.

slim 5y ago
Seems legit to me. It worked. There was no reason for them to want to cash out apart from resistance to change.
- loceng 5y ago
  Meanwhile whoever donated it is seemingly furthering adoption of it helping solidify the unnecessary increasingly large wealth transfer from later adopters to earlier adopters - a promise where the money is only worth the artificial price if enough of society adopt it to allow early adopters to be made whole again without crashing the price..
  - pinkybanana 5y ago
    So what. That guy helped the poor people, and helped himself even more. However on absolute terms, everyone involved is better off. If you are unhappy on how he did it, maybe you can donate your funds to poor people in a no-strings attached way. I don't see however why that would be much better for society.
    - 5y ago