In mid February remittances gained a new player in the form of Coinbase, which has begun a service in Mexico that will enable customers to cash out remittances sent in crypto using the platform at retail locations in the country. The move follows the launch of Facebook-owned Novi’s crypto remittances service.
We’ll be reviewing any further details of the service provided in Coinbase’s quarterly earnings next week, but some key takeaways for now:
- Coinbase was already providing crypto remittances, just not with cash payouts. The company has been pushing remittances as a use case for its send crypto service for some time, although until now recipients could only convert their money into a local fiat currency by sending it to a bank account, and in some cases there was a waiting time for the transfer. By contrast, this will enable recipients in Mexico to instantly convert their crypto-based remittances and collect them in cash from 37,000 retail locations, mainly through a partnership with Remitly and the convenience store chain Oxxo.
- The service is cryptocurrency agnostic. While Novi only sends remittances using the Pax Dollar (USDP) stablecoin, Coinbase will support remittances using any of the cryptocurrencies it supports, although it highlights stablecoin USDC as a non-volatile option. This allows users to send money in crypto they already hold, rather than having to convert into a specific one.
- The product acknowledges the ongoing need for cash. Coinbase specifically launched the service in recognition for the need for cash pay-outs in Mexico, and says it plans to extend the service to other markets in the future. This is in sharp contrast to digital-only services such as Novi, and reflects what we’ve been saying for some time: that cash isn’t going away any time soon.
- Pricing is still to be confirmed. Coinbase is offering the service for free until the end of March, after which it says it will charge a “nominal fee”. In a blog post about the launch, the company stated this would be “25–50% cheaper than traditional cross border payment solutions”, although it is not clear what it is benchmarking against to reach this number. In the same piece it cited World Bank research showing that globally sender fees can reach 6-7% (FXC Intelligence provides the underlying data for the World Bank’s remittance pricing index). However, the cost of paying out to cash in Mexico is highly variable and dependent on funding and disbursement – and is provider specific. Our own FXC Intelligence data shows a much lower median cost paying out cash to Mexico than 6-7% (get in touch if you need the data).
Remittances is becoming an interesting extension product for many non-remittance services, especially to Latam from US based providers. The repeatability of the customer and the often necessity reason for payment makes the customers interesting enough to make Facebook, Revolut and Coinbase all enter the segment. Expect more to follow.
How does the pricing of crypto-powered remittances compare to fiat providers?