Sending Money Sucks

Brian Zwerner
5 min readApr 7, 2022

The only way to get money from your bank account to someone else’s account with same day availability of funds is via a wire. The fee for a wire from a bank in the U.S. costs anywhere from $10–30 each. Internationally wires can cost twice as much. There are 15–20 million wire transfers every month in America, and the banking industry earns over $1Bn per year from these fees. Admittedly, much of this is charged for institutional wires, but you get the point. Moving money is a big business.

Outside of the banking system, MoneyGram is a business that has been around for over 40 years. Their focus is on transferring cash between individuals. You can walk into a MoneyGram store with cash in tons of countries and then someone else can pick up the cash in another MoneyGram store anywhere in the world. They now offer app-based money movement in addition to their traditional store product. Fees on international payments via MoneyGram can run 3–5% of the amount being sent. For lower income people, this is a lot of lost spending power. MoneyGram was taken private recently, but they did nearly $1Bn in revenue in their last reporting year.

We also have digital-first products like Venmo and PayPal that will allow you to move funds electronically between friends for free. However, this is just a journal transfer, you can’t actually spend the money easily. You might be able to make an online purchase with your PayPal balance, but you likely can’t buy lunch in a restaurant with these funds. You can transfer the money to your bank account, also for free, but you can’t walk into the branch and withdraw that cash for 1–3 business days.

Overall sending money today sucks. Either you go with expensive options that allow immediate access or you use the free options but must wait days to use the money. Can Cryptocurrencies fix this outdated system? Probably, but it will take a few more years.

Today, you can easily send USDC stablecoins, Bitcoin, or any other Cryptocurrency to a friend with a click of a button on your phone. The transaction will process in a minute or so, and your friend will have the tokens in their digital wallet. It works a lot like the centralized payment networks of Venmo and PayPal. There is typically a fee for moving the money, but with services like Lightning Network and others this fee can be very low, like pennies.

The funds move from your friend’s Crypto wallet to yours, but now what? You’re not likely able to use your Crypto to buy a cheeseburger for lunch or a T-shirt at many stores today. The good news is this is likely to change. Companies like BitPay allow businesses to accept Crypto for goods and services. You can actually buy a T-shirt at a Dallas Mavericks game using Crypto now. You can also use Bitcoin to reload your Starbucks account, and then you can buy your latte and muffin. BitPay is powering a lot of these transactions. They have been around since 2011 and have raised over $75MM in VC funding from top shops including Founders Fund and Index Ventures. Their success has spurred a lot of competitors, big and small. Coinbase now offers a Commerce product. PayPal does as well. I expect we will see a ton more businesses accepting Crypto soon.

One item of note is that once an individual or business accepts Crypto from a friend or customer, the tax issues get messy quickly. If someone sends you Bitcoin and you convert it to USD to buy something, you technically have a taxable event on the movement in the price of Bitcoin from the time you got it to when you sell it. Bitcoin is treated as property for tax purposes, and you need to declare the gain or loss on the price movement as income. The same applies to businesses that accept Bitcoin and eventually liquidate to pay their USD bills. Oh yeah, and the person sending you Bitcoin is technically selling the $BTC they previously purchased, so they have a taxable event as well.

Eventually, it is possible we will see the rules on this change to be more friendly to the industry. Unfortunately, this will likely require an act of Congress, so it’ll take a few years. It is much easier if your friends and the businesses you buy things from move around Crypto using stablecoins, which maintain a $1 pegged price. I would guess we will see stablecoins as the main mode of transaction in Crypto over the next few years.

Despite these challenges, I expect that Cryptocurrencies will eventually take a big part of the money transfer business away from banks and money transferors. There is a big pot of fees for disruptors to chase here, so it’s an enticing area for startups and even big tech players. I’ll have more to say on this topic in the future as the payment rails for Crypto mature and become more accepted.

One last thing to note here is that beyond money transfer, credit card processing is a much large opportunity. Credit card processors charge 3% anytime you use your card to buy something. Crypto could do this same thing much cheaper. The opportunity here is enormous. People in the U.S. put $7 Trillion of charges on their credit cards annually. The number roughly doubles when you look at the whole world. There are way over $100Bn in credit card processing fees annual. Visa booked net revenue of $24Bn in 2021. Get the picture yet? This a huge place for Crypto to make an impact for consumers and create big businesses. Just today, online checkout company Bolt bought Crypto payments processor Wyre for $1.5Bn, so things are heating up. Expect more on this topic in the future as well.

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