âI havenât seen enough traction.â
One year after we resolved to set an annual debate, MoneyGramâs Peter Ohser remains right, the bitcoin blockchain hasnât disrupted global remittances.
Rather than take off through the power of the Internet, mobile and the price appreciation of a new currency, regulation, last-mile challenges and usability issues continue to keep the traditional powers that be in place.
As for the numbers that have been released (Digital Currency Group asserts that at least $40m in remittances is now going through four of its startups), Ohser isnât exactly impressed given that itâs a $600bn market. At Money2020, he echoes many of his critiques from last year. A new, non-governmental currency, he suggests, is still an idea thatâs a poor fit for cross-border commerce.
To Ohser, bitcoin and digital currencies remain a Napster, a technology thatâs too-hot-to-touch and likely to remain so for regulated institutions that donât want to deal with something that carries high risk and little upside for their operations.
âThereâs definitely money being moved, but for our purpose, for the ability to work with global banks, you canât touch bitcoin, you lose your global banking relationships,â Ohser said.
But, he sees this perhaps not as something that MoneyGram necessarily agrees should be the case, but something thatâs inherent in a financial climate where derisking is on the minds of many major banks.
Ohser told CoinDesk:
âBanks have a hard enough problem with cash, and weâre experts in cash. Banks donât like cash, thatâs clear, but they hate bitcoin even more. Thatâs a real limit for folks like us.â
The conversation isnât exactly a repeat, though.
Rather, Ohser said that MoneyGram remains intrigued by the many blockchain proof-of-concepts (even if he notes theyâre small in size for the noise theyâre making), and that he believes itâs here where the technology is likely to have an impact.
But unlike the trade finance process, where he sees substantial savings to be had in business-to-business transactions across borders, Ohser characterizes the remittance process as one thatâs already efficient.
Even with a digital currency, he argues the model isnât going to adjust. Itâs the back-end of the financial system that he believes is ripe with inefficiencies for the solving.
Interestingly, Ohserâs comments on distributed ledger applications mirror what many digital currency supporters have said about their preferred brand of the technology.
For example, Ohser sees the current correspondent banking model (in which financial institutions provide services on behalf of others in trades) as both âantiquatedâ and contributing to financial exclusion.
âIf youâre a bank in Africa and you have to trade dollars, they have to trade through France and New York, and everyone wants a piece of the action along the way,â Ohser argued.
In this light, he sees the wider use of permissioned blockchains as a better way for banks to become better integrated for cross-border commerce, he just doesnât see the banks going away.
Ohser doesnât buy the Internet argument either. While the various web protocols were eventually weaved together into a common consumer platform, Ohser believes blockchain will be different.
âBecause of the regulations, of all the other infrastructure. Itâs not going to be an open thing,â he said, adding:
âThereâs no one blockchain, itâs going to be 6,000 small blockchains.â
Ohser isnât exactly high on the benefits these blockchains could provide for its market.
The reason? He doesnât think paper currency will be removed from the equation, meaning he believes blockchain wonât particularly impact the consumer-facing part of his business.
After all, he said, MoneyGram still works with banks (moving data and guaranteeing funds), but ultimately, itâs trying to deliver value to end users in physical currency.
âYou have to manage multiple currencies, 120 currencies. For us thatâs still a complicated business,â he said.
While he admits thereâs âbeautyâ in how bitcoin seeks to unite the exchange of data and the exchange of value, he still said itâs ânot the right solutionâ for MoneyGram.
As for cross-border distributed ledger services, like Ripple Connect, he said they remain an option, but that perhaps the network effect isnât there yet for it to be valuable.
âYou can bring a lot more efficiency in correspondent banking. We still have to move through those chains, but I think thatâs a huge opportunity to put more cash in our customer pockets,â he continued.
Here, notably, his comments contrast from last yearâs, where he said systems like Ripple were perhaps unlikely to change or impact MoneyGramâs cost structure.
But while Ohser is interested in the big vision, he said from a company perspective, itâs unlikely that MoneyGram would seek to âpush the envelopeâ with blockchain.
Thatâs not to say that Ohser doesnât see value in the ideas, just that they donât quite make sense for a major remittance firm to pursue given how he believes that the inefficiencies are on the back-end of the financial system.
âThereâs a lot of stuff thatâs way out there about identity and compliance, practical use cases that are too far out for us today,â he said. â[But] if Iâm moving millions across borders, and I can save money on BPS, thereâs going to be movement, but that doesnât happen on the customer side.â
Unlike an increasing number of banks and stock exchanges, Ohser sees the MoneyGram business model as relatively safe given onramps and offramps remain expensive. (As he said last year, his customers need cash, often immediately).
Today, he still argues that with consumers unlikely to change their habits, MoneyGram is in a position to wait and see just what happens when blockchain adoption increases.
âThereâs not a lot of upside for being first to market, if it goes wrong you have more to lose. Thatâs where you see our strategy is on the fast follower side,â he said, concluding:
âBut you pay attention, and you have to be a part of the conversation.â
MoneyGram image via Shutterstock
