Financial institutions still struggle with both simple and complex transactions abroad, serious travelers need cryptocurrencies.
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Cryptocurrency May Not Be What You Think
At its core, crypto really shouldn’t be viewed as it has been portrayed. Bitcoin and other cryptocurrencies are seen as either a way to obscure transactions for nefarious purposes or a completely speculative market for intangible and valueless goods.
On a base level, cryptocurrency should allow Person A to transfer value to Person B nearly instantaneously with very little cost. It makes sense. Money is just a number in an account and with modern technology, there’s no reason why we shouldn’t be able to transfer X value to another person instantly for next to nothing.
The concept of cryptocurrency is a decentralized platform for which transactions are both anonymous and public. Cash used to satisfy the anonymous component (though now high-value transactions can almost never be paid with cash anonymously.) Fiat currencies like the US Dollar or the Euro, for example, are controlled by central banks that can increase or decrease the value of the currency based on politics, or any other reason.
Cryptocurrencies avoid the centralization element, no one controls the currency and most currencies have a finite amount of coins that will be minted. In theory, finite currencies like Bitcoin should only ever increase their value as expanded adoption can only create further scarcity.
Cryptocurrency Is Optimal for Travelers
It’s not all that important that travel sites like Online Travel Agencies (OTAs) accept cryptocurrency to book flights. While it may be convenient if the travel industry began accepting bitcoin as a payment method, the two benefits of crypto (privacy and cost) aren’t really a factor. Whether buying airline tickets or a car rental, identification will still be required so privacy is not really a factor. Most credit cards no longer charge foreign transaction fees so there’s not really a cost-saving either.
The Euro helped travelers visiting more than one country on the continent to avoid expensive changeover fees as they traveled, but currency exchange is still a problem for many outside of Europe.
Crypto could ease the burden and cost of those living and working abroad. Remote working visas make this more common than ever before. Many have found themselves stuck in a foreign country unable to get home due to arrival restrictions and find themselves requiring more cash than under normal circumstances – crypto helps with this too.
There are also some advantages for loyalty programs to utilize blockchain-based technology. (If you’re a developer, email me: sherpa@thetripsherpa.com.)
Banks Struggle, Still – Some Examples
When I was living in the UK I was paid in US dollars to my American bank account for an extended period of time. Every paycheck cost me approximately $150 in transfer fees to move it from the US to my UK account where I paid my living expenses. In a given year, I spent almost $4000 on transfer fees alone which at the time was a considerable portion of my overall post-tax wage. Little has changed in the last 13 years to improve upon this process with traditional banks.
My wife and I would go abroad someplace in Europe once a month. We would disclose to the bank (Barclays at the time) our travel plans in advance of our departure. Without fail, the first ATM withdrawal would clear and subsequent charges would be blocked until I called them to remind them of the travel notice and have my account freed.
We were told to expect this, that nothing more could be done, but I suspect that if the CEO of Barclays or Chase’s Jamie Dimon had this experience every time they left the country, they’d have it fixed.
I have a friend that recently went abroad and his bank (Citizens) has not allowed him account access despite daily calls to the bank. Each time the bank claims to have resolved the matter yet his funds remain unavailable. They shrug their shoulders indifferently.
That same friend was buying a property abroad. He transferred the amount via wire but there was no timeline given for the transfer of funds used in the purchase. Upon arrival, the receiving bank where he owned an account held the funds at their whim. He arranged for his local attorney to remind them that they were expecting exactly this amount and it was operating exactly as planned when it finally arrived. They ultimately released the funds.
In 2010 while we lived in Thailand, my wife and I were able to move our savings for a nominal fee from a UK bank to a local Thai bank that accepted foreign denominated instruments. This wasn’t free, but it was still cheaper than going through the usual channels of wire fees plus exchange costs.
My first example occurred in 2008, the most recent example occurred two days ago. Banks have made virtually no effort to move funds or make their clients’ finances available to them despite jumping through the requisite hoops. It’s time for a change.
Why Hasn’t This Been Solved Yet?
With the availability of technology to solve these sorts of problems, banks seem unwilling to advance solutions that make it easier for their customers to move money around the world, even when notified or presented with a contract. They make money by obstruction so banks have little incentive to solve the problem.
Chase has invented its own cryptocurrency to solve these global transfers but it isn’t available for customer use and hasn’t been implemented in a way that allows clients to remove their funds in a simple and low-cost method.
There are debit cards that will allow some of the benefits of cryptocurrencies but not full access in a simplified manner. Why hasn’t the crypto finance arena allowed for peer-to-peer transactions as inexpensively as they can be conducted online? There’s no money in that.
Conclusion
Travelers possessing the ability to hold their money in a single digital wallet instantly available to them wherever they go is the way forward. Issues like the stability of digital currency must be overcome. Transactional processes can make spending crypto as easy as swiping a credit card though options to do this are limited right now. Blockchain technology protects banks against financial risk but they refuse to co-operate due to lowered demand for bloated, slow transfer options. Travelers and travel companies can lower their risk and their costs by using digital currency and accepting it as a payment option; serious travelers could save a substantial amount by using crypto.
What do you think? Will cryptocurrency become a more viable option for travelers?
It’s about anti-money laundering procedures at banks. I’m a trader and it seems like 5x a month we get a reminder email or have to take a virtual seminar about money laundering. Banks don’t care if your money is held up 5 days and the inconvenience it causes… They care about the 7 to 10 figure fines they’ll receive if they are found to be negligent in allowing money laundering.
Lmao, another contrived use case by a casual crypto bull who barely understands how banking works. “Wahh there are frictional costs associated with moving money across borders, we should abandon the entire monetary system and use crypto!”
Crypto in its current state is at best a store of value to hedge against the weak dollar and inflation. But really it’s just a speculative orgy where morons gamble away their life savings.
I highlight the speculation element but I’m suggesting for significant movements with stable coins it’s a huge improvement.
David, the fomo you’re experiencing, along with the accompanying passive aggression, is quite normal among investors who have chosen to sit out of crypto.
Because when I think crypto, I think “low transaction costs.”
Are you kidding?
Cost per transaction are fractions of a penny. Can you give some guidance as to why you find this expensive?
The crypto you describe is Utopian. In the real world:
1. Crypto is terribly slow. Something like 5 translations per second worldwide. Nearly instantaneously? No way.
2. Crypto requires both parties to have internet. Having no internet means having no money.
3. Businesses that accept Bitcoin user the current BTC/USD rate. With this fluctuating widely, good luck planning your budget.
4. No anti-fraud mechanisms. Use crypto often enough, sooner or later you may find your funds transferred to an anonymous third party, never to be seen again.
For most travellers credit cards are immensely more useful than crypto.
@Uri – Thanks for your comments. Here are some responses.
1) I’m not sure which transactions you’re referring to but mine have always been instant.
2) Where have you been that there’s no internet? And if so, the other banking concerns wouldn’t be handled without hard currency either (transfers/wires/etc). I’m not sure if the use case where that’s an advantage.
3) I mention stability of coins is a problem, but there are stable coins such as the the US Dollar coin which tracks the dollar but still has the same speed and low cost transaction advantages of crypto.
4) This is a concern, absolutely. But if you’re using crypto to replace cash you have the same issues with ATMs and debit cards with little purchase protection.
For common purchases, sure, for larger purchases and longer stays, credit cards and banks are insufficient.
Agree with some of other comments. Seems contrived. Everybody’s banking reality is somewhat different, even at the same institution. For many people with meaningful account balances, banks do not assess ATM fees and foreign currency translation is more or less at market. It does not cost me anymore to withdraw $300 is Boston or THB equivalent in BKK regardless of the foreign bank ATM. Credit cards oriented toward travelers rarely block foreign charges. Wires are still an issue but that’s rarely/never an issue for travel expenses. Is paying in cash really that much less secure than crypto? Guess is depends where in the world you are and nature of counter party. Seems like a pretty niche fact patterns. All and all, I like my bank.
@Kyle Stewart there’s no internet in Myanmar right now. In effect, there’s no internet in Turkmenistan. China could restrict, or kill crypto inside their borders if they were so inclined. Even Turkey has been willing to block things they don’t like. And of course there’s the 40% of Earth’s population that doesn’t have access to the internet.
Also… A schwab account. I don’t understand why they don’t automatically come with all passport applications. It’s the biggest no brainer in all of travel.
On your fees on transfers from UK US – may I ask what proportion of the fees were to the US side bank(s) ?
To me crypto as a solution to international payments problems is the wrong solution for the wrong problem. Nearly all of the delay problems seem to stem from fraud departments of mainstream bank at the in//out point for one or the other fiat currency.
Introducing btc/crpyto adds a 3rd exchange rate risk – as you will need to do currency 1 -> btc and btc -> currency 2, and if you think the fraud dept. are unhappy about your foreign trad banking sector transfer well im sure theyll be even more forthcoming when it is proceeds of a foreign crypto sale…
Crypto can be useful in places with currency exchange controls such as Argentina. Anywhere else you are better off using the likes of Transferwise and Revolut.
This analysis sounds outdated. I’ve lived in Germany in 2018 and had no problem using my Schwab ATM card for cash. Used my US Chase credit cards for everything else and had no FTFs. I never opened a German bank account and used my US bank account to pay the US dollar balance on my Chase cards.
Paying rent by bank transfer was the only thing that had fees and for that I used transferwise. I actually had no wire fees with Chase Private Client, but my landlord had fees for accepting a foreign bank transfer.
With regard to crypto, the reason Coinbase’s IPO has week was so successful is because it generates massive revenue, but nearly 96% of Coinbase’s entire revenue in 2020 was generated from transaction fees charged to users. So crypto is not a transaction fee-free product. Maybe over time, we will see few compression, but probably not in 2021.
This article is poorly thought out, much like Kyle’s article on why AA should invest in crypto. Kyle identified a problem, but didn’t consider direct solutions to the problem. Picking the right financial institution and right account targeted towards globalists will solve the problems he identified.
He also claims crypto is the solution but in a hand-wavy way. No comparison between crypto fees and transitional international banking fees is presented. We are just supposed to assume that his claim is true. Based on Coinbase’s financials, it’s not true – there is a $100B business based on crypto transaction fees right in front of us.
@Nate Nate – I am going to try and respond to these in order.
1) Not outdated, I state that it was as recent as last week in the case of Citizens bank.
2) Crypto would take away the need for your receiving bank to charge as well. CPC also requires a pretty healthy personal balance sheet and is not available to the masses. When I needed it most, CPC would not have been an option, crypto would have been well within my grasp, however.
3) These are somewhat unrelated facts. Coinbase focuses on retail transactions of coin, not transfers to other banks or peer-to-peer. It’s also not the only place to acquire crypto, it’s just the easiest. It succeeds for the same reasons AOL did – it’s not the fastest, best nor the cheapest – it’s the easiest.
4) I welcome your critique but would ask you how you would have instead transferred enough from the US to a European bank in seconds with few fees enough to buy an apartment.
5) I’m not sure what a “hand-wavy way” is but I did cite the costs of transfering in my 2008 example. Compare $4000/year to fractions of a penny per transaction and I think it’s pretty clear. Again you mention Coinbase but they don’t do what you think they do. They just usher in retail customers who purely speculate, not who actually use the currency.
Transferwise (now Wise) is much faster and cheaper than traditional bank transfers. Intra-Europe the transfers happen in seconds. A bonifico in Italy can take days. I doubt governments will ever allow a payment system that is completely disintermediated.
The most popular cryptocurrencies are poorly suited for transactional use. I’ve used bitcoin to get money out of Communist China (long before the FOMO hysteria), but that is a different use case than you are describing.
The CEO of Barclays in 2008 was John Varley. Perhaps more (in)famous from that era was then-Barclays Capital CEO Bob Diamond, Jamie Dimon was never associated with any Barclays institution .
Transferwise/Wise is good for limited use but it shouldn’t be so piecemeal and intra-European didn’t really help in any of the examples, though it may be great for Europeans. I don’t want to have to run transactions by governments at all. If we all used cash, we wouldn’t have to, why should we with crypto?
I agree 100% that the most popular for assets (Bitcoin, Ethereum) are far too volatile for regular use. But the USD coin could be that option. Or if Chase allowed customers to move with JPM coin, that would work too.
To clarify I typed “but I suspect that if the CEO of Barclays of Jamie Dimon” but it should have read “but I suspect that if the CEO of Barclays or Chase’s Jamie Dimon had this experience every time they left the country, they’d have it fixed.” I have made that change now but I wasn’t intending to imply that Jamie Dimon worked for Barclays. I can see how that would be confusing and thank you for bringing it to my attention.
Clearly a lot of people don’t know how crypto works
Fees are paid to those who run the net work coinbase makes fees because they are a company not a true block chain
Go ahead and look up decentralized exchanges
Decentralized lending and decentralized payments
Crypto is the future and any boomer who thinks other wise probably doubted the Internet.
Also some people are losing their life savings cuz their fckin stupid and don’t red charts.
I’m up over 100k since February off one coin lol
“…CEO of Barclays of Jamie Dimon…”
Perhaps Matt and Kyle could work together to proofread each other’s writing.
yep, should have said “or” instead of “of.” Guilty as charged. Corrected now.
@Kyle, here is my response
(2) Why would “Crypto would take away the need for your receiving bank to charge as well”? CPC doesn’t charge me anything for receiving international wires. But my German landlord’s bank did — thats not something I can control. That would be the same with Crypto, as your payee might not want to hold Crypto or pay the exchange fees. Also, I’m not sure what your point about Jamie Dimon is. I’m sure he gets better service than me with my CPC account, and I didn’t have the issues you had.
(3) “Coinbase focuses on retail transactions of coin, not transfers to other banks or peer-to-peer”. Sure, but Venmo peer-to-peer payments are free, so Crypto isn’t the only solution to costs on peer-to-peer payments. And your $4000 in fees are from retail transactions, right, such as atm withdrawls, savings accounts, buying property. So lets make sure we are comparing apples to apples.
Why do you assume that transfers to other banks or peer-to-peer would be free with Crypto? Is there any example of this? PayPal charges ~2% transaction fee on Crypto. Yes, they are also a retail service. I’ll admit I don’t know much about crypto, but I have yet to find a problem that I have that would be easier or cheaper with crypto.
I don’t know what Citizen’s fee structure is for your friend’s account, but there are other options out there. Why doesn’t he look into opening a Schwab checking account, which has no fees or minimums?
(4) You say “How you would have instead transferred enough from the US to a European bank in seconds with few fees enough to buy an apartment.” Can you explain how you would have done this with Crypto? What service would you have used to hold the Crypto in the US? What Euro bank would you have transferred it to? What would the fees have been? Also, why is completing the transaction in seconds important? When you buy a condo in the US, closing usually takes a few weeks at least.
(5) Yes $4000 in transfer fees is a lot, but I didn’t pay anywhere close to that in 2018 for my 6mo stay in Germany. Your experience was from 13 years ago. Why did you open a Barclays account to begin with? Schwab’s checking has been available since 2007 and had no fees on international ATM withdrawals or foreign transaction fees on debit purchases. Wouldn’t that have saved you a significant portion of that $4000? I never have any issues with Schwab not allowing a second international transaction.
“hand-wavy way” — I’m pointing out that you do not give concrete numbers for crypto costs. If I need 100 EUR in Berlin tomorrow, how much will it cost if I hold my money in USD at Schwab vs if I hold my money in Crypto at Coinbase. And if that isn’t the right comparison because it’s “retail”, what is the right comparison and what are the concrete numbers for that comparison.
Don’t forget that in 2018 over $1.7 billion in cryptocurrency was lost worldwide as a result of fraud or theft. Who is bearing that risk of loss? If the custodian is taking it, then they need fees to cover that cost.
We are talking past each other here a little bit. I am going for brevity in these reposnses.
2) Perhaps a German bank would charge for receiving but accounts elsewhere (I’ve lived on four continents including Europe) don’t necessarily do this. You may not need another bank to receive it if you have a global crypto debit card.
3) Your assumption is incorrect. In the example, I was clear that I was getting paid in the US in dollars and had to move it to my own UK account for living expenses. These weren’t ATM fees, this was a wire fee plus a percentage on the transfer plus an inferior exchange rate (though I didn’t count that.). Schwab does have fees for wire transfers, $25 or $15 if set up online (sometimes waived depending on balances) but that does not necessarily apply to international wires (as opposed to domestic) nor does it identify the exchange points.
4) There are a number of online/crypto debit cards that offer this but you can google that. The speed is important because when buying properties abroad you often have to be present. In this case, the transfer took so long and then was held up a second time that flights had to be changed. This “it’ll get there when it gets there” approach has a cost that extends beyond the transfer fees and goes to lodging until the funds are transferred and the property is available, flight changes, and substantial inconveniences for a business person who has business to attend to back home. It doesn’t have to be seconds fast like crypto to beat the banks, but taking an unknowable amount of time when the transfer could be done instantly is unacceptable.
5) You’re having a lot of trouble with this section so I am going to put it back here for review:
“When I was living in the UK I was paid in US dollars to my American bank account for an extended period of time. Every paycheck cost me approximately $150 in transfer fees to move it from the US to my UK account where I paid my living expenses. In a given year, I spent almost $4000 on transfer fees alone which at the time was a considerable portion of my overall post-tax wage. Little has changed in the last 13 years to improve upon this process with traditional banks.” My bank in the UK was Barclays because they were the largest in Manchester at the time. I doubt NatWest or any other would have offered better terms. Schwab is not available as a local bank in the UK operating in British pounds. I can’t take a check written in British pounds and walk it into a Schwab office that doesn’t exist, and I can’t take my US paycheck and walk it into a bank in the UK. Your six-month holiday is not equal to us moving and living in the UK for three years (though the fees quoted were just through the first year.)
If you’re moving €100 to Berlin, of course, you would just go to the ATM and take it out fee-free from a US account. We aren’t talking about casual tourists looking for walking around money. And I’m not talking about Coinbase – anyone who holds crypto knows that it’s the most expensive place to buy and sell crypto. But when we are talking about purchasing a home, or financing 12 months of living expenses and I am comparing it to a bulk fee of $20 for next block (within 10 minutes) or $15 within an hour. Compare it to several hundred to move $100k in literally more than a week. https://bitly.com/2QEYeZ1
And to your statement on fraud… are you really suggesting that $1.7bn in fraud or theft in any way compares to cash fraud or theft? Certainly, you can’t really want to die on that hill.
Sure, living and working in Germany for six months (not a holiday) doesn’t compare to 3 years in the UK. But I was getting paid in dollars, and paid my EUR living expenses without fees. I used credit cards and cash. Never needed to write a check because Germany uses bank transfers. I even paid my German TV tax from my Chase bank account by wire – fee free. Did you get a lot of UK checks? Even if you did 13 years ago, you likely wouldn’t now. I never got a German check.
Sure the amount of fraud in cash is probably more but you missed my point, which was who is bearing the risk. Re cash fraud, I haven’t been pickpocketed since 1995. When I have card fraud, my bank reimburses me. Who will cover crypto fraud? The risk is either being born by the individual or the custodian. And the custodian will charge a fee for that risk, either directly or indirectly.
You are still comparing wholesale BTC fees to retail banking fees. That’s not an apples to apples comparison.
Also you haven’t provided concrete numbers, unless that is what you meant by that link to BTC transaction fees. But that isn’t the whole story unless you are assuming the recipient of your payments (for living expenses, purchasing a home) will get crypto. But that’s not the world we live in right now, so that’s a hand-wavy assumption to make.
Serious travellers won’t be taking financial advice from travel blogs.