We often hear about cryptocurrencies replacing banks and payment processors in the future. There is a long way to go between now and then. Payment networks like Visa (V 0.48%) and Mastercard (MA 0.58%) not only have the resources to adapt to changing technology (as they are among the largest companies in the world by market cap), but they are also actively engaging with cryptocurrency and exploring ways to incorporate it into their business models. In forecasting the industries and companies that cryptocurrencies can eventually disrupt and replace, let's start with an incumbent in the legacy money-transfer industry, Western Union (WU +0.21%). Here's why NEAR Protocol (NEAR 0.92%) could replace the 171-year-old money-transfer mainstay.
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The incumbent: Western Union
Western Union is a $7 billion company that primarily facilitates payments and transfers of money worldwide for businesses and individuals. The company's services are often used for cross-border payments and transfers. An example of a use case for Western Union's service would be a migrant worker sending a remittance payment back to their family in their home country. This is a useful service, and it serves as the lifeblood for families and local economies in other countries. The World Bank estimates that remittances to low- and middle-income countries will reach a record $630 billion in 2022 worldwide. However, this market is ripe for disruption. Not only does it take a considerable amount of time to process transactions this way, it also accrues significant fees. A domestic money transfer with Western Union is usually completed within 24 hours, while an international transfer can take between one and five business days. Here's where crypto, specifically NEAR Protocol, could come into play and disrupt this model.
NYSE: WU
Key Data Points
The disruptor: NEAR Protocol
NEAR Protocol is a proof of stake cryptocurrency with a $2.4 billion market cap. NEAR was developed by a worldwide community of developers called the NEAR Collective and features high speeds, near-instant settlement times, and low fees. NEAR uses its own technology called Nightshade to scale and hit its impressive throughput of 100,000 transactions per second. NEAR would improve upon Western Union's transaction settlement time by orders of magnitude, as transactions on the NEAR blockchain settle in approximately two seconds. Not only would recipients receive their money significantly faster, but they would also receive a far greater proportion of the money sent with less of it being absorbed by fees. Transactions on the NEAR blockchain typically cost less than a penny. For a worker sending money to family back home, this is an appealing option. For example, for a $100 transfer, the family on the receiving end would receive $99.99 in a couple of seconds. Western Union offers a variety of options for sending and receiving money, which is convenient, but all the options accrue higher fees and take longer. For comparison sake, if I were sending $100 to a recipient in another country using my debit card for the receiver to pick up the money in-store, I would pay a fee of $4.99 and have a service time of between zero and four business days. While $4.99 may not sound like much, it is orders of magnitude higher than the transaction fee from NEAR and can add up over time for people regularly sending remittances back home. The near-instant settlement time also has far greater appeal and could make a meaningful difference to people who currently have to wait several days to receive money. Another advantage is that there are no "business days" in crypto. A sender can send money on a Saturday, Sunday, or holiday, and it will arrive at its destination in the same time as it would on a business day.
CRYPTO: NEAR
Key Data Points
The adoption curve
Not everyone is going to know about NEAR or feel comfortable using it. It will take time for NEAR to replace Western Union, but as more people around the world gain access to the internet and smartphones, it will grow increasingly likely. The technological adoption curve means that technology often seems strange and clunky at first as it is adopted by early movers before eventually being accepted by the masses and becoming seen as the default option. The NEAR wallets were designed to be accessible and easy to use, and they are available as extensions on popular web browsers like Chrome.
While we are at least several years away from NEAR truly replacing a legacy payments option like Western Union, the beginnings of the transition are underway. In early 2021, the NEAR blockchain was typically used for less than 10,000 transactions per day. On June 5, 2021, there were 254,239 NEAR accounts. On June 5, 2022, nearly 630,000 transactions were completed in one day. Just one year later, on June 5, 2022, there were over 13 million.
Can NEAR replace Western Union?
While NEAR could run into additional challenges or regulations if it reached mass adoption, it is entirely possible that NEAR Protocol could one day replace a legacy payment provider like Western Union or at least disrupt it in a major way. NEAR would also need to become more stable in order to reach mass adoption, as its price has been volatile this year, fluctuating between $3.10 and $20.39 over the past twelve months. However, with fees that are negligible at less than a penny and near-instant settlement times, NEAR offers a compelling reason for people to make the switch, and with considerable momentum in user growth and transaction growth already, the curve of technological adoption could eventually make NEAR a mainstream payment and remittance option for everyday use by people all over the world.
