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PROBLEM: SOLUTION: Bitcoin
International Payroll Delays and Fees
I
by JONATHAN CHESTER
If your business is required to make even a small number of international payments to contractors or employees, you are all too aware of the delays and fees involved. One of the greatest benefits Bitcoin brings to the table for businesses like yours is the elimination of these issues. Using Bitcoin for international payments, your payroll process becomes streamlined to a degree that will make you wonder how you ever did it any other way. The delays, bank transfer fees and miscellaneous charges you’ve experienced using traditional payment transmission methods will disappear forever. Uber, the Internet rideshare company, offers a prime example of how Bitcoin can simplify the payroll process. Uber has two choices to pay their contractors. They can either incorporate and build banking relationships in every country, working with non-userfriendly interfaces and old, low quality APIs, or they can go through several slow and costly integrations of multiple platforms. Either way, the contractors are left with no choice but to accept high FOREX costs and slow, unreliable transfer times. According to the World Bank, the average of cost of sending funds across borders is 8 percent, and the average time for transfer completion is three to five days, with workers shouldering the bulk of these costs.
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But why does it take so long for wages to be transferred and exactly how much is lost to intermediaries? Here’s a step-by-step breakdown of a simplified international contractor transaction: 1. Client initiates the international bank transfer from their bank account and pays a $45 flat fee. 2. Their bank forwards the funds next business day to a large correspondent bank with the resources to maintain international correspondent banking relationships. 3. The large correspondent bank removes $25 from the total amount. 4. The large correspondent bank sends back $7.50 to the client’s bank for initiating the transfer. 5. The large correspondent bank forwards the funds next business day to their large multinational correspondent bank with a presence in Brazil and the capital to facilitate a foreign exchange. 6. The large multinational correspondent bank exchanges the USD to BRL and takes 7.5 percent in the spread between the interbank rate and the retail exchange rate. 7. The large multinational correspondent bank forwards the funds next business day to the contractor’s local bank account. 8. The contractor receives the international bank transfer into their bank account three business days later and pays a $15 fee.