Though Bitcoin fees are by no means the lowest in the crypto world, the cost of transacting through the Bitcoin network is still worlds away from any other traditional money transfer service so far.
During the price spike in December 2017, the Bitcoin miners fees were a lot higher than usual due to the enormous demand on the blockchain, however things have now returned to normal and the fees have returned to a reasonable price.
Although the cost did reach dizzying highs during this period of increased network conjestion, hitting a peak of around $35 per transaction on 23rd December, 2 days before Christmas, this is still cheap when compared to other money transfer services providing large amounts are being transferred.
Though the fees can increase based upon demand, this is still better than having a fixed high cost as we currently have with some of the global money transfer services. The Bitcoin fee structure is fluid and responds in line with the demand which is much fairer for the user.
Current Bitcoin fees
The average cost of sending a transaction on the Bitcoin network, regardless of how much you send is around $1 at the moment according to bitcoinfees.info
You can see the chart again from bitcoinfees.info showing the fee price over the past year:
How do the Bitcoin fees compare with traditional Money Transfer Services?
In the digital age, sending money around the world is a part of daily life and there are many options available for doing so. Before Bitcoin created peer to peer digital money in the form of cryptocurrency, the only way to send money was to send and receive fiat currencies in digital form was through the use of third party companies, each one charging high fees for the privilege.
PayPal fees vs Bitcoin
PayPal is one of the most popular options when it comes to sending and receiving money. Founded in 1998 under the brand name Coinfinity, PayPal became PayPal after merging with online banking website X.com, co-founded by Elon Musk in 1999. 3 years later in 2002, Ebay acquired the company for $1.5 Billion and it became Ebay’s primary method payment method.
Sending payments via PayPal to friends and family, providing the payment is made to somebody in the same country using the same currency, is free.
For other payments though such as the ones on eBay, the PayPal fees are only paid by the receiver, and for goods and services, that fee at the moment is 3.4% plus £0.20 in the UK.
The service is usually completed in a matter of minutes, if not seconds, however one of the main problems users encounter when using PayPal is that they reserve the right to hold your funds. Sometimes they do it randomly, sometimes they do it if the payment is flagged as suspicious. They can hold your money for as long as they like and it can be very frustrating if you need the money urgently.
To send £1000 using PayPal, the fee would be £34.
Western Union vs Bitcoin
Western Union was founded way back in 1851 dominated the telegraph industry during the late 19th century and up until 2006 when the service was discontinued, they were best known for their telegram services.
Since then they’ve transitioned almost fully into the money transfer market with that now making up the majority of the companies revenue. After a series of acquisitions including Angelo Costa and Travelex’s Global Business Payments division, they have now built up a sizeable global payment network.
In order to send funds, a sender goes to a Western Union office and presents funds (plus fees) for “Next Day” or “Money in Minutes” service. The sender provides his or her name and address, the recipient’s name, and a designated payment destination. Western Union then provides the sender a 10-digit Money Transfer Control Number (MTCN) that the sender must provide to the recipient. The recipient then proceeds to a Western Union agent office in the designated payment location, presents the 10-digit MTCN, and a photo ID. Money is then paid out to the recipient. In some locations, if a recipient lacks identification documents, the sender and receiver can set up a pre-arranged password. Funds are paid out in cash, although if payment exceeds a local maximum or cash on hand, a check is issued. Alternatively, a sender may forward funds to a recipient by using Western Union’s website or by phone. In some countries, the recipient doesn’t need the MTCN number if one has sufficient identification.
This lengthy process is time consuming and expensive and customers can often run into problems, especially when sending large amounts of money.
The fees vary depending upon which service is used, but to send £1000 from the UK to the USA, cash to bank transfer, the fee is £29.20.
Money Gram vs Bitcoin
Money Gram is Western Union’s biggest rival in the money transfer space. Initially formed as a result of two businesses merging, the company fell on hard times in the economic crisis in 2008 when their share price fell a whopping 96%!
During the crash, the company lost more than $1.6 billion due to investments in securities which had been backed by risky mortgages and almost went bust because of it. They’ve since recovered though after restructuring the business in an effort to cut costs, as well as selling a majority of the shares to Thomas H. Lee Partners and Goldman Sachs to keep afloat. It’s no wonder Goldman Sachs have been seriously looking into supporting Bitcoin and cryptocurrency trading, even hiring a cryptocurrency trading expert recently. They recognise they cannot fight it, so instead they’re joining the revolution and cashing in on it.
Although Money Gram costs less than Western Union, it’s still considerably more than it would be to send over the Bitcoin network.To send £1000 to the USA from the UK, the transfer fee is £10.90.
Swift Payments vs Bitcoin
A revolutionary game changer for the global banking industry in the 1970’s when it was created, the The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that enables financial institutions worldwide to send and receive information and financial transactions.
The vast majority of banks still use Swift when it comes to cross border payments and message sending. Although The Bank of England are testing Ripple to be used for their cross border payments, the current system still uses Swift.
These banks are stuck in the past and even though better alternatives are now available, the service is integral to the smooth operations of the banking industry with over 15 million messages being exchanges on the network every day and changing it would be a monumental task. The entire foundations of which modern banking are built upon rely on the network and changing it would require uprooting and reordering everything!
It works because the majority of banks use it, so an alternative would only be effective is everyone began using it at the same time which would very challenging to orchestrate and it’s a challenge that if not properly overcome could kill the banking industry as newer, better technologies are adopted. Bitcoin, for example.
Ripple is looking the most likely to work with the existing banking industry to replace Swift as they’re already partnering and testing with big name banks at the moment. Santander are testing Ripple already with live products for example.
The cost of sending a payment abroad using Swift is £20, no matter the value of the transaction! Because all banks use it the cost is the same across the board.
Sending £1000 to the USA using Swift would cost £20.
Conclusion
From our analysis of how Bitcoin compares with the above payment transfer services, it’s no wonder Bitcoin adoption is increasing as fast as it is. These systems are old and outdated and were created to accommodate the world as it was, not as it is now.
Cost summary – Sending £1000 would cost:
Bitcoin: $1
MoneyGram – £10.90
Swift – £20
Western Union – $29.20
PayPal – $34
Even as the most expensive of all cryptocurrencies, Bitcoin is still far cheaper than any of these traditional money transfer services!
Now everyone can be their own bank. The main issue aside from fees with these traditional services is the fact that each and every one of them reserve the right to freeze and hold any transaction made on their platform. Each one has different rules regarding which transactions they investigate, and they do it because of strict anti money laundering laws worldwide.
Because Bitcoin and other cryptocurrencies are decentralised, stopping transactions is not possible. Transactions can be sent to anyone for any amount, anywhere in the world without being questions, and that truly is revolutionary. Never before has it been possible but the world will have to get used to it because cryptocurrencies are here to stay.
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