Back in the 2010s, Lim Hong Zhuang took a break from corporate life to run a small farm in Malaysia. Every month, he would calculate the salaries of his 20 Indonesian workers, drive to the bank to withdraw cash, and pay them the cash. Upon which, the workers would pass him back a portion of the cash and ask him to remit it to their families overseas. He soon discovered multiple issues with the remittance system. It was time-consuming; he had to drive 45 minutes each way to get to the remittance agent located in town. It was costly; the workers paid seven percent in fees on average. And there was no transparency or accountability; the workers relied heavily on the trustworthiness of all the intermediaries, including himself.

“Anyone could just keep the money and tell the workers it had been sent, and they would have no way of knowing for sure,” he told People Matters.

Despite these problems, the traditional remittance system remains the most accessible, simply because so many overseas workers are not recognized by the traditional banking system. They are unable to hold bank accounts because they do not meet minimum sum requirements, or because they are in the country illegally; even when cooperative banks accept them, they are still not able to send small amounts on short notice.

Where there is a gap in services, an alternative can always be found

Lim had been interested in cryptocurrency for some time, and he decided to see if he could put his knowledge to use in solving the remittance issue. In 2018, he and his team at Shuttle One created a digital commodity, using blockchain technology, that could be used for payment across borders. The idea was that anyone could access it, any time, anywhere; that there would be full transparency because the movement of the commodity was visible at all times, yet complete security because blockchain technology makes it impossible for anyone but the actual holder of the commodity to change its value or ownership.

This method of payment would also make the fee structure of remittances much more transparent, he found. The amount remitted, the exchange rates, the various parties involved, and the fees chargeable would all be visible to end users, removing the asymmetry of information that often plagues the financial industry and reducing costs as a result. Shuttle One is able to carry out money transfers at a fee of three percent, which is the target set for the United Nations Sustainable Development Goal 10.

Moreover, it was fast. “When the digital money goes across to the recipient, it takes place in less than a minute. They see how much was charged as fees, they get a receipt,” he said. “They can send small amounts on the spot, which is what they really want: to send a few dollars for their child to buy a textbook today or to pay a utility bill. Whereas even the cooperative banks have a minimum amount for transactions and a few days of lead time.”

Start by solving the intermediaries’ problems

Lim could not approach the workers directly, though. To get them to accept his idea, he had to work with the existing, established institutions: the remittance houses. “You have to solve their problems before they are willing to champion our product to their customers,” he explained. “And we quickly realized that one of their biggest problems is that they have a lot of working capital tied up with their partners in other countries.”

If a remittance house located in Singapore, for example, anticipates sending US$1 million a month in remittances to its partner in Malaysia, it will have to send that money in cash, upfront, to the partner even before it receives the inflow from its customers. The system is entirely based on trust, Lim said, and each remittance house has millions of dollars locked up with its various overseas partners.

But if the remittance houses were able to adopt Lim’s digital commodity as a way of transferring money, they would no longer need to pay their partners that much money in advance. “They realized that for the first time in financial history, this was going to help them,” he said. “And because of that, they were willing to go to their customers and say, ‘I can now help you transfer money quicker, better, cheaper’.”

A drop in the bucket, but with potential to expand

Shuttle One launched its system in early 2019, and slightly less than a year later, the company has some 652,000 users across the region. This is not even a dent in the 1.3 billion informal workers that the International Labor Organization estimates to comprise Southeast Asia’s informal economy, and Lim is unable to make a firm guess as to how long it will take before digital commodities can make a significant difference in the system.

His main concern at the moment is compliance with regulations. The remittance houses he works with are all regulated under the financial system, and Shuttle One needs to ensure that it, too, is similarly compliant with local laws. Security is another issue: like the system it aims to replace, Shuttle One operates on the basis of trust, and to maintain that trust, cybersecurity is paramount.

“We are probably the first company trying to tackle a very boring problem,” Lim says, half-jokingly referring to not only the dry issue of compliance, but also how little attention is paid to the difficulties that migrant workers and those in the informal economy face when trying to send their earnings home.

To the individual workers struggling with long lead times and high fees, though, it is not boring. The remittance industry in Southeast Asia is worth perhaps S$200 billion (US$143 billion), and if his company is able to reduce agent fees from seven percent to three percent for even a fraction of the system, that adds up to a great deal of additional income going to improve the lives of workers and their dependents.

Get free access to People Matters magazine's April issue on 'Talent in times of crisis'