Using XRP, Bitso captured a slice of the U.S.-Mexico remittance market in 2019. It’s eyeing much more in 2020

A crypto-focused exchange service captured a slice of the transaction volume between Mexico and the rest of the world last year using the digital asset XRP – and it's seeking more growth in that area for 2020.

In 2019, around $686 million was transferred from the U.S. to Mexico every week, according to data published from the Mexican Central Bank. Of that figure, Bitso – based in Mexico City – facilitated about $16.1 million per week, the firm told The Block. That accounts for roughly 2.34% of weekly volume. 

Bitso has been working since 2015 to accelerate transactions between the U.S. and Mexico with cryptocurrencies. And the volume it accrued saw an average 18% week-over-week growth during the past 5 months. 

According to Emilio Rivero Coello, the exchange's senior strategy analyst, Bitso’s popularity among Mexican families with frequent remittance needs is due to its partnership with the U.S.-based Ripple, which created XRP.

The platform currently conducts most of the cross-border transactions via Ripple’s XRP and saw most of its volumes coming from money transfer giant MoneyGram, said Bitso head of strategy José Antonio Quintana Marín.

Both MoneyGram and Bitso have received investments from Ripple, with the former raising $50 million from the blockchain payments firm and the latter’s funding round being joined by Pantera Capital and Coinbase. 

“We are working with a few money transmitters. MoneyGram makes most of the volumes, but we are working seven or eight additional ones as well,” Marín told The Block. 

How it works

Most of the U.S.-Mexico remittances were sent through money transmitters, which in turn rely on international bank transfer to complete transactions.

Bitso replaces the banks during the remittance process; after consolidating orders from individual customers, money transmitters then trade USD into XRP on the exchange first and subsequently exchange XRP back into Mexican pesos.

The entire process takes less than 1 minute and can cut the transfer time by half, claimed Bitso. 

On average, sending $300 dollars from the U.S. to Mexico could cost $6.53 and takes up around a week, according to Bitso and a 2019 survey commissioned by Mexican National Population Council and BBVA Bancomer Foundation. 

According to Marín, remittances from the U.S. contributed the highest foreign currency inflows to Mexico, more than foreign investments and tourism in 2018 and 2019. Most of the inflows go to Mexican families with relatives working in the U.S. who send money home. 

“Remittance is a huge thing in Mexico and 90% of those remittances are used for basic needs… We are actually getting a use case that benefits one of the developing countries – problems we have at the moment – high fee to send money home,” said Marín.

Bitso has set a much bigger target for weekly remittance flows by the end of 2020, according to Coello: 15% to 20% of weekly payments between the two countries.