Banks are not using OKLink’s blockchain-based money-transfer network, but the startup’s executives hope that will change once they achieve scale.
OKLink continues to add remittance providers to its platform, such as mobile wallets and remittance apps, throughout Asian and emerging markets. Cash pickup locations such as merchants are a smaller part of the network: they require a means of connecting, and OKLink is working on cost-effective technologies, such as a QR code, to integrate family marts or other physical points.
Remittance apps in a given market can connect with similar counterparties worldwide, thereby enabling processing of small remittance transactions without these other companies having to invest in a presence overseas.
OKLink uses bitcoin payments to move remittances cheaply and quickly across its platform. To date, banks have not established their own remittance capabilities using distributed ledgers – although there is nothing stopping them from doing so. OKLink’s edge, its execs say, is that it is serving peripheral markets that wouldn’t be attractive to banks, at least not for now.
“Banks want to pursue the unbanked and other new consumer customers,” Jack Liu, chief strategy officer at Hong Kong-based OKLink, told DigFin. “There will be a crossover [to our network] when they already have those consumers, or the payment takes place at their bank and generates new business.”
But that day may be a ways off. OKLink executives declined to provide figures around volumes of remittances they are processing, or total amounts outstanding. They describe the number of partner enterprises they have partnered with as “over a hundred, but there are thousands out there,” as Tim Byun, chief risk officer.
He denies a legal case against OKLink’s founder, Star Xu, will impact the company.
Xu is also co-founder of OKCoin, a Chinese bitcoin exchange; OKCoin and Xu are being sued by Roger Ver, a bitcoin investor, for $571,000. (The case stems to a dispute over a company called Bitcoin.com, allegations of broken contracts, and of a forged signature.)
Liu and Byun say OKLink is a separate business that shares a founder (although Liu also serves as an OKCoin executive). OKCoin is a financial backer of OKLink, although OKLink also is supported by venture capitalist money, including Silicon Valley-based private investor Tim Draper.
Byun says the Ver suit’s damage is capped at $571,000 and has nothing to do with OKLink’s business. But according to Coindesk, Ver is suing to liquidate OKCoin.
Connecting the remittance companies
OKLink bills itself as a B2B blockchain company providing a platform for remittance companies around the world to connect, thereby avoiding set-up costs of establishing brick-and-mortar in other countries or opening multiple accounts at money transfer operators such as Western Union and Money Gram, or banks.
Its executives note OKLink is not a remittance company itself or a fiduciary in the wire-transfer process. It acts to enable remittance apps and other players to connect in one place instead of rely on bilateral relationships across borders. This brings the average cost of remittances, which the World Bank puts at 7-8% per transaction, to 1% or below, Liu says.
“Our network works well in small corridors, with low-value payments,” Liu said. Existing infrastructure networks such as Swift, which operate as hubs rather than peer-to-peer, find it uneconomic to process a $25 wire transmission – therefore banks charge a lot for such services. Remittance apps such as Coinplug in Korea can bring the cost way down, but struggle to get their software brand recognized outside of a local market.
Although OKLink’s executives want to eventually get banks onto their network, for now they are happy to be under the radar, serving small transactions to customers. “We don’t have the scope or magnitude for banks to be taken aback,” Byun said. “We’re not impacting their fees. But we’re chipping away at market share.”
As of the end of 2016, according to the World Bank, global remittances to small- and medium-income countries totaled $440 billion, with China, India, the Philippines, Mexico and Pakistan the biggest recipients.
Western Union is the largest remittance company, with 15% of global market share, while the top five players command only 25%, according to Byun. “The market has a really long tail,” he said, partly because so migrant workers tend to stick with remitters from their home country.
OKLink has recently attracted high profile talent. Former Moneygram CEO Mohit Davar joined as a strategic advisor in January, with a mission to accelerate the network’s growth.
Byun previously served as a bank auditor for the U.S. Federal Reserve and Federal Deposit Insurance Corporation, as well as compliance roles at Visa and BitPay, a bitcoin merchant processor in the U.S.
Liu was previously a derivatives salesman at Barclays in Hong Kong.
OKLink’s first remittance transaction took place in November 2016.