Opinion: Coinbase international payments represent crypto badly
At its best, it's underwhelming. At its worst, it confirms everyone's worst impressions of cryptocurrency.
International payments and cryptocurrency have always been tied at the hip, given how eminently useful they are for each other. Coinbase has now taken a step in that direction by specifically pushing itself towards use as a "fast" and "free" international money transfer service.
Spoiler: It's not great.
The real test isn't whether people can send crypto to other crypto fans because that's always been possible.
The real test is whether the Coinbase service is easy and seamless enough that someone who just wants to send a fiat international money transfer will look at Coinbase and decide that it's just as good as anything else, without worrying about the crypto element.
From start to finish, the process for an entirely new user on a fiat-to-fiat transfer will be as follows:
- Create a Coinbase account
- Deposit funds and convert that fiat into either XRP or USDC – the two cryptos Coinbase lets you use for this service
- Send the crypto to the recipient
- The recipient sells it for fiat
Functionally, it's exactly like any other international payment service, except the sender and receiver have to manually perform their conversions to and from the intermediary currency, instead of having this invisibly handled on the back end. It's a bit inconvenient, but it's still easy enough to do through the app.
Another catch is that the recipient will need to have a Coinbase account. It's a major disadvantage compared to other money transfer services. The good news is that you can send money with just an email address, and then the recipient will be invited to create a Coinbase account, but it's still not ideal.
The third and fourth issues are that this really only works in specific corridors, and that it's not at all free once you add in the conversion costs. Once you factor in the fine print, it's fair to say Coinbase is being incredibly disingenuous here:
Conditions apply, to say the least.
The service doesn't actually work in about half the countries that have their flags up there, and if you actually want to get your money in something other than the almost entirely unspendable USDC or XRP, it's very much not free.
For example, in Mexico (top right flag), the recipient would have to withdraw the crypto from their Coinbase account, send it to an exchange and then sell their XRP or USDC for pesos before they can actually get their money.
If abuela wants her money, she'd better be ready to bust a move on Bitfinex.
By declaring how "free" this service is, and painting it as a potential option in all these countries, Coinbase is setting people up for disappointment and potentially setting up its customer service team up for dealing with a steady stream of
victims customers wondering what happened to their money.
At its best
Even if you look at the service at its best, the conversion fees turn it into a mildly inconvenient option with middle-of-the-road prices.
The best possible deal you can get for an end-to-end fiat money transfer through Coinbase is a 1.49% fee on either end for a money transfer from the USA to Europe. So on a US$1,000 transfer from the USA to Europe, you're looking at a total of about $29.50 in fees all up, and the recipient will end up getting €863.
Of course, it's still a lot better than Western Union, which according to its website would charge an almost unconscionable 7.5% margin on the same US dollar to euro transfer, on top of a $5 flat fee, for a 6-day transfer that will leave the recipient with €823.25.
Western Union's rates are proof that not all jokes are funny.
But if you look at one of the many more reasonable services available, you can quite handily beat Coinbase. Here's TransferWise, for example.
Unfortunate and underwhelming
This Coinbase offering is simply not very good for international money transfers. It combines poor rates with a galling degree of inconvenience. If there's a reason to use it, it's not immediately obvious what that reason is.
If people's first experience with cryptocurrency is this thing, they will be understandably underwhelmed.
For some context, cryptocurrency is already seeing relatively wide use for remittance payments, especially in South East Asia with platforms such as Remitano (a prominent P2P crypto marketplace based in Vietnam) and Abra (focused on the Philippines) gearing themselves very specifically towards that purpose and delivering much better rates than Coinbase.
Both of them are also quite a bit more ingenious than Coinbase, but just haven't attracted the same volume or mind share. Remitano, for example, combines a wallet with a peer-to-peer marketplace for cashing in and out. It even has a peer-to-peer USDT market for those who would rather avoid volatility than play the market.
And Abra uses a – potentially somewhat overcomplicated – system in which all currencies and assets held in the wallet are transferred as and backed by Bitcoin on the back end.
Elsewhere, crypto was preceded by another type of digital currency in the form of mobile airtime. For years now, it's been possible to instantly send someone money in the form of mobile phone data and call allowance. It's literally a digital currency backed by mobile infrastructure. This asset has also received a crypto twist, but the currency itself – mobile airtime – was being traded and used for instant international payments long before that came along.
Digital currency has so much potential, and there are many examples of it already being used in many different forms. And Coinbase gives us this?
There are doubtless plenty of regulatory obstacles preventing it from being all it can be. There are obviously a range of costs to account for, and obviously it's going to be a gradual learning experience for Coinbase's money transfer service to evolve over time.
But that would be much more understandable if Coinbase wasn't blatantly presenting the service as something like "free" money transfers or advertising it as usable in "countries including India, Mexico and the Philippines."
Coinbase money transfers are a very poor representation of what digital currency can do, and the way it's set up means people will very clearly and visibly have to handle cryptocurrencies while they use it. There's a real risk of people associating the costs and flaws of Coinbase transfers with cryptocurrency in general.
Disclosure: The author holds ETH at the time of writing.