Online bank SoFi has planned to use Bitcoin as a focus asset to process remittance transactions this year. Using the Bitcoin Lightning Network along with the Universal Money Address (UMA), the platform is looking to simplify its international money transfer services with lower fees and faster processing.
In a statement shared on August 19, SoFi said it will soon allow its users to convert U.S. dollars to Bitcoin in real-time and settle international transfers via its app. It has partnered fintech platform Lightspark to integrate the UMA system and facilitate transactions through the Bitcoin Lightning Network.
The online bank, founded in 2011, said this service would bring a meaningful improvement to the everyday financial lives of individuals who work abroad and wire money back to their respective home countries. As opposed to traditional money transfer services that charge high service fees, BTC-based remittance transfers are deemed more cost efficient.
“Digital banks are embracing UMA because it’s fast, cheap, and secure, and it uses the only open payments network that exists, Bitcoin. UMA on SoFi means customers can move dollars instantly, any time, globally,” said David Marcus, CEO and co-founder of Lightspark.
Understanding UMA and Bitcoin Lightning Network
The Universal Money Address (UMA) explains itself as “an email address, but for money”. The open-source service users facilite 24/7 international money transfers via fiat currencies or crypto through enabled wallets, exchanges, or banks.
To use it, money senders get to generate an invite link, which is shared with the receivers. The recipients are then guided to a compatible wallet, exchange, or bank within their country to wire-in the funds.
The Bitcoin Lightning Network — which is a Layer-2 payment protocol built on the Bitcoin blockchain — is an integral part of the UMA system. The protocol that went into its operational phase in 2018, was created to improve the speed of BTC transactions and bypass the high fees that occurs on the main BTC network especially during periods of high congestions.
“UMA uses the Bitcoin Lightning Network behind the scenes to enable instant, real-time, low-cost settlement,” says the website for UMA.
SoFi’s roadmap
The online bank aims to offer international money transfer services at one of the lowest costs. Its app will display the exchange rates and the associated service fee upfront in a bid to maintain the transparency with the users.
Once the users initiate a transaction, the app will convert the sent BTC tokens into the local currency of the destination country and deliver the funds directly to the recipient’s bank account.
“At launch, SoFi’s international transfer service will first be available in Mexico with more countries to be added shortly after launch. This phased approach ensures speed, security, and consistency for members from day one, with even more countries to follow,” the announcement said.
SoFi has opened a waitlist for interested users looking to avail the service.
“We’re unlocking the value of blockchain technology, to give members faster, smarter, and more inclusive access to their money,” said SoFi CEO Anthony Noto commenting on the development.