One way to do this is to perform a three-way transaction where the person sending the remittance (the bitcoin seller) transacts directly with the person buying bitcoins in the remittance destination country. The cash being paid for the bitcoin transaction is simply just being handed over to the family member rather than to the party selling the coins.
Because there are a number of risks with person-to-person trading, those risks can become even greater when the two parties are trading remotely. For this reason, a trust history will help lessen the risk.
LocalBitcoins maintains a directory of those willing to meet face-to-face and pay cash for bitcoins. They also have a method called "LocalBitcoins Transactions" which is simply an account-to-account (A2A) transfer method so that the buyer of the coins doesn't need to wait for a Bitcoin payment transfer
to receive confirmations. Additionally, those bitcoins can be released and the buyer doesn't need wi-fi or any other network communications other than mobile phone or SMS/text messaging when completing the in-person transaction.
Here would be the steps:
1.) Bob, located in the U.S., wants to send $200 worth of value to his mother who is located in Cape Town, South Africa. Bob looks through the ads on LocalBitcoins and finds a buyer offering to pay a fair price and has no complaints showing in the trading history. Bob places a sell request in response to the buyer's ad and funds the transaction with the amount of bitcoins.
These coins are not sent to the buyer, but simply are reserved for this specific transaction. Either Bob or the buyer can cancel the transaction and the Bitcoin funds are returned to Bob.
2.) Buyer contacts Bob and arranges the time and place to meet. Bob explains the three-way transaction and how the cash will be picked up his mother. Buyer agrees to this approach.
3.) Bob provides instructions to his mother to meet the buyer at a certain location and time. Bob's mother needs to only bring her mobile phone.
4.) Bob's mother arrives at the buyer's location and notifies Bob that she has arrived and that the buyer is there and has the $200 worth or Rand in cash to pay for the transaction.
5.) Bob releases the bitcoins that were reserved for the transaction. In return, Bob is given a "verification code".
6.) Bob tells the buyer (either in a text message or by voice) the verification code. The buyer now can trust that the bitcoins were transferred and hands over the cash to Bob's mother.
7.) Bob's mother notifies Bob that the $200 worth of Rand in cash was received. Bob uses the LocalBitcoins reputation tracking to leave favorable feedback for the buyer, and the buyer does the same in return for Bob.
The transaction has then concluded. This transaction can be concluded at a lesser cost than the Western Union transaction.
Some buyers will even offer to do the traveling to deliver the funds in-person directly to the remittance recipient, without having to arrange a meeting.