If you were ever been involved with the transfer of funds between two countries, you would be aware that minimal progress was made regarding international payments.
Transaction times are extremely slow and the process is often obscure and expensive. A 21-st century digital solution for handling payments can accelerate the process. Furthermore, such a system will improve efficiency, while reducing costs.
The Global Payments Industry
The industry involved in global payments is expansive and accounts for a third of all banking revenues.
Additionally, the distributed ledger technology (DLT) underlies cryptocurrencies and may be the right solution. Estimations are that approximately 90% of the top North American, European, and Australian banks are experimenting with this technology.
Furthermore, the USP of the blockchain refers to its ability to facilitate electronic agreements between parties without the need for mediation. While some believe the technology is unfinished, others believe that it possesses the potential to transform global payments.
Otto Benz is the director of payments technical services at the Lloyds Banking Group. He says, “All parties within the payment system have to reconcile the data at every stage. DLT could provide a highly available, cryptographically secure and trusted platform where all parties have access to the same data.”
Therefore, the challenges involving payments affect the small to medium-sized enterprises the most. Marcus Treacher is the global head of strategic accounts at Ripple. He adds:
“It can also take weeks for a cross-border payment to settle, which can put the brakes on a small business’s liquidity, and create friction between customers and suppliers.”
Moreover, Treacher believes, “Putting all the world’s transactions on one blockchain is impossible. Institutions also have diverse needs when it comes to payments and one single blockchain is not capable of serving all of these, let alone in the public domain.”
Additionally, many have called distributed ledgers clunky and cumbersome. Some believe centralized databases are more efficient than blockchains.
“The crucial problem of maintaining the order of all transactions across all copies of the data is a fundamental computer science problem. For DLT to make it into production, the majority of institutions have to agree to use the same procedures.”
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