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While the term “blockchain” may have been inextricably linked with cryptocurrency in the past, there are other uses for the technology that have nothing to do with cryptocurrency.
One of these uses is international money transfers. Money transfers may not be something you think about very often, but there is a huge market for it. Transfers can be complex, inefficient transactions and usually involve fees, which are often passed through to the consumer.
Blockchain payments eliminate delays and reduce the costs associated with traditional-bank-based cross-border money transfers, and can benefit any peer-to-peer money transfer.
Here we look at three of the main advantages presented by blockchain.
Faster Money Transfers via Blockchain
Traditionally, international money transfers take 3 – 5 days to process.
Blockchain technology actually eliminates the need for a third-party institution, enabling direct transfers between individuals instantly.
Cheaper Money Transfers via Blockchain
Transferring money internationally can be an incredibly lengthy and expensive process, with fees typically ranging from 5% to 20% of the transfer amount. This high fee is a result of the involvement of one or more financial institutions to process the transactions indirectly, and is compensation for the manpower to facilitate this service. In addition, a foreign currency exchange fee is also charged by banks.
Blockchain, on the other hand, enables faster and cheaper direct transfer. It will save the high fees that are charged by middlemen, and can reduce the total cost of money transfers by up to 3%.
More Secure Money Transfer via Blockchain
Transactions made via blockchain technology cannot be manipulated, hidden or hacked, as the technology is not controlled by centralized financial institution or governments. In order for its authenticity to be compromised, almost the entire network of hundreds of thousands of individually operated nodes, distributed all across the world, would need to be coordinated and altered at the same time. Additionally, the encryption technology feature of blockchain ensures both privacy and verifiability simultaneously on the public audit trail.
The Feb-2018 McAfee Report, estimates that cybercrime is on course to costing the world $600 billion in 2018. Furthermore, Cybersecurity Ventures predicts that cybercrime will cost the world $6 trillion annually by 2021.
While existing financial services providers have enjoyed an oligarchy over the secure payments industry for over a decade, the technological mechanisms they employ have remained essentially the same during that period. This lack of development has made them vulnerable to cybercrime, which drives up the regulatory costs and is reflected in the consumer’s fees.
Firms such as Ripple, BitPesa and Everex offer cross-border money transfer services to their clients using blockchain technology.
BitPesa offers a simple way for consumers and companies around the world to buy and sell in African currencies, including those of Nigeria, Kenya, Tanzania, Uganda, the Democratic Republic of Congo and Ghana.
Ripple, a transaction network with a native digital token (XRP), provides one frictionless experience for real-time payments anywhere in the world. Ripple’s network is built for enterprise; therefore, the industry is seeing increasing adoption of Ripple’s settlement infrastructure by banks and other payment institutions.
Everex targets the two billion underbanked people around the world who lack access to modern financial institutions, including bank accounts or credit. Everex’s platform features quick deposits, international mobile payments, instant international money transfers and cash withdrawals, local currency exchanges and retailers around the world.
Although the money-transfer industry has been dominated by firms such as MoneyGram and Western Union, these services are time-consuming and expensive. For consumers who want to reduce costs while increasing the speed, security and transparency of sending money abroad, blockchain technology is truly the next-generation solution to the issues associated with traditional banking services.