In the past five decades, the payments industry has seen significant growth and has become one of the largest sectors globally. However, one major issue remains – the industry still relies on outdated technology that is becoming more inefficient over time. A recent report from Binance Research sheds light on the potential benefits of blockchains, distributed ledger technology (DLT), and their applications in boosting efficiency within the payments sector.
Traditional payment systems are estimated to generate trillions in revenues by 2024, with continued growth projected in the coming years. Despite the industry’s financial success, it has been described as a “Frankensteinian conglomeration” filled with multiple middlemen who charge high fees for each transaction. With an average of six intermediaries involved in cross-border transactions, costs are high, reaching 6%. Moreover, the process is time-consuming, often taking up to five business days to settle, creating inefficiencies in tracking funds movement.
Blockchain technology has the potential to revolutionize the payments industry by offering a more efficient and transparent digital environment for users. According to Binance Research, blockchains could significantly improve the merchant and consumer experience by providing a global platform for quick transactions at a fraction of the cost compared to traditional systems. By eliminating middlemen and correspondent banks, blockchain technology could streamline the payment process and enhance communication between parties.
Despite the evident benefits of blockchain technology in payments, the industry’s massive size presents challenges in adoption. Binance Research suggests that the gradual integration of blockchain solutions may be necessary to address scalability and regulatory uncertainties. While some established payment giants like Visa have initiated pilot programs for global payments, significant growth is needed at the individual and retail levels to realize the full potential of blockchain technology in the sector.
The payments industry stands to benefit greatly from embracing blockchain technology as a means to address inefficiencies and streamline transactions. By gradually implementing blockchain solutions and overcoming regulatory hurdles, the industry can pave the way for a more efficient, transparent, and cost-effective payment ecosystem for merchants and consumers alike.