Blockchain Could Save Fintech Firms Billions as Sector Players Seek Improved Cross-Border Payments: Report

The blockchain technology could help the global fintech sector gain financially, as well as give it a much-needed refreshment in the coming years. Implementing the distributed ledger technology, that is blockchain, into the existing financial sector could save around $10 billion (roughly Rs. 82,252 crore) in the next seven years. The finding was published as an outcome of a survey, that was conducted by Ripple in partnership with the US Faster Payments Council (FPC).

A total of 300 finance-related professionals from around 45 nations were surveyed by Ripple and the FPC. The participants included financial analysts, company CEOs, and fintech directors. Out of the total respondents, 97 percent have expressed confidence that the blockchain technology has the potential of improving online payment services, especially for the processing of international transfers.

At present, the report says, people linked to the finance sector are dissatisfied with legacy rails for cross-border payments.

“Crypto cuts costs. The cost of transactions is 80 percent less expensive for end users who use stablecoins for cross-border payments,” the report said.

Transactions recorded on blockchains are saved as chunks of information and are distributed in different blocks of the network. This makes the storage of sensitive information more secure against hackers and cyber criminals while also keeping the process cost effective as compared to the hefty costs of maintaining present day servers and data centres.

In addition, history of transactions recorded on blockchains cannot be tampered with, and this keeps the financial records transparent and tamper-proof without any extra cost added to do so.

These reasons are why governments around the world, despite being sceptic about accepting cryptocurrencies, are accelerating work around CBDCs.

Based on blockchain networks, CBDCs are the digital representation of fiat currencies that are expected to make online payments faster and more secure, while also reducing the dependency on cash notes, which are often misused for illegal activities like money laundering that go unrecorded.

Despite it being volatile and unregulated, the blockchain-backed crypto sector has also managed to retain support from the global investor community. The sector, which was valued at over $3 trillion (roughly Rs. 2,46,91,380 crore) around November 2021, currently stands at a market cap of $1.18 trillion (roughly Rs. 97,04,768 crore).

In the next one to three years, the Ripple report estimates, 52 percent merchants from around the world will begin accepting crypto as payments.

Crypto acceptance will see boost mostly in the Middle East and Asia-Pacific regions where 64 percent and 50 percent retailers are likely to begin accepting crypto payments. European traders (58 percent) are also looking to open doors for crypto payments especially now when the EU has approved the MiCA crypto regulation for the region.

The report further notes that people aware about blockhain systems favour green blockchains, that use the Proof-of-Stake mining model. Over 98 percent of the respondents to the Ripple survey said that low energy consumption by blockchain networks is a must for their acceptance in existing fintech sector.

“Cryptocurrencies present a potentially compelling blend of flexibility and utility. They appear well-positioned to solve some seemingly intractable issues in payments by filling various gaps in payment flows efficiently and effectively,” the report quoted Reed Luhtanen, Executive Director, US Faster Payments Council as saying.

The report has noted that as more nations bring-in laws to govern the crypto sectors, the blockchain technology will be well received by more financial institutions.