Blockchain is undoubtedly an emerging and futuristic approach that can be simply described as a decentralized method. Blockchain technology is a peer to peer without the involvement of the third party.
But what does it mean? Is Blockchain fully secured?
Blockchain is acquiring almost all the sectors and reshaping the industries to the next higher level. Blockchain, due to its cost-efficiency, transparency, and security, can be seen as a solution for all businesses that regularly make cross border payments.
But the primary concern lies that says ‘can blockchain disrupt global cross-border payments? This article will focus on how blockchain is bliss in making cross border payments, throwing light on the restrictions and pitfalls as well. Before answering this question, let’s understand what it means when we say cross-border payments and the significant issues that are associated with such payments.
Issues with Traditional Payment Methodology
To source goods and services for business from one country to another, we need cross-border payments. But these payments are not that easy as
- Sending payments internationally via banking channels is a complex and daunting task.
- There are many unseen exchange rate fees that you face when you are making cross border payments.
- Sending money overseas by the traditional method can be challenging as banks can be hacked or robbed.
Blockchain can be seen as a backbone in dealing with cross border payments as this technology is known to maintain digital money. Blockchain is capable of solving the challenges that are faced in traditional methods of cross border payments.
How Blockchain is Easing Overseas Payments?
We know that a blockchain is a decentralized approach, ensuring security and transparency at the same time. When it comes to how blockchain can be beneficial in cross border payments, here are a few compelling reasons that we cannot overlook.
Reduction in Transaction Cost
From businesses to consumers, everyone is benefited by blockchain technology as this technology offers security and transparency. Apart from that, blockchain can help in reducing the transaction cost that clients suffer when dealing with traditional transfer processes, as it has been estimated that the traditional payment method costs almost 7%.
Automates Business Functions
Blockchain technology can be seen as bliss to cross-border payment methodology. This newer payment alternative allows easy tracking through low-cost channels, automating various business functions like auditing and others.
Where the traditional cross border payments take more than 3 days, blockchain technology gets things finalized in seconds or we can say just within a click of an eye. From Germany to India, money can be spent securely in just a few seconds rather than days.
Blockchain allows global payments in fewer steps without breaching the security. Apart from security, blockchain payments are tamper-proof and more accurate.
All credits go to leading-edge encryptions for making blockchain technology a lot more secure for one and all.
No Bottleneck Problem
Blockchain technology is helping businesses and consumers in numerous ways. This technology does not suffer from a single point of failure as blockchain is decentralized and distributed peer to peer where chain updated and synchronized across multiple places.
In blockchain technology, transactions are validated on the blockchain and if in case the transaction fails due to many reasons both the parties are informed immediately. When using SWIFT in cross border payment, there is no underlying settlement process where an individual can alter the banking system, which increases the possibilities of frauds, unlike in blockchain technology.
Apart from all that direct transfer between the global organizations, reduction in overall cost, faster transaction time, transparency, and encryption is making blockchain technology common worldwide.
Where Blockchain is Struggling
Undoubtedly blockchain has opened a lot of futuristic opportunities, yet it is not without the pitfalls.
Privacy is still one of the major pitfalls associated with blockchain technology. Blockchain does not involve any third party, which ensures no intermediaries or correspondents involved while sending money overseas. Still, it is necessary to ensure that there is no data manipulation at any point in the chain.
Acceptance by banks and agencies is still one of the challenging factors as banks are finding it harder to adopt and implement while few are strictly in opposition. The other major drawback is the lack of government approval and regulations while incorporating Blockchain technology.
Global business and international trade are going to last forever. With the increasing cross border business demands, people are still looking for more comprehensive options to send money overseas. Though blockchain can seem to be challenging and less understandable, it follows a simple procedure. Few banks and companies are hesitant in adopting blockchain technology, while other organizations are already working with blockchain providers to have secure and faster transactions.
But of course, improvements are still foreseen while using blockchain technology in cross border payments.