Blockchain in FinTech Fuels the Future of Payments
Western Union and Moneygram are widely known names in the payments sector of finance. As technology rapidly disrupted financial services over the last 20 years, FinTech (financial technology) companies have emerged globally to provide a simple, low-cost alternative to well-established agencies. For customers that send money monthly to their family in developing countries, these enhanced and cost-effective services have added up to significant savings annually.
The continued movement and migration of people globally has only increased demand for international payments, with the remittance sector sending close to $600B in 2017. As an industry, fintech continues to evolve in this area by leveraging new technology (blockchain) to enhance services even further, making the transfers available as low (or no) cost and in real-time.
The legacy process for remittance involves multiple parties (such as an initiating bank, intermediary bank, and receiving bank) that play a part in moving money from one person to another. Each party in this process would charge a fee for their role in the transaction with an average total cost of 7 - 8%, and a dismal completion time of 2 - 5 business days. Larger banks and institutions have helped customers make these requests as wire transfers but at higher cost and similar speed, charging flat fees that start at $10 up to $50+ (depending on account status).
In recent years, FinTech companies that specialize in payments have been able to reduce the average cost and timing of international transfers in the industry through innovative platforms. PayPal is a well-known established fintech that has provided payment options for years, but has lost market share to new players, such as TransferWise, WorldFirst, and WorldRemit — offering multi-currency options or not requiring a bank account, only email address.
Remarkable advances have been made to further enhance services with blockchain technology, in order to provide payments at an even lower cost (or free of cost) through a seamless mobile experience for customers around the world — able to speed up transaction times from days to seconds. Abra, an app-based platform known for digital currency exchange (cryptocurrency), provides a service to help users make transfers internationally free of charge from without intermediaries or banks. Ripple and Stellar are other blockchain platforms disrupting the payment sector of FinTech that have partnered with large institutions in order to streamline remittances securely — both platforms provide their transfer service by leveraging digital tokens on their respective blockchain platform, to facilitate the transaction from start to finish.
For customers in developing countries around the world that rely on receiving funds, and their friends or family that need a trusted, efficient, and low cost solution —fintech’s next disruption of the payments sector through blockchain is a welcomed addition.
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Image Credit - Yeeply