Blockchain to Accelerate Payment Processing Services & Trade Finance, American Express FX International Payments

Tho’ few blockchain-based payment services are yet available, that’s expected to switch ter 2018 spil the investment that has poured into exploration of blockchain’s potential by banks, financial-technology startups and other companies yields fruit. According to a survey of 200 global banks published by the IBM Institute for Business Value and The Economist Intelligence Unit, 15 procent of banks expect to introduce full-scale commercial blockchain solutions ter 2018, with “mass adopters” rapidly following suit – bringing the total to 65 procent of banks by 2020 (just three years). 1 This postbode offers a roundup of many live and near-live blockchain payment processing solutions and trade finance deployments.

Blockchain technology promises to facilitate quick, secure, low-cost international payment processing services (and other transactions) through the use of encrypted distributed ledgers that provide trusted real-time verification of transactions without the need for intermediaries such spil verslaggever banks and clearing houses. Blockchain technology wasgoed originally used to support the digital currency Bitcoin, but is now being explored for a broad diversity of applications that don’t involve bitcoin.

There are two main areas of blockchain activity that may see live deployments te 2018 and may have implications for businesses: international payment processing services involving bank-to-bank transfers and trade finance applications (including the use of “smart contracts”). Thesis areas are ripe for disruption because existing systems are often old, slow and costly, according to a report by Credit Suisse, which notes that today’s cross-border wire payments can take days to clear and involve fees spil high spil Ten procent. Two

Blockchain May Speed International Payment Processing Services

Some blockchain-based B2B payment processing services already exist, others are expected to launch ter 2018 and zometeen. Perhaps the fattest emerging trend is the use of distributed-ledger technologies unrelated to Bitcoin, such spil Ripple and Ethereum. Te Japan, a consortium of banks plans to go live te the Spring of 2018 with a blockchain-based payment processing service that will support real-time domestic and cross-border payments at lower cost versus traditional services. Three

Several existing blockchain-based payment processing services are based on Bitcoin. Some of thesis are designed for the relatively petite subset of businesses trading directly ter Bitcoin. But other payment processing solutions address a much larger audience by using the Bitcoin distributed ledger to transfer payments ter conventional currencies. This enables them to bypass existing banking infrastructure, with the objective of accelerating payment and reducing cost. The provider converts the payer’s local currency into Bitcoin, then converts the Bitcoin into the receiver’s local currency, often delivering international payments within one to three days. Four Te Kenya, BitPesa is using this method to enable companies to make quicker, cheaper payments inbetween African countries without having to rely on slow and inefficient local banking infrastructure, according to a Citi Research report. Five

Blockchain May Lower Cost of Trade Finance

Numerous initiatives are focusing on applying blockchain to accelerate and reduce the cost of trade finance, which some consider ripe for disruption 6 because it presently often involves costly, time-consuming, paper-based manual processes. 7 Ter a latest proof of concept, Commonwealth Canap of Australia, Wells Fargo and Brighann Cotton undertook what wasgoed believed to be the very first live global blockchain-based transaction involving two banks, the transaction involved a collaborative workflow to track and pay for a shipment of cotton inbetween two Brighann units ter Texas and China. 8

IBM’s financing unit is working on a blockchain system to free up capital by resolving disputes with customers more quickly, its tests suggested that resolution time could be diminished from 44 days to Ten. 9

Despite the potential benefits, some believe it may take time for blockchain trade finance solutions to become prevalent. A report from the Boston Consulting Group estimates that technologies including blockchain could reduce the operational and compliance costs of paper-based trade by 10-to-15 procent, but says that the overeenstemming among banks and non-banks is that mainstream blockchain applications te trade finance may be five years away. Ten

Contracts That Execute Themselves

For trade finance applications, a key capability of blockchain technologies is brainy contracts. Thesis are puny, self-executing programs stored on the distributed ledger that automatically execute payments or other deeds when specific conditions are met. For example, the contract might trigger automatic payment processing when a company verifies that it has received a shipment of goods, thus accelerating the transaction and reducing the likelihood of payment processing service errors. Ter 2016, financial consortium R3 and its member banks ended trade finance prototypes that used wise contracts to process factoring transactions and letters of credit. 11

The Takeaway

Ter 2018, more B2B blockchain-based payment processing services are likely to stir from the experimentation phase to real-world deployments, spil initiatives by banks, financial-technology startups, and other companies stir closer to fruition.

The Author

Mike Faden has covered business and technology issues for more than 30 years spil a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Playmates.

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