Real-Time Payments Is A Need Long Time Coming.
Instantaneous payment settlement method is a long time need just put on a shelf. The rise of the Covid 19 pandemic just pronounced it more clearly nowadays. Real-time payments which can only be mirrored before by cash payments becomes limited because it requires face to face transactions. Credit card transactions used to dominate digital payments. For so many years now we just relied on an outdated system provided by a “middleman” like SWIFT. Financial institutions across the world have to rely on a series of IOU's passed between various institutions. This process requires complicated legal arrangements and pre-fund currencies with each other to alleviate the counterparty risk created by IOU's. This is counterproductive and highlighted the need for real-time payments NOW!
The reality of the demand for real-time digital payments is very much evident. China makes a move to have its own digital currency because of this. As of the current trend, even countries like Thailand, Vietnam, and Indonesia have payment via mobile wallets outpacing credit card transactions. Blockchain technology can make all of this an efficient and seamless experience. After all, Bitcoin, the mother of all cryptocurrencies is created to be an immutable and trustless transaction ledger.
Blockchain Technology Offers A Solution For Real-Time Payments.
Now we have a number of cryptocurrencies where payment solutions are their primary use cases. We have Ripple (XRP), Stellar, Monero, and Bitcoin Cash are among the coins that are on the forefront for these uses. Each of these cryptocurrencies has features that spell the difference why you should these coins for their benefits and value. Time may limit us to taking a look at each coin. We shall take a look at what it seems a common feature with top cryptocurrencies that serves this particular use case. They may differ with system efficiency and other particular coin features but they all serve as an immutable and trustless transaction ledger
Let's take a look at Ripple (XRP) for example. Particularly the XRP cryptocurrency and Ripple company, XRP has its On-Demand Liquidity (ODL) service. Financial institutions can now use the XRP ledger and its own digital assets as means of instant (real-time) settlement, this virtually removes any need for pre-funding. ODL eliminates the complex IOU infrastructure. This is really a great benefit for institutions, it frees up their capital and guarantees competitive currency exchange rates. Ripple coin (XRP) acts as a bridge between these two currencies, ensuring payments are delivered and received in local currency quickly. What "efficient" cross border payments used to process in 3 days now becomes only a frictionless 3 seconds with the blockchain technology.
What Banks Should Do?
Banks should provide and keep up with the need to make themselves relevant in the industry. The finance industry needs to reshape itself to meet the demands of institutions and consumers alike. The need to be innovative is a means to be the leader of the new world order. The pandemic brought our world to a new reality and it could be a welcome change, institutions need to be able to provide their customers with real-time transactions, no legal impediments, no process delays, or future settlement dates attached.
Your Thoughts.
How about you? Do you really think blockchain technology can bring a major difference to the finance industry? Share your thoughts by leaving your comments below.
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