As a seasoned investor who has witnessed the evolution of technology from the dawn of the digital age, I can confidently say that blockchain technology is poised to disrupt the antiquated and cumbersome traditional payment system. Having navigated through various economic cycles and technological revolutions, I’ve learned to spot opportunities that not only promise growth but also aim to solve real-world problems.
For more than half a century, the global payments industry has expanded to become one of the most significant and rapidly developing fields. Yet, it grapples with an ongoing challenge: much of its infrastructure is built upon technology from the mid-20th century, which becomes less efficient as it ages.
According to a study by Binance Research, the research arm of Binance – the world’s biggest cryptocurrency exchange – suggests that blockchain technology, distributed ledger systems (DLT), and their associated applications could potentially revolutionize the payments sector by enhancing efficiency and posing a competitive threat to existing players.
Pains of the Traditional Payment System
As a researcher delving into the realm of financial systems, I’m excited to share some intriguing insights about the traditional payment system. By the year 2024, it’s projected that this system could potentially rake in an astounding $2.83 trillion. But here’s where it gets truly fascinating: by the year 2029, we anticipate that number to soar even higher, reaching a staggering $4.7 trillion! This impressive growth is expected to occur at a compound annual growth rate of 10.8%. Simply put, this means that if you were to invest in this system today, you could potentially witness an average yearly increase of around 10.8% over the next six years. Isn’t it fascinating to see such dynamic growth in the world of payments?
Binance researchers described the industry as having transformed into a complex, multi-layered entity reminiscent of a “Frankensteinian conglomerate.” This structure is filled with multiple intermediaries who tend to levy significant fees for every transaction that transits through them. Typically, traditional payment methods involve approximately six intermediaries, leading to an average cost of 6% for cross-border transactions facilitated by such channels.
Apart from being expensive due to multiple intermediaries involved, these cross-border transfers often require a significant amount of time to complete. Typically, it can take as long as five business days for these transactions to be finalized, causing both senders and receivers to lack visibility into the funds’ movement.
According to the researchers, it’s high time for a new beginning in our current payment system infrastructure, and blockchain tech might be just what we need to make that happen.
How Can Blockchain Help?
As a researcher delving into blockchain technology, I am captivated by its potential to revolutionize the merchant and consumer experience. Unlike the conventional financial system, it provides a unified, transparent, and globally accessible digital environment where transactions can be executed swiftly, using just a smartphone and an internet connection. Remarkably, this speedy transfer of value costs roughly 50,800 times less than traditional methods, making it a highly attractive alternative for both businesses and consumers alike.
Blockchains establish a straightforward connection between businesses and customers, eliminating the necessity of numerous intermediaries and intermediary banks, allowing innovative financial technologies (fintechs) of tomorrow to break free from conventional payment systems.
Significantly, financial payment titans such as Visa are experimenting with services for high-end international transactions. However, there’s a need for substantial expansion in terms of individual and retail usage.
In the vast payments sector, it’s anticipated that incorporating technologies such as blockchain will be a gradual and careful process, based on Binance Research’s perspective. Yet, these researchers posit that this slow adoption period allows the blockchain industry to mature, develop essential tools, address challenges like scalability and regulatory concerns, effectively moving beyond its initial stage of development.
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2024-09-02 01:20