Blockchain technology can help the global fintech industry reap financial gains and give it a much-needed boost in the coming years. Implementing distributed ledger technology (i.e. blockchain) in the existing financial sector can save approximately $10 billion (approximately Rs. 82,252 crore) over the next seven years. The discovery is the result of an investigation conducted by Ripple in partnership with the Faster Payments Council (FPC) in the United States.
Ripple and FPC surveyed a total of 300 finance-related professionals from approximately 45 countries. Participants include financial analysts, company CEOs and fintech directors. Across all respondents, 97% expressed confidence that blockchain technology has the potential to improve online payment services, particularly in the processing of international transfers.
The report says that currently, those involved in the financial sector are dissatisfied with the legacy rail of cross-border payments.
“Cryptocurrencies can reduce costs. For end users who use stablecoins for cross-border payments, transaction costs are reduced by 80%.” The report stated.
Transactions recorded on the blockchain are saved as blocks of information and distributed across different blocks of the network. This makes the storage of sensitive information more secure from hackers and cybercriminals, while also keeping the process cost-effective compared to the high costs of maintaining today’s servers and data centers.
Additionally, the transaction history recorded on the blockchain cannot be tampered with, which allows financial records to remain transparent and tamper-proof without any additional cost.
These reasons are why governments around the world are accelerating work around CBDCs despite their skepticism about accepting cryptocurrencies.
CBDC, a digital representation of fiat currency based on a blockchain network, is expected to make online payments faster and more secure while reducing reliance on cash notes, which are often misused for illicit activities such as unrecorded money laundering.
Despite being volatile and unregulated, the blockchain-backed cryptocurrency industry has also managed to retain the support of the global investor base. Around November 2021, the industry was valued at more than $3 trillion (approximately Rs. 24,691,380 million), and the current market capitalization is $1.18 trillion (approximately Rs. 97,047.68 billion).
A Ripple report estimates that within the next one to three years, 52% of merchants worldwide will begin accepting cryptocurrencies as a payment method.
Cryptocurrency acceptance will mainly increase in the Middle East and Asia-Pacific regions, where 64% and 50% of retailers are likely to start accepting cryptocurrency payments. European traders (58%) are also looking to open the door to crypto payments, especially now that the EU has approved the region’s MiCA crypto regulations.
The report further states that people who understand blockchain systems favor green blockchains that use a proof-of-stake mining model. More than 98% of respondents in the Ripple survey stated that the low energy consumption of blockchain networks is a necessary condition for their acceptance in the existing fintech field.
“Cryptocurrencies present a potentially compelling combination of flexibility and utility. They appear to be well-positioned to solve some seemingly intractable payment problems by filling various gaps in the payments process efficiently and effectively.” The report quoted Reed Lutanen, executive director of the Faster Payments Council, as saying.
The report points out that as more and more countries introduce laws to manage the cryptocurrency field, blockchain technology will be welcomed by more financial institutions.
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