As shown by the proliferation of Bitcoin and the wave of innovation that followed, blockchain technology can be applied to many different industries.
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One would think that such a high-volume industry would have more efficient processes in place already but, alas, many aspects of the banking system are still predicated on laws that were established decades ago.
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Oftentimes, international transactions are flagged and ultimately not going through because of stringent security protocols which can wrongfully alert the system and create a massive headache for customers who are simply trying to conduct business and don’t serve any threat.
Cross-border transactions are a huge problem since they are highly inefficient and quite expensive for banks and business, alike. The crux of the problem is that payment systems are typically based on local laws and there is still no global standard that enables the process to run smoothly.
Cross-Border Payment Solutions on the Blockchain
One of the most high-profile examples of this is Ripple, which is taking on the daunting task of completely replacing SWIFT, an international banking network that currently dominates payment order transfers. Instead, Ripple is partnering with TransferGo, an international payment platform, to test its XRP-powered xRapid (a component of RippleNet), lowering the cost and liquidity for their global payments. TransferGo CEO Daumantas Dvilinskas confirmed that they are using the technology to “establish real-time communication between us and our banking partners in India” and make international payments immediately.
Ripple was not at all shy about their feelings toward SWIFT. Ripple CEO, Brad Garlinghouse, was quoted as saying: “SWIFT said not that long ago they didn’t see blockchain as a solution to correspondent banking. We’ve got well over 100 of their customers saying they disagree.”
It seems SWIFT has another blockchain-related threat on its hands in the form of the Central Bank of Iran (CBI). In a dramatic development, SWIFT ousted the Central Bank of Iran from its financial banking system and, in response, the country decided to accelerate development of its own state-backed national currency, Crypto-Rial, to transfer payments. Developed by the Informatics Services Corporation (ISC), a private tech wing of the CBI, the technology will enable Iranian commercial banks to use the tokens as a payment instrument in transactions and banking settlement, in the coming days.
One of the top three insurers in Japan, Sompo Holdings, Inc. is teaming up with BitPesa, a foreign exchange platform and treasury solution based in Africa, and are also trying to address the issue of remittance and payment processing and ultimately encourage global trade.
And it doesn’t stop there. A project led by JP Morgan, the Interbank Information Network (IIN), is also diligently working toward being the only solution to the problem of cross border payments, at scale. This project would be less about cutting costs (like the above examples) and more about creating new products that couldn’t otherwise be done without blockchain. JP Morgan estimates that IIN will handle more than 300,000 transactions a day. But it remains to be seen if it can successfully do this and eventually surpass SWIFT which processes 14.5m cross-border payments, as noted in the Financial Times.
-By Stewie Zhu - November 15, 2018
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