Blockchain in cross border payment in poor countries
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Blockchain is a new technology of the world and is used in many fields in life such as ecommerce, logistics and especially fintech which started with the development of Bitcoin. After Bitcoin, we can apply blockchain in many fields of fintech, and cross border payment is no exception.
In this article, let’s find out with FinFan how much can bank save by blockchain in cross-border payment and how does blockchain help poor countries cross border payment.
How much can bank save by blockchain in cross border payments?
Before using blockchain, that was the process of cross border payment process:
Step 1: The senders will fill out the forms from their banks about the receivers and pay a little fee for an agent to transfer this money and exchange rate.
Step 2: The money will be sent by the agent to receivers by direct transfer to receivers’ banks or at the pick-up places (often receivers’ banks or the banks have a connection with the sending agent).
Step 3: The receivers receive money from the sending agent.
After using the blockchain, the money will be transferred directly to the receivers’ bank accounts and doesn’t need to go through the agent or middleman.
Blockchain tech removes the middleman in asset rights transfers, lowering asset exchange fees, giving access to wider global markets, and reducing the instability of the traditional securities market.
Moving securities on blockchains could save $17B to $24B per year in global trade processing costs.
How does blockchain help poor countries cross border payment?
The reality in poor countries
In poor countries, the number of unbanked and underbanked people is still high and they can get the condition to have bank accounts. They can’t do the cross border payment in the old way like through an agent or send directly to bank accounts.
In poor countries, inflation is a fear with governments, because of the low value of these nations’ currencies.
In poor countries, corruption is also a point to note when the weight of money can blind some government officials.
How does blockchain help poor countries cross border payment?
*The blockchain serves to bank the unbanked. People with little to no access to a solid banking infrastructure can access various financial services for free. Blockchain allows people to participate in their local economy much more easily by giving them access to fast and low-cost electronic cash for daily purchases. In addition, they can use the growing decentralized finance (DeFi) ecosystem to access advanced financial instruments such as lending and borrowing to make passive income or get quick access to a line of credit.
It fights inflation. Cryptocurrencies—with a limited maximum supply like Bitcoin—are designed to be deflationary. The usage of crypto can fight hyperinflation in some developing countries and help people retain their capital while keeping it in a liquid, transferable form.
The immutability of the digital ledger can fight corruption. Corruption in many developing nations is rampant. Extreme poverty pushes people to resort to corruption, especially in governmental administrations. The immutability of blockchain can help digitalize all documents and archives, allowing for more transparency in administrative processes. Voting on the blockchain can also be a great tool to avoid tampering with elections.*