In this article we shall tackle blockchain application in the remittance space.
Blockchain is described as a decentralized data ledger that is safely shared. Data sharing among a collective group of chosen members is made possible by
blockchain technology. Transactional data from many sources may be readily
gathered, integrated, and shared via blockchain cloud services.
What is blockchain remittance?
In today’s global economy, the word “remittance” is frequently used. A migrant
worker’s cross-border payment transactions with their home nation are referred to as
the remittance economy. It fuels the flow of money in many emerging countries.
The majority of remittances are connected to centralized organizations like banks
and currency exchanges. One option is remittance services built on the blockchain.
This article outlines all you need to know about global remittance alternatives using
blockchain.
A financial solution called blockchain remittance applies blockchain technology to the
diverse requirements of the remittance industry. It indicates that service providers
can employ blockchain-powered payment options to transfer money between two
people, perhaps separated by national boundaries.
Blockchain remittance does not rely on centralized authority like payment systems,
sender and receiver are the parties to the transaction. The only middlemen are a
mobile wallet/bank app and the blockchain network.
What are some of the problems with current Remittance Channels?
A few notable problems include:
● They are expensive-
Remittance channels have higher transaction costs than domestic financial transfers.
The average transaction charge worldwide for transferring $200 to another nation is
7%, according to The World Bank. This means that the remittance platforms may
charge up to $14 to execute a $200 international payment. Numerous mediators are
one cause of this high cost.
● They are slow.
On top of being expensive, they are slow. The infrastructure for conventional
remittance methods is outdated. A typical remittance transaction would typically take
up to 5 days. Nobody wants to wait a long time to get money from abroad.
● They are not standardized
The present remittance platforms clearly have a standardization problem. Before
reaching the recipient’s bank account, a single transaction occasionally makes use of
numerous international standards, including EDIFACT and SWIFT. In addition to
raising the transaction fees, the absence of uniformity has several practical
drawbacks. Experts have also noted that these channels’ transactions are not
sufficiently transparent.
Examples of Blockchain remittance
Stellar is an illustration of how blockchain might benefit the remittance sector. Stellar
is a cryptocurrency platform for financial services. Stellar Lumens (XLM) tokens
enable users to exchange cash and cryptocurrency.
Another important name is Coins.ph, which enables users to conduct daily
transactions and international remittances using cryptocurrency. These are but a few
instances of blockchain remittance schemes.
What does Blockchain remittance solve?
Blockchain technology has two inherent properties: adaptability and scalability.
Blockchain remittance removes a number of middlemen from the process. With the
exception of the clients’ mobile wallets or banks, blockchain technology will operate
as the only middleman in the transaction.
The transaction costs and time restrictions associated with remittance transactions
will be reduced by this new design. The recipient will receive a remittance
transaction in a matter of minutes or perhaps seconds. The transaction costs will
also be low because there are no middlemen involved.
Blockchain remittance relies on the fundamentals of cryptography for security and
verification. All transactions made using blockchain technology will remain on a
public ledger while maintaining the highest level of privacy for all parties. Algorithms
used in blockchain technology stop data manipulation in all its forms. In essence,
transactions made possible by blockchain remittance will be largely safe, private,
and verifiable.
People may use blockchain remittance in a far wider variety of ways than they can
traditional transfer methods. A good example is a smartphone app that handles
blockchain remittance online. Blockchain remittance can be made possible by ATMs
in rural locations without access to the internet. The adaptability and flexibility of
blockchain technology can be used in a wide range of various situations.
Limitations of blockchain remittance
1) Cryptocurrency is used in blockchain remittance, thus the lack of clarity in the
laws will be a serious problem. Since financial institutions are a component of
traditional remittance, the threat increases.
2) The use of cryptocurrencies also brings with it the effects of their volatility.
Stablecoins are the suggested answer by experts, however, they might not be
as well-known as volatile cryptocurrencies.
3) Although remote ATMs offer a solution, practically all aspects of blockchain
remittance require an active internet connection. There may be issues with
this dependence in various regions of the world.
4) Blockchain remittance systems work using bridge tokens or cryptocurrencies.
Customers must still utilize their bank accounts to obtain bitcoin, which is an
inconvenience.
Would you like to transfer money abroad? The constraints of current remittance
routes will soon be gone thanks to blockchain technology. A greater number of
individuals are anticipated to utilize blockchain remittance services as a result of the
growing popularity of cryptocurrencies.
Joyce Obuya
Relevant experience as a content writer. Highly proficient in Keyword Research and its tools. Experienced writer in both short-form and long-form blogs as well as Business Publications
