How Blockchain Startups Are Trying to Solve the Problems of Global Payments
Since the birth of the cryptocurrency revolution, multiple industries are beginning to explore the potentialities of what blockchain technology can do for their sector. The global payments industry is not immune from this transition, with the phenomenon look set to challenge the status quo of slow, expensive and bureaucratic inter-bank payments. There are many other issues that exist in the cross-border remittance system today, but blockchain startups are eager to shake up the system.
The multi-trillion dollar industry in a state of stagnation
To illustrate the size of the cross-border payments industry (which constitutes 40% of all global payments), it is estimated that more than $135 trillion is sent to and from foreign shores each and every year. Although we now live in a world of globalization, no single payment infrastructure exists. The result? High transaction fees and long delays.
For business-to-business transfers, de-facto payments network SWIFT have led the way since the early 1970s. However, their transaction supply-chain generally requires all of the following stakeholders:
- Sender’s Bank
- Sender’s Correspondent Bank
- Beneficiary’s Correspondent Bank
- Beneficiary’s Bank
As one can imagine, each stakeholder will have their own internal procedures to follow (delaying the payment cycle) and will also require their own fees (making the transactions expensive).
Let’s take a look at an industry like the raw materials exchanges (such as oil, coal or gold). The manufacturers, buyers and brokers of these products have shoehorned themselves into systems to accommodate the financial industry which is anything but optimal for their workflow, costs and process. They’re now using a patchwork of currencies and are depend on banks that turn with the speed of an oil tanker to settle deals and do business. The completely unnecessary 6-step process described above doesn’t add any value to these transactions, except lining the pockets of the financial institutions.
The solution: blockchain technology
The Kvantor have created an innovative protocol that has the capacity to facilitate these settlements by means of opportunities to operate with instruments expressed in digital tokens.
The Kvantor platform provides the participants of the exchange with a portal where they can find each other, arrange tenders, exchange with commercial proposals, obtain information from the world's leading commodities and raw materials exchanges.
This means transaction speeds in the seconds, and fees at a cost of practically zero. How? By utilizing distributed ledger technology, based on HyperLedger, the parties trading in raw materials can send and receive funds without needing a centralized third party.
Instead, transactions are verified, confirmed and audited through a consensus mechanism known as Proof-of-Authority (PoA), allowing anyone with an internet connection to access their payment instantly. Moreover, the technology has the ability to scale on a level comparable to VISA, which is crucial to avoid delays when the network gets busy.
This will service the needs of the inter-bank industry, whereby financial institutions will have the ability to settle funds across borders in seconds. It will not matter if funds are sent locally or internationally, the outcome is the same. A fast, cheap and highly scalable globalized payments network for economies.
(KVANTOR is a platform which facilitates borderless transactions and seamlessly integrates with banks and FinTech providers who are disenfranchised and are looking for alternatives to traditional channels, such as SWIFT.)