How Blockchain Is Changing Cross-Border Payments

Banking activities like saving, depositing money, making online purchases, making transfers, and other banking transactions might seem like simple everyday things to you and me. However, there are still a large number of people in this world who do not have easy access to banks. As a result, as many as two billion people may not even have bank accounts.

The ability to process payments across borders through electronic means has been invaluable for sending money between countries, online purchases and making other kinds of payments as easy as possible. However, while technological advancements has allowed fees for international transactions to go lower and lower, these fees are still considered relatively high and eat away into the amount being transacted.

For some consumers, whether they are the payer or the receiver, these transaction fees can be quite a lot. Even in the lower range, like Paypal’s 2.9%, it can still hurt, especially for small business owners.

With blockchain technology, transaction fees are expected to be even lower due to cutting out of middlemen like banks and credit card services. Thus, increasing the margins for business owners and receipt amounts for foreign workers sending money back home. Blockchain technology also means that digital currency stored online can be transferred to a bank or ATM instantly without having to wait for a minimum transaction amount or subject to a minimum number of business days.

How Blockchain Can Help The Migrant Worker

One type of consumer affected by transaction fees when remitting money across border is the migrant or foreign workers. With costs going at around 7%, this is quite a big cut compared to what money they’re sending back to their home countries. As migrant workers usually only make minimum wage, this loss from the total amount could affect them and their family back home, who are usually poor.

With blockchain, workers can send digital currency from their end straight to their relatives back home, using just their smartphone. This bypasses remittance agency fees, bank fees and intermediary fees. This allows remittance of currency with very minimal loss to both sides, and further helps alleviate poverty as concerned parties are now able to spend and save more.

The Benefit Of Blockchain To Small Business Owners

When a retailer offers to accept credit or debit card transactions, they are often charged a fee for each transaction. For bigger companies with big profit margins, these fees are often offset by the revenue. However, for small businesses, this eats into their profit, and might even spell a loss for them. With lower transaction fees, small businesses can earn more.

Another benefit to small business owners – and even big businesses, in fact, is that blockchain technology decreases instances of fraud. If a purchase is made with a stolen credit card, merchants are often not paid by the banks even though the items have been dispatched. As blockchain is resistant to modification of data as well as being instantaneous, data cannot be manipulated for the most part, while merchants get their money straight away – it’s as good as cash.

With lower transaction fees and faster finance remittance, blockchain is set to disrupt the traditional monetary transactions. It’s also more accessible to those who are considered the unbanked and underbanked with the use of digital wallets and digital currency, such as using FINX to transfer money to a friend or to a merchant, straight from their savings account. Meanwhile, it’s also safer than bringing wads of cash around, and eliminates the need to prepare small change. Blockchain transactions is definitely the way of the future that will make transactions easier while also helping to boost the economy.

How Blockchain Is Banking The Unbanked

Banking activities like saving, depositing money, making online purchases, making transfers, and other banking transactions might seem like simple everyday things to you and me. However, there are still a large number of people in this world who do not have easy access to banks. As a result, as many as two billion people may not even have bank accounts.

This category of consumers, known as the unbanked, is especially prevalent in low- and middle-income emerging markets and third world countries, but it happens in developed first world countries as well. There are still many citizens around the world, especially those living in impoverished areas or slums who are not able to use banks as a way to save money, thus denying them the stability, safety and even the interests that banks provide.    

Then, there are those categorised as the underbanked. They may have bank accounts, or access to banks, but are not able to enjoy the benefits as a banking customer. This could be due to many reasons including banks that do not want to extend credit to the underbanked because of the risk of non-repayment, or that interest rates are so high that the underbanked are not able to save money. Large banking corporations are even offering microfinance loans these days, but at such high interest rates, the underbanked’s financial power is seriously undermined.

It is well-documented that access to savings and loans can help those in the lower-income levels improve their financial circumstances. Without these, they could be stuck in poverty for generations upon generations.

How Blockchain Can Help The Unbanked and Underbanked

Through the power of blockchain technology, the financial fate of the unbanked and underbanked has the potential to change for the better. Blockchain provides alternative methods for the underbanked to conduct digital financial transactions. It’s a good as having a credit or debit card, but without the fees associated with these services.

One of the biggest challenges for banks in serving the underbanked is that individuals in this category do not have clear identification information. This makes it difficult for banks to identify and assess their customers. However, blockchain technology makes it easier for individuals to have a digital identity, and their own financial account. This would allow low-income individuals to be able to save and lend through a blockchain network.

One of the biggest financial transactions by citizens of developing countries is remittance of money by immigrants working in a foreign country, sent back to families back in their home country. Usually, foreign worked need to depend on their employers to help with remittance. Using blockchain technology, the process is seamless and far simpler.

Examples of Blockchain for the Underbanked

Different types of blockchain platforms for the underbanked include the following:-

  • Digital wallet platform
  • Blockchain lending facilities
  • Investment platform for third-world country citizens

For example, with a Digital Wallet like FINX, users can buy and own digital currencies, and save it right on the platform. Users are not tied to the conventions of traditional banks and are able to safely and securely save money, thus increasing their net worth bit by bit. Sending remittance to family members overseas is also easier as everything is through the same app and system, all protected by passwords and encryption. The blockchain system is really the way of the future especially for the unbanked and underbanked, with huge possibilities in impacting the financial world in a positive way.