- March 29, 2019
- Posted by: suma
- Category: Blockchain
Every futurist research lab in many of the largest banks, central banks, financial institutions, think tanks, consulting firms and government committees around the world are asking only one question how could blockchain change the finance technology?
The digital revolution has totally transformed media, as we all know. It’s had an effect in the finance industry as well.
One of the biggest problems that the banking sector is currently facing is cross-border payments. On average, an internal bank-to-bank money transfer can take up to 2-5 working days. This can be a problem in today’s world especially when you consider how many people are now employed in remote location jobs.
If you have ever done any freelance work, then you would know how long SWIFT transfers can take if you are doing bank-to-bank transfer. Worse than that is if you get paid via PayPal. If your company sends your payment on Friday, then you may have to wait till Tuesday to just get paid, because these financial institutes are always closed on weekends.
The reason why it takes so long for settlements is that there are a lot of middlemen involved who deal with the transactions in batches.
With Blockchain, settlements become user-optimized, which will save a significant amount of time and money, for both parties involved.
The blockchain completely removes the need for middle-men because the transactions are settled near instantly (if a permission chain is used).
In fact, that’s not mere speculation, there is already a working PoC of how blockchain technology can exponentially reduce transaction times in these areas.
SAP recently collaborated with ATB Financial and fintech startup Ripple to send the first international blockchain payment from Alberta, Canada to ReiseBank in Germany. The bank used the SAP HANA Cloud Platform and the SAP Payment Engine application to take advantage of Ripple’s pioneering blockchain network.
The $1000 CAD (€667 EUR) blockchain payment, which would typically have taken from two to six business days to process was completed in about 20 seconds. The proof of concept has since been enhanced, and we are able to complete the transactions in just 10 seconds.
From 2-6 business days to 10 seconds. Now, that is a disruption!
It seems that the blockchain technology and the financial sector are made for each other. While it is true that they do have some obstacles to overcome, the fact is that the sheer utility that it brings into the space is seriously exciting. Let’s wait and see the projects that are going to come out in the near future to know for sure. However, when all is said and done, it looks like the blockchain technology can seriously disrupt this industry in a positive way.