Blockchain Can Ease the Pain of Modern Payments: Binance Research

Over the past five decades, the payments industry has become one of the largest and fastest growing sectors in the world. However, it faces a problem: the industry still runs on 50-year-old technology rails that become more inefficient as time goes on.

A report by Binance Research, the research division of Binance, the world’s largest crypto exchange, highlights that blockchains, distributed ledger technology (DLT) and applications built on them have the potential to ‘significantly increase efficiency in the payments industry and challenge players. in space

Pains of the Traditional Payment System

The traditional payment system is estimated to generate revenue of $2.83 trillion by 2024 and is expected to reach $4.7 trillion by 2029 at a compound annual growth rate of 10.8%.

Despite the amount of revenue generated in the industry, Binance researchers said it has become a kind of “Frankensteinian conglomerate”, which is filled with numerous intermediaries who charge a lot for every transaction that goes through them. Traditional payments involve about six intermediaries; the average cost of executing cross-border transactions through these channels is 6%.

In addition to the high cost and the presence of numerous intermediaries, these transactions take time to conclude. Cross-border payments often take up to five business days to clear, leaving senders and recipients in the dark and unable to track the movement of funds.

“Today’s payment technology stack is in dire need of a fresh start, and blockchain technology could enable that,” the researchers said.

How can Blockchain help?

Binance said blockchains could do “wonders” for the merchant and consumer experience. They offer a global, uniform and transparent digital environment where users can execute transactions in seconds with just a smartphone and an internet connection at a cost of 50,800 less than the traditional financial system.

Blockchains provide a direct line of communication between merchants and consumers, eliminate the need for multiple intermediaries and correspondent banks, and untether future fintechs from the traditional payment system.

Notably, some traditional financial payment giants such as Visa have started to run pilots to enable institutional-grade global payments, but significant growth is needed at the individual and retail level.

Because the payments industry is massive, adoption of technologies like blockchain would likely be slow and cautious, according to Binance Research. However, researchers believe this gives the blockchain industry time to “emerge from its adolescence,” create the necessary tools, and address issues such as scalability and regulatory uncertainty.

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