Blockchain is poised to overhaul global payment systems

Blockchain technology is set to transform the global payments landscape by addressing inefficiencies in traditional financial systems, according to Binance.

The Binance research report highlights that although existing payment methods such as Visa and Mastercard provide the convenience of almost instant payment confirmation, actual payment times are often delayed by several days.

This delay is especially evident in cross-border transactions, as communication between banks in different countries can extend payment times.

In contrast, blockchain-based payments offer near-instant resolution. The report cites a 2021 pilot conducted by Visa and Crypto.com in Australia, where the use of the USDC (USDC) and Ethereum (ETH) blockchain enabled cross-border transactions to be resolved in a fraction of the time traditionally required.

Blockchain payments are cheaper than traditional payment methods

The report highlighted some cost advantages of blockchain payments. Traditional money transfer services charge high fees, especially in regions like Sub-Saharan Africa, where the average cost of sending money is 7.73%.

The use of blockchain in payments is becoming increasingly popular due to its significantly lower costs compared to traditional methods.

In comparison, blockchain networks like Solana (SOL) enable transactions at a fraction of the cost. Sending stablecoins via Solana incurs minimal fees, typically just a fraction of a cent.

Stablecoin popularity

According to the report, stablecoins have become essential for blockchain payments, with the market reaching over $10.8 trillion in transaction volume by 2023. Excluding automated activities, the figure is $2.3 trillion.

Source: Coinbase, Binance Research, as of August 2024

The stablecoin market is growing steadily and the total market value has exceeded $160 billion, led by Tether (USDT) and USDC, which dominate the market with 73% and 21% respectively.

Challenges in blockchain infrastructure

The report noted that existing blockchain infrastructures have challenges. Scalability remains a major issue, with even the most advanced blockchains like Solana struggling to keep up with the transaction processing speeds of established payment networks.

The report revealed that Solana has experienced multiple outages since its launch, raising concerns about the reliability of blockchain technology for large-scale enterprise use.

“Since mainnet launch in 2020, Solana has experienced 7 major outages that halted block production, the last of which occurred in February 2024. Such growing pains cause institutions to be cautious about relying on blockchains for essential business operations such as payments.”

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Despite these challenges, the report argues that blockchains offer a promising alternative to traditional financial systems. Their transparency and decentralized nature provide greater trust and security in financial institutions—qualities that are increasingly sought after in a global financial system where centralization and control can be used for geopolitical purposes.

Looking ahead, the report envisions a future where blockchain technology plays a central role in global payments, particularly remittances. As the technology matures and regulatory frameworks evolve, businesses and consumers may increasingly opt for blockchain-based transactions over traditional methods.