This article is a bit lengthier than some typical postings and is found at the World Economic Forum site. But the topic is one we consistently see and comment upon both on these pages and in member research. The author is the CEO of Stellar Development Foundation, which manages an open-source network for currencies and payments that relies on blockchain to keep the network in sync.
Again, the gist of the piece is more about the cross-border use case, given the current sub-optimal environment, and bringing together easier experiences for all use cases across the globe through interoperability.
‘It’s no secret that the cross-border payments landscape using traditional rails is fraught with fees, hurdles and delay. Individual senders incur outsized fees for the billions of dollars sent in personal remittances every year. Global businesses choose between bearing an FX cost or passing that cost onto their customers. And all of those involved must wait days or weeks to complete transactions. The bottom line: sending money via traditional rails is far from a borderless experience….Part of the problem is that systems are not interoperable. To send money to different corners of the world without blockchain, a whole patchwork has been haphazardly knitted together over the decades to achieve some semblance of financial interoperability between financial institutions, correspondent banks and money transfer operators along the value chain. Connecting these disparate systems, particularly in underserved markets, where the local currency is not globally traded, has created friction that results in long delays and high fees at each link of this chain.’
The author has a strong opinion that blockchain is already here and highly functioning in cross-border use cases. It does seem that the use case of focus is more on the consumer side, given the reference to the G20’s stated prioritization of cross-border payments modernization for the benefit of underserved markets and economic advancement generally.
However, businesses are also referenced and the use of open source networks to connect such markets has a general benefit, given the growing access to e-commerce markets through mobile channels and the need for local payment flexibility.
‘Once we recognize that the blockchain future we’ve all been dreaming about is actually here, right now, we have to ask ourselves whether we are creating long-term solutions…Open networks allow innovation from the many rather than the few. Open networks ensure that anyone can build upon, improve and challenge the technology and push the market to consider the next idea. Open networks promise interoperability and allow for continual ideation and progression. If we were to start building this technology in a silo, on closed networks that can’t work together, we would risk putting ourselves right back where we started. By working together in the open to connect traditional financial rails with digital ones, we can reap the benefits and work through shared challenges.
This is why it is all the more important for us to demonstrate to stakeholders what a difference this technology can make for consumers, citizens and businesses, boosting local and national economies – and how the technology can be subject to regulatory oversight. This is why it is critical for the private sector to engage with governments to ensure that new regulations balance the need for new and improved financial rails with the need to guard against innovations that empower illicit actors. The desire to get this right is shared by all stakeholders and it’s by working together that we will achieve that balance….Blockchain is real and actionable today, ready to tackle not only cross-border payments but many of the most meaningful, impactful financial use cases for citizens, consumers, governments and businesses. Now, with a concerted public-private partnership, we can take it mainstream.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group