The crypto industry has revolutionized the traditional financial space with its fast-paced almost instant funds transfer system which is based on the digital ledger technology. It has made the cross-border money transfer, way more efficient, accessible, cheaper and quicker. Despite the stronghold of the traditional ways of financial structure on our lives and minds, nevertheless, the DLTs and cryptocurrencies are taking a strong hold on to our society and making its place. One can easily see the impact of the cryptocurrency’s potential by the way it is getting a widespread adoption by almost all spheres of life.
In the official blog article posted by the World Bank last week, the World Bank analyzed the importance of distributed ledger on the cross-border payment system. The article applauded the blockchain technologies and emphasized on the promise of the DLTs to have a good effect on the users. The DLTs and the blockchain technologies will benefit the economically developing countries, the article said. The international payments made with the help of DLTs promise a huge improvement in the lives of millions of its users from such countries. With the transparency the DLTs offer, it becomes easy to track the remittances. It also helps in lowering the compliance rates for MTOs, as well as for the supply chain payments. All of this has a good impact on the economic activity in the country where the money is transferred to. Here is an excerpt from the article-
“DLT-based cross-border payments potentially offer a promising pathway to dramatic improvements in the lives of millions of people in emerging economies. DLT could improve the traceability of remittances and reduce compliance costs for MTOs and supply chain payments, stimulating economic activity in destination countries.”
The distributed ledger, therefore, is far more efficient in comparison to the traditional remittance systems. In the article, it was pointed out that the remittance costs are especially high in the
“corridors where they are most needed. Sub-Saharan Africa remains the most expensive region to send money to, with an 8.97% average cost.”
The operational rates and costs, therefore, can be tackled and further reduced by the help of cross-border payment systems. Ripple is one big factor behind the evident changes in the remittance business; the article further pointed. Last year the international remittances business touched 642 billion dollars. Countries such as Nepal and Haiti, the remittances business makes for approx 1/3rd of the gross domestic product. It is a highly important issue to be improved upon.
The article further revealed that although many technologies are being developed, yet Ripple has its due share of holding importance due to its contribution to the sector. For instance, xRapid- the Ripple solution which is backed by XRP, is a strong example to illustrate the role of Ripple. It has pulled down the costs of the fund’s transfers by up to 70 percent. Last year Ripple’s piloting xRapid involved many financial institutions. The institutions saved 40 to 70 percent in remittance costs. The transfers also managed to cut the transaction time to about 2 minutes. On xRapid the transfers took 2-3 seconds. There was a clear explanation of how much time the domestic payment and the intermediary digital asset exchanges took.
The article concluded that the cryptocurrency transactions are anytime better than the traditional fiat-based remittance services. As per the article the former, on an average, are 388X quicker and 127X cheaper than the latter.