Blockchain Powered Remittance
Cross-border money transfer has long been the earliest and most promising application of blockchain technologies. In recent years, remittances amount to a significant flow of funds into the developing world, surpassing foreign direct investments, and official development assistance.
Remittance is defined as the transfer of funds to a distant location, usually between parties that live in different geographical locations. It has its potential impact on individuals, businesses, and the broader economy of the countries to which payments are made, thus making remittances a substantial component of their economy. However, there are various key obstacles to the payment of remittances via formal banking channels.
- A huge section of the remittance industries rely on third-party intermediaries and financial institutions, which renders the current system expensive and inefficient. Also the transfer often takes weeks to process making this a slow system.
- A major concern clouding remittances through traditional banking channels is that the recipient needs a bank account to receive the payment. In many cases the recipients do not have a bank account, in which case higher risks are involved.
- Blockchain enables smart transfer of money cross-border, enabling federal agencies to keep a trail of money transfers.
- Blockchain offers transparency and the facility to track the movement of the asset. Thus, both the sender and the recipient can check on the flow on the fund.
- Easier on boarding of new banks to aid faster transfer.
- Greatly reduces the transaction cost from using SWIFT network and Payment Gateways.
- Offers automation of critical business processes using Smart Contracts.
- Facilitates ad-hoc funding to reduce liquidity costs for pre-funded accounts.
- Offers safe and secure transaction channels.
- Coupling blockchain technology with ATMs can be a welcome solution for sending and receiving money globally. It can lead to the exclusion of middlemen or central agencies and can reduce the turnaround time for settlements.