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The Green Sheet Online Edition

April 23, 2018 • Issue 18:04:02

Readers Speak

Blockchain cross-border payments? Not so fast

We are delighted to share the following perspective from Laurence Cooke, founder and CEO of Nanopay Corp.

The current interbank process for handling global payments is slow, expensive, highly manual, dependent on multiple intermediaries, lacks transparency and ultimately provides a lackluster customer experience. To address these concerns and keep up with the latest in disruptive technologies, banks have taken steps to begin embracing blockchain solutions for cross-border payments. Examples include Santander's recent announcement that they are working with Ripple and IBM's work with Stellar.

However, one of blockchain technology's biggest drawbacks is that it is difficult to scale, and unfortunately, using the technology for cross-border transactions may not be its best application. In some cases, blockchain-based tech can handle around 15 transactions per second, which is significantly less than currently available traditional tech that can handle 30,000 transactions per second.

Part of the appeal of blockchain technology is its potential for a high level of security, which results from its role as an immutable digital ledger of transactions. It also offers transparency, as those involved in the payments process can see every entry into the ledger. With more nodes, or a point of intersection within the distributed ledger's network that can serve as a redistribution point or communication endpoint, these benefits of blockchain become more secure and more transparent. However, with every additional node added, the process is slowed down. Though blockchain-based solutions claim to complete transactions in as little as three seconds, the average transaction takes about half an hour. Meanwhile, other technology can conduct a transaction in just one to three milliseconds.

Scalability of blockchain technology, or lack thereof, is easily the biggest hurdle in true mass adoption of this method of payments, especially cross-border payments. Although blockchain is seen by some as a "magic bullet" for seemingly all the world's woes, its development and implementation has a long way to go before it solves traditional pain points in the financial sector. While there is technology available to solve these problems that does not involve the trendy, yet volatile, blockchain, why not use it?"

Do you have insights to share with the payments community? Send us your thoughts at greensheet@greensheet.com. end of article

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