Distributed ledger technologies currently possess all the necessary features that can ease the pains of cross border remittance industry which have made it a topic of discussion for institutions across the globe whether are these the future. A recent blog post released by World Bank also discussed the same naming how Ripple Circle and JP Morgan are bringing DLT to use in cross border payments.
World bank questions “Is the future of cross-border payments distributed?”
Rodrigo Mejia-Ricart, a research and public policy analyst at the Better Than Cash Alliance, a UN-based partnership of over 60 governments, companies and international organizations, recently released a blog post for World bank that discussed how distributed ledger technology is bringing the world closer by easing the pains of the traditional global remittance industry – by making it quick, easy and less expensive.
The remittance is critical economic resources in emerging economies, helping vulnerable populations withstand adverse economic conditions. The magnitude of the industry is huge and has reached $613 billion in 2017 and are projected to have grown 4.6% in 2018 to a record high of $642 billion. Putting it in perspective global remittances represent four times more than total official development assistance globally, which in 2016 reached $158 billion. For emerging economies, the personal remittances numbers are quite huge for eg it is 10.5% of GDP in the Philippines, 13.7% in Senegal, 28.3% in Nepal and 29.3% in Haiti.
A post discussed that how cross border payment innovations are helping reduction in operational costs for remittances services provides and speaks about how Ripple, Circle, JP Morgan, and Swift are bringing DLT to use too. Quoting for from the report how each of the players has impacted the industry for its betterment.
- Ripple: Ripple’s xRapid has saved financial institutions which are involved in the pilot up to 40%-70% in foreign exchange costs, and the average payment times was just over two minutes. The transfer of funds on xRapid took two to three seconds, with most of the processing time explained by domestic payment rails and intermediary digital asset exchanges.
- Circle: Circle’s Circle Pay service is currently available in 29 countries and allows seamless transfers between US Dollars, British Pounds, and Euros. Their website reports that they charge zero fees and zero exchange rate markups.
- SWIFT: SWIFT has implemented Global Payments Innovation (GPI), aimed at dramatically modernizing B2B cross-border payments by making them faster and more transparent.
- VISA: Visa’s B2B Connect is testing a DLT solution for B2B cross-border payments.
- JP Morgan: JP Morgan is trialing a DLT application that provides messaging, validation and foreign exchange pricing services to improve the customer’s cross-border payment experience. JP Morgan also developed JPM Coin, a digital coin designed to make instantaneous payments using blockchain technology.
The blog concludes that DLT-based cross-border payments potentially offers a promising pathway to dramatic improvements in the lives of millions of people in emerging economies. This technology has the potential to improve the traceability of remittances and reduce compliance costs for MTOs and supply chain payments, stimulating economic activity in destination countries.