Of all the modern technologies which will shake up entire industries, none will have a larger impact on money transfers than blockchain. Blockchain is the underlying technology behind cryptocurrencies. The technology could cause some serious changes in the way we transfer currency internationally. In this piece by MoneyTransfers.com, a specialist in online money transfers, we explore what blockchain could mean for money transfers.
Is Blockchain a Game-changer?
Blockchain is effectively a giant, immutable ledger of all transactions that have taken place in a peer-to-peer (P2P) network.
If you don’t believe that blockchain will be a game-changer for money transfers, consider what’s already happened. Cryptocurrencies have been around for years, and they have been surprisingly well adopted in some countries. Cryptocurrencies are particularly well-embraced in countries like Kenya. In some countries, Bitcoin is often used as a form of payment or remittance. With Venezuela even launching their own national cryptocurrency in an attempt to avoid economic sanctions.
When it comes to blockchain as a tool for money transfers, there are many ways in which the technology has already been tried and tested. There really isn’t much to complain about when you consider all the advantages blockchain has to offer.
How Secure is Blockchain?
First off, blockchain offers excellent security. A blockchain network is a P2P network in which every transaction is recorded on a ledger. The information on the ledger can be as transparent or private as necessary. The Bitcoin blockchain is fully transparent, while the Monero blockchain leaves all the important information completely private.
Regardless of the level of privacy on any given blockchain, the brilliant thing about the technology is that it doesn’t leave one singular point of weakness. This is why while you’ve likely heard about exchanges being attacked, the blockchain itself is incredibly secure. This is where blockchain can have an enormous impact on money transfers. While most online money transfer systems are secure, other options such as cash pickups are often subject to tampering or theft. When it comes to blockchain technology, there is less chance of tampering at every point of the process.
The Speed Benefits of Blockchain
Blockchain-powered transfers are incredibly fast. This is especially true when it comes to younger cryptocurrencies. When you look at Bitcoin right now, it doesn’t offer such fast transfers anymore. That’s because of the “halving” mechanism placed on cryptocurrencies. Bitcoin is the exception in this case, as most cryptocurrencies are transferred very quickly.
Most fiat currencies are transferred internationally very slowly, as you’re likely aware. The reasons for this are many, but it ultimately boils down to an international financial system which is dated. Fortunately, blockchain offers a way to speed the process up significantly. P2P systems make it much easier to transfer information in seconds. This is true of cryptocurrencies as well, as they can be sent from one person to another in a matter of minutes or even seconds.
Reducing fees on international money transfers
Out of all the ways blockchain will change money transfers, there is no way in which it is more threatening to the status quo than in the cost to send money internationally. All money transfer services charge either a fee or a markup/margin on currency exchange rates, and sometimes both!
You’ll often see money transfer providers advertise the fact that they have “no fees”. This is true in a way, but their lack of STATED fees will be compensated for with exchange rate markups that convert your currency at a rate anywhere from 0.4% to 3% higher than the mid-market exchange rate.
Blockchain-powered cryptocurrencies typically charge very small fees that are more transparent than these exchange rate markups.
A Complete Industry Shakeup
The effects that blockchain will have on money transfers constitute a serious shakeup of the industry. Blockchain brings a completely new offer to the table when it comes to many arms of the finance industries. Blockchain’s applications are being studied and attempted in many industries, including logistics and healthcare. These changes have already been demonstrated, but many more changes are on the way.