Seamless and instant cross-border payments are not a far cry from reality. Know how cryptocurrencies are presenting an opportunity to make cross-border payments less complex and chaotic.
In recent years, there have been countless defining moments in the world of cryptocurrencies.
What started with Bitcoin has now moved on to Dogecoin, Tether, and Ethereum and as of today, there are thousands of cryptocurrencies that are being traded around the world!
Call it a revolutionary technology or just another FinTech fad — Cryptocurrencies have come a long way, especially in terms of popularity. Given the technological advancements in the last few years not to mention the media uproar, crypto talks have made their way to our dinner-time conversations.
As the cryptocurrency industry is edging to mainstream adoption, this quote by Bill Gates comes to my mind —
“The future of money is digital currency.”
Allied Market Research recently forecasted that the cryptocurrency market size globally will reach $4.94 billion by 2030, expected to grow at a CAGR of 12.8% from 2021 to 2030. This explains why some of the experts from the industry have been hinting that cryptocurrencies are paving the path for the democratization of finance.
Talking about finance — while there have been many use cases of cryptocurrencies, their use in cross-border payments is where it really shines. With public blockchain and their native currencies being global by nature, organizations are now increasingly adopting cryptocurrencies for cross-border remittances.
Looking back, it’s safe to say that the pandemic has catapulted the need to send money across borders — there is data to back up this claim as well.
‘The Digital Currency Shift: The Cross-Border Remittances Report’ by PYMNTS and Stellar Development Foundation revealed that close to 41 million U.S. consumers sent money abroad in 2021. That’s not all, more than 50% of them increased the frequency and the amount of these remittances.
While cross-border transactions have been on the rise, they continue to be plagued by inefficiencies, making them one of the most inconvenient consumer transactions in the world.
Think about it — all it takes to send money to a local recipient is looking up their nickname on Venmo, adding a quick message, and confirming the payment. But transferring money across borders continues to be complex, fraught with glitches and unexpected delays.
With a few crypto years behind us, we now see more people embracing cryptocurrencies for remittances. The report also stated that 23% of consumers who made online cross-border payments used at least one form of cryptocurrency.
The bottom line is, cryptocurrencies are no longer reserved for those of us who are financially adventurous or tech-savvy. I believe in the coming months, cryptocurrencies will be a catalyst to enable hassle-free international payments.
Even though cryptocurrencies have shown us that moving money across borders need not be expensive and can be done instantly — regulatory ambiguities pose an obstacle when it comes to the ascent of cryptocurrencies in the cross-border payments space.
Which is why it will take a few more years for crypto to make a dent in a market that is currently ruled by the incumbents like Western Union.
The future looks good for banks that are proactive in adopting the technologies underlying cryptocurrencies — doing so, will help them reap great rewards by cutting down on the operational costs tied to international payment rails. In the grand scheme of things, leveraging cryptocurrencies to redefine cross-border payments will also help banks cater to underserved markets.
Traditionally financial institutions, governments, and their regulatory authorities have been reluctant to change. Though Bitcoin has been around for a while now, governments have been slow to adapt and regulate the market in an effective manner.
Crypto today boasts of global liquidity at the same level as fiat money. It’s undeniable that cryptocurrencies can improve the current state of cross-border payments and it’s only a matter of time before we will be able to enjoy seamless, secure, and faster cross-border payments.
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Chief Executive Officer, Opus