Page 13 - EngineerIT December 2021

ICT BLOCKCHAIN

As a result of its implementation, blockchain technology can make banking faster,
cheaper and more automated as fewer intermediary steps will be needed. Therefore,
remitters and beneficiaries can utilise a more streamlined platform for making and receiving
cross-border payments.

Ripple’s partnership with banks
Ripple (XRP) is a crypto asset that can be used for making rapid payments. Using the
RippleNet platform, one can send and receive money across borders with low fees and fast
transaction times.
There are currently hundreds of banks and financial institutions around the globe that
have partnered with Ripple. The Society for Worldwide Interbank Financial Communication
(SWIFT), which facilitates international money transfers between banks, is responding
strongly to the RippleNet platform by innovating its own existing system. As a result of this
direct competition, SWIFT has already improved its transaction speeds and is working on
better facilitating low-value transactions. Ramtin Mesgari
Ripple is only one of many systems that are trying to streamline the current
payment system. Whether or not they succeed, they are all paving the way for
improvement in the industry. As stated before, even if the advancement does not come more effective transactions.
directly from a blockchain solution, it will indirectly lead to the innovation of existing The inevitable synthesis between
systems. Ripple’s partnership with numerous banks and financial institutions has blockchain and banking will lead to an
already made this evident. ecosystem that’s open to innovation,
collaboration and increased competition.
Challenges in the space Therefore, the blockchain ‘disruption’,
Both internet and technology characterise the 21st century, but the requirement for these which we are constantly hearing about
very things is what poses a challenge for many migrant workers. In the remittance process, is a valuable way for banks and financial
there’s a need for internet access and a digital identity, without which one would be institutions to keep up with the times. It is
excluded from this part of the financial world. only through reinventing and innovating
Although crypto assets could potentially provide a solution to the high remittance fees, that decaying legacy systems can be
they bring with them a third challenge: their volatile value. But even without this volatility, replaced with more streamlined ways of
there still exists two major challenges which are common to both crypto assets and the handling transfer of value.
traditional remittance process. Whether triggered by blockchain, or
The banking system currently relies on internet access to facilitate transactions but brought about directly from it, the future
most of the countries which receive remittance payments – and need it the most – do of banking is bound to change. n
not have fully-fledged internet access. Furthermore, cross-border payments, despite their
necessity to these countries, tend to play a large role in money laundering. Hence the References
reason for heavy regulations in the space – such as KYC and AML – which are designed - World Bank. 2019. Record high remittances
to verify and validate the digital identity of any person making payments. What further sent globally in 2018. 8 April 2019. Available:
complicates these matters is not only the need for internet access, but the need for https://www.worldbank.org/en/news/press-
release/2019/04/08/record-highremittances-
information that a migrant worker might not necessarily have, such as their own date of sent-globally-in-2018 [2021, August 29].
birth, identity number or residential address. - United Nations. 2019. The number of
Although blockchain technologies do not provide a solution to the need for internet international migrants reaches 272 million,
access, there are alternative mechanisms starting to emerge in this space. There are continuing an upward trend in all world
companies experimenting with the use of soundwaves to replace the need for internet regions, says UN. Available: https://www.
un.org/development/desa/en/news/
access and other companies, such as SpaceX, that aim to provide these countries directly population/international-migrantstock-2019.
with internet. html [2021, August 29].
Blockchain technologies do, however, provide a potential solution to the second - De Meijer, C.R.W. 2019. Blockchain and
challenge that remittance processes face. Given that financial institutions are interested in disruption in the financial world: will
knowing their customers and preventing fraud, they can utilise blockchain systems to assist banks survive? [Blog, 12 February].
Available: https://www.finextra.com/
them in this regard. As a result, banks can introduce decentralisation, transparency and blogposting/16658/blockchain-and-
immutability to mitigate risks and improve cyber-security. disruption-in-thefinancial-world-will-banks-
survive [2020, September 6].
Conclusion - Simmons, J. 2020. SWIFT challenges Ripple:
It’s evident that blockchain technologies have the potential to disrupt traditional banking Global instant payments for SMEs. Available:
https://www.crypto-news-flash.com/swift-
systems in the best possible way. Both existing and forthcoming blockchain platforms aim to challenges-ripple-global-instantpayments-for-
address all the issues with the existing systems; the goal is to facilitate cheaper, faster and smes/ [2020, September 3].

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