Have you ever faced difficulties in transferring funds to your friends or family living in a different country? If yes, then you know the pain and burden involved in international payments!
Right, international funds transactions are heck! The traditional payment systems involve high processing fees, time-consuming transactions, too many intermediaries, and zero traceability features. This will turn you into a black mood, we know!
The World Bank report stated that in 2019, around 650 billion dollars of individual money transactions were conducted, globally and 45 million dollars of this went to commission fees.
But the moment we got blockchain and cryptocurrencies into place, international transactions became easy. The emergence of blockchain technology has accelerated international payments and digital transactions. As a result, users can transfer funds within a fraction of seconds.
All the challenges are being addressed, resulting in cost and time-efficient transactions, no dependency on go-betweens, high-end security, transparency, and traceability features. Crypto coins have wholly reduced the processing fee. You see the role of cryptocurrencies now?
For international money transactions, we have a few popular companies such as TransferWide, PayPal, Western Union, MoneyGram, etc. They all charge different fees and have their respective limitations and restrictions for international funds transactions. The time, cost, and other factors vary for each company.
However, we also have the SWIFT method to conduct international funds transactions. But American Express says that the SWIFT payment mode is generally slow. Also, it isn’t easy to trace the payments during the transactions.
So to speed up the transactions, big players are exceptionally competing with the traditional payment systems. For instance, JPMorgan has recently tested blockchain payments between satellites orbiting the earth. The bank executives also stated that the digital devices could use the technology behind virtual currencies for transactions. So, in no time, IoT payments could become a reality, including a smartwatch ordering or pay for groceries on an e-commerce site will become more accessible than ever!
International transactions between two countries involve different exchange rates. And due to the fluctuations in the dollar price, exchange rates during the transaction may see volatility.
But with cryptocurrencies, this is never a complication. Cryptocurrencies often come with great speed, and hence, the volatility can no longer be a challenge here. They complete transactions in seconds with more security and transparency.
Also, in traditional payment transactions, data is limited to a single source. Whereas blockchain-based transactions often come with a decentralized scope. Thus, the information is stored in several systems and shared across the network. This will also secure the data and protect it from malicious attacks.
So all these factors made people switch to cryptocurrencies. PayPal’s cryptocurrency service is one of the main developments that set off the preferences to use cryptocurrency-based payments.
According to the United Nations development report, the cross-border transaction fees will fall below 3%, and payment corridors above 5% will disappear by 2030. Also, Deloitte revealed that blockchain technology usage in international payments is expected to reduce transfer fees from 40% to 80%.
Crypto-based transactions also do currency exchanges. They are conducting using digital wallets. Thus, a person can pursue cross-border transactions by instantly converting the currency and sending it to the beneficiary account.
Ripple, Ethereum, Stellar are a few cryptocurrencies that offer low transaction fees and instant transfer to users. They have drastically improved digital transactions and reduced fraudulent activities in international payments. The transactions became decentralized, scalable, and secured.
However, there are specific challenges involved in the usage of cryptocurrencies in international funds transactions. Numerous experiments will improve the protocols, systems, and other innovations in the blockchain space.
No wonder that the future might see significant crypto-based international fund transactions!