The future of payments: How blockchain is reshaping business transactions and consumer remittances The future of payments: How blockchain is reshaping business transactions and consumer remittances
Exploring the transformative power of blockchain in business transactions and consumer remittances.
4 min read
Updated: Jul. 22, 2023 at 1:43 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Blockchain technology has made significant advancements across various sectors, but it can be challenging to distinguish between real-world applications and lofty promises. Two standout cryptocurrency use cases have begun to showcase their transformative power: business transactions and consumer remittances.
Both areas currently suffer from inefficiencies in the current system, such as high fees and slow transfer times. With blockchain, borderless transactions can be executed within seconds for as little as a fraction of a cent.
This is the power of cryptocurrency transactions. For business payments, this unlocks the ability to stream payments globally, increasing efficiency and reducing costs instantly. For consumer remittances, an estimated 1.4B people worldwide are currently unbanked. Those who arenโt suffer from high fees and slow settlement times. Remittances are a low-hanging fruit for blockchain that will benefit those that need it most.
International Businesses: Leveraging Crypto Payments
Traditional financial systems fall short in an increasingly borderless world. Foreign exchange fees, lengthy transfer times, and transaction fees are common pain points.
While international wire transfers can take up to five days, cryptocurrencies like Ethereum settle transactions within seconds (12 seconds on average). Others settle even quicker – Stellar within 2-5 seconds and Solana within 400 milliseconds. This speed enhances business flexibility and cash flow.
Blockchain networks offer significantly lower transaction fees. Ethereum currently averages ~$20, which is acceptable for businesses. However, Ethereum scaling solutions, like Arbitrum and Polygon, charge less than $0.10 per transaction. Others, such as Solana, settle for less than a cent.
Last, companies accepting card payments typically incur 2-3% transaction fees. Cryptocurrency payments eliminate such fees, making it a no-brainer, especially for those with large revenue volumes or tight profit margins.
This is all readily available, and businesses will increasingly adopt these forms of payments over the coming years as a natural progression toward improved technology.
Consumer Remittances: A Boon for Global Migrants
Similarly, remittances, a necessity for many in developing countries, are plagued by high fees and slow transfer times. These problems make it well-suited for cryptocurrencies, greatly reducing fees and wait times.
In 2022, the World Bank estimated the average remittance fee to be 6.24%. This is partly due to traditional remittance services like Western Union often charging over 7% more than mid-market exchange rates. Coupled with local bank fees, these costs substantially impact, considering that migrants sent an estimated $800B in 2022. This places a rough estimate of remittance fees at $49.9B. Blockchain-based payments could significantly reduce this. Ethereum currently faces high network fees, but many other networks are more affordable.
Crypto remittances provide increased accessibility. Despite over 1.4 billion unbanked adults worldwide, two-thirds own mobile phones. Crypto remittances bridge this gap, allowing even the unbanked to receive funds seamlessly.
Many blockchain partnerships are already being rapidly formed to tackle these challenges. Ripple recently partnered with MFS Africa to streamline real-time mobile payments. Jack Dorseyโs company Block recently partnered with the African exchange Yellow Card to facilitate payments from the U.S. that are converted to local African currencies. Stellar is a blockchain network focused on low-fee remittances for countries that need it most and are busy building out local partnerships and integrations.
Decentralized finance (DeFi) is also a viable solution. DeFi enables anyone with an internet connection to create an account on popular DeFi networks, where they remain in full custody of their funds and can engage in near-instantaneous global transactions. Networks like Ethereum, Tron or Binance Smart Chain are most popular. For example, Tron Network has already seen widespread adoption in Africa due to its extremely low fees.
Current Barriers
Despite immense benefits, the adoption of cryptocurrency payments and remittances takes time. There are three key barriers to overcome:
- Infrastructure: parties receiving payments must be able to both convert the payments into their local currencies and spend them. This requires bank integrations, which can be a slow and cumbersome process. The U.S. alone has over 4,800 commercial banks. It takes time to bring them on-board, and even more time to complete the necessary integrations.
- Education: Many potential businesses and consumers remain uneducated or skeptical about cryptocurrencies and unsure how to use them. This is particularly true for consumers amongst the unbanked population who stand to gain the most from crypto payments and might otherwise be vocal proponents for a faster and cheaper solution. Businesses are also consistently bombarded with new opportunities and must prioritize resource deployment.
- Regulation: The U.S. is taking unprecedented action against large crypto exchanges, making many weary of engaging with the space. Other countries, such as India, whose citizens would benefit immensely, have governments that have cracked down hard on the sector. Countries like Dubai have been more supportive, and we will likely see these countries make rapid advancements over the coming years.
While progress will be made over the coming months and years, true change takes time.
Suppose local vendors begin to accept payment for goods and services in cryptocurrencies. In that case, the burden of finding banking and payment partners to integrate with becomes irrelevant as consumers no longer need to off-ramp to spend their tokens. In this vein, Visa and Mastercard have quickly embraced blockchain technology to avoid the risk of irrelevancy.
Anticipating Future Trends: Resurgence of the Blockchain Market
Based on current macroeconomic challenges, such as high inflation and historic cyclical trends, it’s plausible that the blockchain market may experience a significant resurgence in either 2024 or 2025. During this period, nations with favorable blockchain regulations are expected to lead the way, attracting institutional investments and driving increased consumer adoption.
Blockchain payments and remittances are one sector poised for immense growth due to their overwhelming value-add to society. This trend has the potential to spur infrastructure investments, raise consumer awareness, and exert regulatory pressure on entities that underestimate the undeniable benefits of blockchain technology.
While we are still in the early stages of blockchain adoption, incremental changes will gradually pave the way for a transformative future.
Guest Contributor 
Hamilton Keats
Hamilton Keats is the CEO and co-founder at Krayon Digital. Krayon offers enterprise-grade wallet solutions to startups and SMEs.
