A new Ripple report has projected that blockchain has the potential to save financial institutions around $10 billion in cross-border transaction costs by the year 2030.
Note that blockchain technology is continually reshaping the financial industry. In this line of thought, the Ripple report says blockchain potential is immense in expediting payment systems and the ensuing cost savings.
However, is it not too early to predict that the broader financial sector is ready to fully embrace the nascent technology on a larger scale? Experts give their opinion in this analysis.
More on the Ripple report
The report, released last week, was prepared by the digital payment network, Ripple in collaboration with the United States Faster Payments Council (FPC). The survey received inputs from 300 finance professionals (analysts, directors, and CEOs) spanning 45 countries.
The report sheds light on the growing consensus about the advantages of blockchain. It illustrates a palpable shift in the perception of this technology across sectors including fintech, banking, retail, consumer technology, and media.
Approximately 97% of the professionals are confident that blockchain technology will be instrumental in expediting payment processes over the upcoming three years.
Also, the report highlights the cost-saving potential of cryptocurrencies. Over half of the respondents agree that cryptocurrencies could significantly reduce payment costs, both domestically and internationally.
With a projected surge in global cross-border payments ($156 trillion by 2030), the Ripple report predicts that blockchain’s application in global transactions could save financial institutions an estimated $10 billion in cross-border payment costs by 2030. This conclusion was substantiated by findings from fintech analysis firm, Juniper Research.
However, only about 50% of the respondents were optimistic about significant merchant adoption within the next three years. 27% of respondents from the Middle East and African regions anticipate that a majority of vendors will adopt cryptocurrency payments in the following year. While 13% of the Asia-Pacific region forecasted the same transition period.
Can blockchain help save $10 billion?
The conviction in the Ripple report underscores the positive outlook toward blockchain, indicating a readiness to welcome its disruptive capabilities.
According to Oluwatimilehin Daramola, a retail analyst at United Bank of Africa, this Ripple report projection is very feasible and it is what most financial institutions want due to being more flexible and cost-effective.
“Fintech and digital banks are another example of this. Some will still develop Robo advisors to offer automated investment advice, replacing normal traditional advice. A lot of replacement will be made, it’s already happening.”Oluwatimilehin Daramola
However, the only aspect where Timileyin believes that traditional finance cannot be replaced is the aspect of customer service. In his opinion, that is the advantage traditional companies have over digital companies.
Timi Olagunju, a tech lawyer and blockchain expert, on the other hand, is of the view that Ripple’s forecast of blockchain technology potentially saving financial institutions $10 billion by 2030 is a bit speculative, but not completely off the mark.
To him, Blockchain’s decentralised nature can boost efficiency, lower costs and decrease fraud, leading to big savings for financial institutions.
“Industries like fintech, banking, retail, and media are increasingly adopting blockchain technology. For instance, fintech companies like Ripple are using it to reduce the cost and time of international money transfers. Banks like JP Morgan and HSBC are using blockchain for efficient interbank transfers. Retailers such as Walmart are using it to make their supply chains more transparent, and media companies are looking into blockchain for managing digital rights,” he said.
Despite all these, challenges like regulatory issues, scalability, and security are all going to make the mark difficult to attain as quickly as 2030 especially for countries like Nigeria, according to Timi Olagunju.
“For example, CBN adopted the use of blockchain-based digital currency, eNaira, but CBN banned banks for leveraging or dealing in crypto,” he said.
Ultimately, what can be deduced from the report and experts’ opinions is that blockchain technology will play a crucial role in facilitating faster and cheaper payment systems. Might not be soon, but with gradual growth and improvement, large-scale adoption will surely happen.
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