The basic idea behind upgrading to a blockchain-based payment system is that blockchain-based transactions are faster, more secure, and cheaper as compared to the methods that banks use for operations. Cross-border payments, which can take anywhere from 2-5 days to clear, are a clear example of this problem. Blockchain is capable of processing transactions many orders of magnitude faster than the current system at a fraction of the cost while ensuring a very high level of security. Another advantage of Blockchain is the transparency of its transactions. It also allows all the operations and balances to be seen by all users on the network, making it virtually impossible to be manipulated or tampered with. All these things make blockchain-based payment systems very attractive to banks who would save a lot of their operating costs.
The problem remains in the adoption, as banks are covered from head to toe in regulatory red tape, making them very slow-moving beasts. There’s no denying that a real-world blockchain-based payment network would require years of extensive testing before it is released to the public because banks are responsible for maintaining the trust of people. However, it is good to see that such payment channels are actively being developed both by various banks and also by several other blockchain startups. For instance, there is a company in Kenya that is working to provide a way to send payments between people without requiring any bank. There are other companies too that are already working with numerous Japanese and Thai banks to create efficient cash transfers through the application of Blockchain Technology.
Keeping in mind all the advantages that blockchain provides, it is no surprise that banks are rushing to employ its benefits and the future looks quite promising for blockchain-based payments.
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