Blockchain has multiple applications in the payments industry including use in cross-border payments, foreign exchange (FX) settlement, trade settlements, card payments, and more.
For most people, blockchain and cryptocurrency are almost synonymous with each other. Cryptocurrencies like Bitcoin and Ethereum are often seen as competitors to traditional payments and official currencies. But the truth is that cryptocurrencies are applications that have been built on the principles of blockchain technology. If any other application used the same principles of peer-to-peer communication, distributed databases, transparency, permanence, and security, it could very well qualify to be called a blockchain application and enjoy the same benefits. These principles can be used in the payments industry offering many advantages.
Blockchain and Payments
Blockchain has multiple applications in the payments industry including use in cross-border payments, foreign exchange (FX) settlement, trade settlements, card payments, and more. We will explore some of these here.
International Reconciliation: SWIFT with 34 global
banks successfully completed a proof of concept
to evaluate if Distributed Ledger Technology/Blockchain could be used for
Nostro reconciliation. Nostro/Vostro accounts are used when a bank does not
provide services directly in some countries but does it through a correspondent
bank. The conclusion of this PoC was that Blockchain could effectively support
automated real-time liquidity monitoring and reconciliation if adopted globally
by all the participant banks.
Card Payments: Card payments are
for shoppers, but there is a high processing fee involved for merchants. This
is because there are multiple intermediaries…