The study by the International Association of Money Transfer Networks (IAMTN) stated that through the blockchain technology that powers cryptocurrencies, remittances can be instant due to the ability to eliminate intermediaries like banks and in turn lower costs.
Notably, the findings are backed by leading industry players who IAMTN interviewed on the innovative technologies with the potential to improve cross-border payments. Interestingly, the stakeholders noted that blockchain and crypto possess ‘infinite opportunities’ to enhance cross-border settlement.
“The use of cryptocurrencies for the settlement of transactions can be a good alternative to traditional settlement processes. This is because of the possibility it allows to settle transactions instantly on a blockchain, without the need to go through the correspondent banking system, with its limited opening hours and long processing times,” the report said.
In particular, IAMTN stated that the need to explore blockchain technology is necessitated by the drop in correspondent banking relationships alongside the surging cross-border payment volumes.
The study further observed that despite the touted benefits of blockchain in payments, it is still unclear which is the best use case for the technology that can be used in remittance.
Besides blockchain, IAMTN identified open application programming interface (API) and artificial intelligence (AI) as key technologies that can enhance international settlements.
It’s also worth mentioning that the report also acknowledged that industry players are attempting to implement blockchain into their systems but have encountered various challenges, with regulations ranking top. According to the study, in some regions, rigid laws exist, but others lack clear guidelines to govern the integration of new technologies leading to uncertainty.
“Overall, complying with regulations can become costly and challenging for financial businesses due to the need to keep up with evolving regulatory landscapes worldwide. In particular, challenges arise when regulation does not keep up with technological advances,” the report added.
Other challenges include a lack of accessibility, awareness, literacy, and trust in new technologies with the report calling on policymakers to fast-track the regulatory process to ensure clarity in the space.