A new United Nations (UN) report highlights the important role digital payment systems are playing in developing and evolving the global economy. According to the UN, digital payment systems refer to the use of debit and credit cards, online and mobile payments and systems based on distributed ledger technologies, such as blockchain.
“In general, digital payments make transactions faster, reduce frictions and lower transaction costs, offering productivity gains and enabling firms to engage in trade,” the report elaborates.
“They free banks and merchants from the financial and non-financial costs of manual acceptance of payments, record keeping, counting, storage, security, delays, transparency of payment tracking, the risk of non-payment at cash-on-delivery, recipient security and transportation of physical currency.”
In the future, says the UN, distributed ledger technologies such as blockchain may increasingly be used for cross-border payments. This technology can make online payments safe – and being peer-to-peer – it is less expensive than intermediated payment platforms.
“While few Internet users currently prefer this method of payment, it is gradually being adopted as it improves security, accelerates settlement, reduces the size of the minimum viable transaction and executes digitized versions of traditional contracts (aka smart contracts),” the report continues. “Its properties enable cross-border micro-transactions, including remittances, which would otherwise not be made due to high fixed costs or lack of trust among parties.”
In related news, Gartner analysts are confirming that the banking industry will derive $1 billion in business value from the use of blockchain-based cryptocurrencies by the end of 2020. Indeed, the current combined value of cryptocurrencies in circulation worldwide is $155 billon – and this value has only increased as tokens continue to proliferate and market interest grows.
“Cryptocurrencies are more mature than the technical and business infrastructure that supports them. This is, in part, due to the lack of credibility tokenized developments have received from mainstream businesses,” Gartner analysts explain. “However, once banks start to see cryptocurrencies and digital assets in the same context as more traditional financial instruments, more distributed business value will begin to accrue.”
This, says Gartner, will require every industry to rethink aspects of current fiat-based business models such as pricing of goods and services, accounting and tax methods, payment systems and risk management capabilities to accommodate these new forms of value in their business strategies.
As we’ve previously discussed on Rambus Press, blockchain is a shared digital ledger collectively updated and maintained by its enrolled users, which enables parties to transact with each other in a completely transparent manner. Each transaction is public and its details, together with the time and date, are unanimously verified by the other users on the network. Since there is no mediator between parties, completing a transaction becomes cheaper and simpler to achieve.
Security is ensured due to complex cryptographic rules that prevent any single participant from updating the system without seeking validation from the network. This makes the system immune to manipulation as inconsistencies are automatically identified and rejected. Since no single participant holds a master copy of the ledger (multiple copies are simultaneously updated by different participants), no single party can take full operating control. These factors ensure that the system maintains its integrity without the oversight of a centralized authority.
Interested in learning more about blockchain? You can check out our article archive on the subject here.