Over the last decade or so, cross border payments have come up in abundance, catering to different segments of customers. Some focus on retail remittances, some target small businesses(SMB), others claim to serve the underbanked and the unbanked consumers.
They are all solving the same fundamental problems, with some variations on how they deliver the solution to their chosen segments. These fundamental problems; settlement speed, opaque transaction fee structures, limited availability of the payments systems, generally speaking, still exist.
Why would a #blockchain based networks make any sense and would it not just crowd an already crowded market of cross border payments fintech ?
Well, the concept of a blockchain network could potentially mean a solution for a lot of the problems that the traditional fintechs are trying to fix. Instant settlement, no clearing need, transactions are immutable and irrevocable, so reliability. Transparent fees agreed on with consensus, and the system can be available 24/7.
The traditional fintech solution offers a sort of optimization of current process or technology, they form alliances with banks and agents, charge competitive fees etc. But still all within the limitations of current tools.
Blockchain, on the other hand, would need a major revisit to the processes and how the various stakeholders interact with each other. Everything from how funds are stored (natively as tokens in wallets most cases), on a ledger which is public or permissioned for a closed loop of stakeholders.
Interoperability within the token economy would be easier for a blockchain based network. Initiation from a crypto wallet or a wallet storing central bank digital currency will be relatively easier to plug into, and I believe this is an important differentiation.
I believe there is an argument to be made for starting from scratch. Even though it is difficult compared to modifying an existing infrastructure, on the other hand, it eliminates the restrictions established by the current state of things.
Lightnet Group has created BridgeNet, a blockchain cross border network based in Asia. They seem to be getting a lot of interest from the investors, recently receiving a capital commitment for ~$50 million from LDA Capital with an option to increase the commitment to $100 million.
As the financial instruments, securities and other assets are tokenized, a blockchain based network, cross border or otherwise, will become a norm. Push towards Web 3 will probably prove to be a catalyst for the growth. This is the next major fundamental shift in financial infrastructure.
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