Sending money across countries is often seen with remittance payments by people working in foreign countries and sending money back home. This makes the least costly method of sending money home the most appealing. In 2020, the World Bank estimated that remittance payments sent through traditional fiat banks are charged an average fee of 6.75%, a significant amount for sending money to another country. While it’s decreased from the whopping 9.75% average fee charged back in 2009, cryptocurrencies payment fees are more appealing as on-ramp platforms charge significantly less than traditional banks.
Currently, it takes an average of between three to five business days for funds to arrive from sender to recipient through traditional banking. Cryptocurrency payments, facilitated through blockchain networks, is generally immediately, slashing the time taken to receive the money significantly.
It could lead to more global financial security
According to research from global banking firm Deloitte, blockchain transactions can be rich in data from sender to recipient, even though the information is encrypted. With most on-ramps having know-your-customer (KYC) and anti-money laundering (AML) protocols in place, this information could help regulate the financial market across the globe.
Blockchain offers financial access to the unbanked
According to research, there is a massive part of the world that remains unbanked. With an estimated 1.7 billion people without access to a bank account, a massive part of the global adult population has no access to online financial services. This makes sending money digitally to another country an impossibility for some. Cryptocurrency payments help facilitate this as a feature to those without banks, increasing the global financial access overall.
The challenges of cryptocurrencies for global payments
While cryptocurrencies offer numerous benefits over traditional financial systems, there are still a few hurdles to overcome before we see wider adoption in the industry.
The complexity of crypto
Cryptocurrency is still seen widely as a complicated industry, with many perceiving the space as technical and difficult to understand. As more are given insight into how to use cryptocurrencies (something that can be done AND taught through smart phones), and as more users start taking advantage of the technology, we will likely see a spike in the uptake of crypto payments.
Gas and transaction fees
Scalability on some platforms, especially decentralised exchanges and protocols with little liquidity, leads to rising fees for transfers. This is especially so in times of increased demand, with Ethereum users particularly suffering with high gas fees. More cryptocurrencies are looking to resolve issues of scalability as well as platforms that facilitate payments.
Cryptocurrency payments – both to send and to receive – rely on countries that are not averse to the crypto industry. With more countries looking to regulate the space, we’re likely going to see more legislation that will help facilitate crypto payments, but this is still emerging across the globe.