Since the infamous December 2017 cryptocurrency boom, the next stage of the blockchain and cryptocurrency evolution and, soon to be adoption has been the development of the institutionalised cross-border blockchain payment solution in pretty much any major financial and tech firm.
Probably one of the most well-known, Ripple and XRP, is one of only three blockchain-first companies named in the famous Forbes Blockchain 50 list. They pledge to partner with large and institutionalised financial companies and banks. Ripple is the most established at embedding its various products within these companies and has now well over 200 partnerships with well-known financial institutions to offer cross-border payment solutions. It was the first and the trailblazer but earlier this year JP Morgan Chase announced its own blockchain-based cross-border payment solution experiment, the JPM Coin.
The competitive battle for a viable and workable solution has continued as blockchain backer IBM created their own solution via a partnership with Stellar Lumens (XLM), the Blockchain World Wire. IBM already has a considerable stake in the blockchain market with Hyperledger Fabric the most-used in the Forbes Blockchain 50 list, accounting for 26. Stellar Lumens has often been put in the same bracket as Ripple as both altcoins offer similar benefits, operate in a similar way and are essentially competing for the same clients.
The technology is here and available, companies globally are competing in a healthy way for a cross-border blockchain payment solution, but are these enterprise companies missing their key market entirely aka normal people? So far, because of Bitcoins brand and publicity, its decentralised nature and the “dark web” (an internet underneath the genuine world wide web), many are buying and selling using the no.1 cryptocurrency as a go-to payment method.
Pros and cons
We can already see simple commercial similarities between Ripple, JPM Coin, and IBM’s World Wire – they all want clients in similar sectors of finance. Ripple wants to be the go-to for banks, JPM coin is the creation from a bank and even the IBM’s World Wire solution has applications predominantly for financial and enterprise institutions. All have obvious pros and cons but an institution is unlikely to sign up to two unless both are common forms of payment and transaction.
None of these solutions are designed private clients, consumers and the individuals who want to benefit from sending money across borders through the blockchain in an affordable manner.
Yes, cryptocurrencies such as Bitcoin, Litecoin and other cryptocurrencies offer this solution and meet basic needs. However, due to low supply, trust and understanding cryptocurrency adoption is nowhere near broad enough to reach critical mass.
It means that on the one end, where JPM Coin and World Wire find themselves, there are strong ties to the traditional banking systems and the pain points that bring – in terms of bureaucracy, legacy and lack of innovation. Then, there is the decentralised cryptocurrency space that post 2017, that has little credibility and necessary trust to leave consumers confident of wiring their hard-earned cash.
“The biggest barrier for something like World Wire to get off the ground is the traditional banking system and its resistance to innovation,” explains Elizabeth White of The White Company, a business trying to provide cryptocurrency solutions for consumers and businesses.
“Large intentional banks have been using systems like SWIFT for decades and have whole ‘wire departments’ dedicated to processing transactions. While blockchain would significantly modernize, automate, secure and speed up the whole process, it would require retraining and reworking a bank’s entire operations to implement,” White said.
“IBM is using World Wire to compete with SWIFT for international bank transfers. While the system has a lot of potential and has a real chance of supplanting SWIFT; Individuals or companies cannot use World Wire, so they would still have to go through the regular banking process to send international payments.”
“For many banks, moving to XRP, JPM Coin, or World Wire is just not worth it because their customers are not yet demanding the speed and low cost of blockchain transactions, and in fact banks are making a lot of revenue on wire fees and the like.”
“There is also some apprehension amongst many banking professionals about using ‘blockchain’ because sadly there are quite a few that still don’t understand the technology and may even associate blockchain with money laundering, completely missing the significant anti-fraud prevention advantages of distributed ledger.”
Room for two
The potential is massive. Banking is the most disrupted industry at the moment with digital banks like Monzo stealing market share and making banking easy for retail clients to wire fiat money in real time. However, cryptocurrency has been gradually growing but does have (an understandable reputation) for being used by fraudsters and scammers
The progression and evolution has been much more controlled, regulated and measured approach into 2019. This has opened another door for the enterprise companies and major institutions to join in, but these polarised sides have left a big gap open in the middle. The SEC is set to released its much-delayed decision on when or if it’s to regulate cryptocurrency and how it will go about it. Other countries like Switzerland have already accepted and embraced it.
The time when we live in a society and a global world where both options exist is heading in the right direction with stability and security of major financial institutions thanks to offering things like insurance from a major UK Bank Lloyds, as well as utilizing a blockchain, Stellar, which is also backed and used by IBM. An offering of an easy to use, safe and user-friendly front end, with a stable coin (that isn’t Tether), and opportunities to trade other cryptos, will help entice even more users.
“Our payments platform, for example, is built on Stellar, which is a dedicated payments protocol supported by IBM, Deloitte, Stripe and others, and is focused on optimizing speed and efficiency of payments,” adds White.
If it is to be looked at across a spectrum – decentralised cryptocurrencies on one end, enterprise cross-border blockchain solutions on the other.
No doubt blockchain tokens, digital assets, cryptocurrencies and altcoins are the future. Yet, that future is still being laid out by the financial giants, as well as the decentralised communities. Patience, regulation and security development is paramount to leave no questions about its long-term ability to deliver. There are so many stumbling blocks and barriers that need breaking down but I think in 5 – 10 years we may look back and think “How did we live without them?”