If cryptocurrencies were the flavour of 2017, and 2019 is all about enterprise blockchain usage, then it is also important to note the quiet amalgamation of these two that has been bubbling under: the institutionalised cross-border blockchain payment solution.
Everyone knows that one of Bitcoin’s most significant assets is its borderless nature and that it can be used as a cross-border payment solution. However, the decentralized nature of Bitcoin has hamstrung its widespread adoption somewhat, and several companies have thus spotted a niche in the traditional market.
First, there was Ripple, one of only three blockchain-first companies that was recently named in the Forbes Blockchain 50 list, that has made its mandate to partner with large and institutionalised financial institutions and banks. Ripple has, as of January this year, announced over 200 partnerships with well known financial institutions to offer cross-border payment solutions.
Ripple, as a blockchain-first startup, was always in danger of being usurped by prominent and powerful names coming in to steal its market. Some believe this has already happened. JP Morgan Chase this year also 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 has also come forward with their own solution, the Blockchain World Wire. IBM already has a considerable stake in the burgeoning blockchain market with Hyperledger Fabric the most-used in the Forbes Blockchain 50 list, accounting for 26.
So, the race is on to provide a cross-border blockchain payment solution, but are these enterprise companies missing the mark somewhat, and even missing their key market entirely? Many businesses and companies might see the value in using IBM’s solution, while the man in the street, who is fed up with the traditional financial system, might be more inclined to use decentralised options like Bitcoin.
But where is the workable, easy to use, user-friendly option that makes cryptocurrencies and their cross border potential available for all?
Pros and Cons
Looking down the line of Ripple, JPM Coin, and World Wire, we can see straight away that these cross-border payments are all vying for a similar market. Ripple wants to be the go-to for banks, JPM coin is born of a bank, and even the World Wire solution has applications predominantly for financial and enterprise institutions.
None of these solutions are designed for the other side of the market; the consumers and the individuals who want to be able to cash in on the effectivity and affordability of sending money across borders through the blockchain.
Now, many here will say Bitcoin, and other cryptocurrencies, fill this niche; they are tools for the people and intended to help those who want to work outside of the traditional financial regime. But, it must also be remembered that 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 brings - in terms of bureaucracy, legacy and lack of innovation. Then, on the other hand, there is the decentralised cryptocurrency sphere which still has a massive ‘Wild West’ reputation, this leaves a vast market stranded in the middle.
“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 that appeal to both 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.”
A hybrid system
The evolution of the cryptocurrency space has been necessitated thanks to its turbulent and tumultuous past. It began as this magical internet money that could disrupt every sector imaginable and caught the imagination of swaths of people, but it also opened the doors for fraudsters, scammers, and speculators.
The backlash has been a 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.
It is this middle ground of ‘no-coiners’ that remain, waiting to be roped in... Perhaps when the right system comes along, and that system is a potentially combination of the two sides we have now.
White, and the White Company, believe they are on the right track to reach this left over target market as they are providing 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 by IBM.
But, they also feel that the offering of an easy to use and user-friendly front end, with a stable coin, 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 - a middle ground needs to be built and established. Users want the security of banks and financial institutions, without the bureaucracy and legacy associated with it.
A path to the future
It is quite agreeable that blockchain tokens, digital assets, cryptocurrencies, or whatever sort of label lands on them, are the future. But that future is still being laid out by the financial giants, as well as the decentralised communities.
There does however need to be a middle-out growth that will help entice the vast majority of users into this new and mostly misunderstood space. If the enterprises are looking out for themselves and other big companies, and the cryptocurrencies are being used by those in the know, where is the ‘iPhone moment’ that turns cryptos onto the mainstream?
