One of the challenges in the current payments infrastructure is that payments involve several steps, especially when we make cross-border payments, even if it's between two euro countries. Payment messages and files need to be exchanged between multiple parties, which need to process the payment and this can take days to complete. A company making the payment doesn't know exactly when the payment will leave the bank account, while those on the receiving end don't know exactly when they'll receive the funds. The SEPA Instant Credit Transfer initiative will address these problems but could a payments infrastructure based on blockchain also solve these challenges?
This article by the European Payments Council (EPC) explains how a blockchain-based payments infrastructure could meet our needs by providing:
- traceability; and
- a public, global ledger.
The article states: “If this usage becomes a reality, payments processing would be in real time, and companies would no longer need to depend on bank statements to reconcile their accounting ledgers.”
So is blockchain the perfect technology to provide instant, transparent, secure and traceable payments? Will it be even better than instant payments? It seems that, despite the hype, the technology does have some drawbacks. CTMfile has already covered some of the problems that blockchain developers will have to overcome in this article: Blockchain is about to take off but there are hurdles ahead
One of the hurdles also mentioned by the EPC is scalability. The EPC notes that SWIFT processes up to 30 million messages a day but any blockchain-based payments infrastructure has a long way to go before it can handle that volume of transactions. The current volume of bitcoin transactions is currently at a few hundred thousand per day, so the technology needs to be tested for reliability when handling much higher volumes. The EPC also mentions the challenge of making payments over a public network and the need to evaluate the feasibility of developing private blockchain networks. Lastly, it mentions the legal challenges as the legal framework in some jurisdictions is still being developed and is not harmonised across jurisdictions.
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