As per globenewswire, the global market for “Blockchain Technology” is estimated at US$4.4 billion in the year 2020, and is projected to reach a revised size of US$142 billion by 2027. It means the size of the market right now is relatively low and is still in the process of transition.
Banking sector has introduced millions of people to e-banking. When it comes to blockchain, most of the retail sector have remained reluctant to adopt this technology. This cautious approach is still understandable as there is no large-scale financial industry’s initiative that can be viewed as an example. Furthermore, strict regulatory requirements for the banking sector are a high barrier to entry. But things are changing as most of the new fintech companies are embracing the new challenges and opportunities across the world.
Developed countries may seem to have taken the lead in blockchain technologies. This is partially due to the country’s positive innovation climate encouraged by its regulatory authorities, but the developing countries are catching up.
Adaptability in Developing World
There is no doubt that financial transactions are one of the most important applications of blockchain technology, as they are characterized by the speed and ease of transferring money across borders from one place to another in a few moments, with the advantage of fees and transfer costs much lower than the current situation.
But the most distinctive aspect is that the block technology does not need data centers, which enables remote areas and developing countries where formal banking services are not available, to jump directly to blockchain-based solutions, making these countries save the prohibitive costs of creating new infrastructure.
On the other hand, one of the most important advantages of blockchain technology is that it provides other solutions related to “smart contracts”, or Smart Contracts that control the movement of digital assets between the parties. These contracts aim to give confidence to all financial agreements, as they make all transactions.
Further more finances will be more transparent and visible to all, which will help people and governments to monitor the actual allocation of funds, in addition to monitoring the disbursement of these funds by governments, so that they can reduce corruption or tax evasion operations in the future .
The World Bank has estimated that the overall market for remittances cross-border payments is forecasted to grow to $747 billion by the end of 2020 with developing countries maintaining a major share. As per EU about 40% of remittances are sent to rural areas, and estimations quantify around €200 transaction per person sent on average each month.This massive international transaction volume continues to hinder the working efficiency of banks due to the time taken and the fees involved. Fees are commonly 2 to 3 percent of transaction value and can be as much as 10 percent.
Moreover, rapid growth in smartphone adoption is one of the main reasons why the digital remittance market has steadily increased in size. At the moment, the fastest developments are happening in Southeast Asia, in particular the Philippines and Vietnam, but some African countries – like Kenya, Tanzania, Nigeria, and Uganda are catching up.
Blockchain technology offers solutions to these issues, and that is why several tech companies including giants are now incorporating this technology into their platforms which will enable retail banks to process faster transactions with minimal fees. An estimate by McKinsey says that blockchain applied to cross-border payments could save about $4 billion a year.
The practical application of blockchain technology reaches further than financial assets, in a way any type of digital asset and critical information can be tracked and trader through a blockchain. For example the construction industry and the IT industry, often require problems related to cooperation with subcontractors and the project plan are amended from time to time. Such “who where when why information” problems can be addressed through blockchain technology.
There are a large number of countries and governments that have already started relying on the application of blockchain technology, including Singapore, especially in the field of maritime transport, as well as the UAE. Switzerland and Estonia in fintech, China and Australia in mining field, Canada and USA in retail field. But in fact there is a wide trend around the world to apply blockchain technology in fintech, health and infrastructure development including Africa.
However, while there are many convincing benefits from using blockchain based technology, there are also considerable negative associations with the technology itself, as it is perceived to lack the robustness of the formal financial infrastructure, also given the possible risks from noncompliance with Anti-Money Laundering and Counter Terrorism Financing regulations.
The way the Internet works, it faces several obstacles or attempts to obstruct the way of applying it by some governments and institutions that prefer to maintain centralization, and their desire to arbitrate their control over the country’s capabilities and citizens savings.
On a brighter note, technological advances have made smartphones accessible to a large majority of the population at a cheaper price. An increasing number of companies have begun using blockchain-based technology to speed up procedures and visibly lower financial costs in developing world.
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Image : Gerd Altmann
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