Demystifying Cryptocurrency: Blockchain-based Applications and Opportunities in the B2B Payments Space


Blockchain has become a hot commodity in the worldwide financial sector, and it is especially useful to businesses (as well as finance and investment firms) on the transactional front. In this blog miniseries in partnership with Ripple, the world's only enterprise blockchain solution for global payments, the Solutions for Business team at OANDA, leading provider of foreign exchange data services and payments solutions for global companies, will try to demystify the world of cryptocurrencies and present corporate audiences with the benefits and opportunities that come with B2B blockchain-based payment applications.

On the financial institution side, many banks and investment firms are already using ledger technology to generate secure financial transactions, producing quicker settlements, and substantially lower transaction costs.

Why the shift? In large part, it's due to antiquated digital technologies and a reliance on technology tools that still have yet to eliminate (or even largely reduce) paper-based documents. Adding to the problem is an equal reliance on third-party technology providers to handle financial transactions, settlement, and record-keeping — all high cost.

Doing away with dated technologies and business relationships and transitioning to blockchain will also contribute positively to the bottom line. According to data from Santander, the bank expects to save $20 billion annually. Financial consumers will benefit, too. Separate data from Capgemini notes that consumers should save about $16 billion in finance fees with blockchain.

Blockchain in Play

Those scenarios shouldn't be surprising. Imagine the following, more specific benefits blockchain brings to finance and investment firms:

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●     The ability to transmit money in all kinds of currencies, on a global basis, for minimal fees.

●     The ability for corporate financial officers using blockchain to bolster efficiency and boost corporate financial transparency.

●     The ability to hold records on digital-based currency transactions on a distributed network of computers, safely and securely.

Perhaps that's why 57% of corporate chief financial officers either plan on integrating blockchain into their company or are considering doing so by the end of 2018, according to Juniper Research. Finance and investment companies, in particular, are getting the message.

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But as companies like Ripple are proving, blockchain and global payments are an idea whose time has come. With Ripple, corporate financial officers now have one frictionless experience to send money globally using the power of blockchain. “By joining Ripple's growing, global network, financial institutions can process their customers' payments anywhere in the world instantly, reliably and cost-effectively," Ripple states. Banks and payment providers can use the digital asset XRP to further reduce their costs and access new markets.

What’s XRP and how can it be leveraged in the B2B space?

According to the company, XRP is the fastest and most scalable digital asset enabling real-time global payments anywhere in the world.

Built for enterprise use, XRP offers banks, payment providers and money service companies a reliable, on-demand option to source liquidity for cross-border payments.

Financial institutions such as Cuallix, MoneyGram, MercuryFX, and IDT Corporation are piloting the use of XRP in the payment flows to not only source on-demand liquidity for cross-border payments, but also remove the need for intermediary banks that have pre-funded local accounts — creating a real-time payments experience.

Early adopters

According to an EY study entitled, “Blockchain: How this Could Impact the CFO," corporate financial departments and investment firms are primarily deploying blockchain to “increase IT security, manage extended value chains and streamline contract enforcement."

According to the Juniper Research report, the “best fit" categories for finance and investment companies looking to blockchain are transaction settlement and the movement of digital fiat currencies.

But any corporate finance department looking for stronger transparency and clarity in transactions (along with the need to reduce or eliminate dependence on paper-based legacy systems) and who need help in managing robust volumes of transmitted financial data may want to climb on the blockchain bandwagon sooner, rather than later.

Challenges, Too

That's not to say blockchain doesn't come with issues and challenges—it does.

Banks, financial institutions, and financial technology companies still need to source out key issues like standards of operation, technology ownership rights, tax issues, and governance—all of which need to be sorted out before blockchain can shift into higher gear on the financial and investment landscape.

As the benefits of turning to blockchain become more widespread, corporate financial decision-makers will begin to view distributed ledger platforms and global payment facilitators like Ripple no longer as a luxury—but as a necessity—in the decade to come.