Blockchain payments are already reducing costs and streamlining settlements – Binance Research

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Blockchain technology is revolutionizing the payments industry with near-instant settlement times and significantly lower costs compared to traditional systems.

According to a recent report by Binance Research, blockchain-based remittances settle within an hour, outperforming both digital and cash methods.

Visa’s pilot with Crypto.com using USD Coin (USDC) on the Ethereum blockchain simplified cross-border settlements for their Australian card program, reducing complexity and time.

While conventional card networks like Visa and Mastercard offer fast authorization, actual fund transfers can take days, especially for cross-border transactions.

Moreover, the cost benefits are highlighted in the report as substantial. Traditional remittance costs average 6.35% globally, while blockchain transfers on networks like Solana cost just $0.00025, regardless of the amount sent. Binance Pay offers free transfers of up to $140,000 Tether (USDT), with a $1 fee for larger amounts.

Blockchain’s transparency and decentralization are also highlighted in the report as advantages, such as the fact that every transaction is recorded on an immutable ledger, fostering trust and accountability, while its decentralized nature increases security and resilience against attacks.

Challenges facing blockchain payments

Despite the benefits identified in the report, challenges remain. Current blockchain networks lag behind traditional systems in terms of transaction processing capacity.

Solana, the fastest layer-1 blockchain, processes around 1,000 transactions per second (TPS), compared to Visa’s capacity of over 65,000 TPS. Grid stability is also a concern, as Solana has experienced seven major outages since 2020.

Additionally, the complexity of transitioning from legacy payment systems to blockchain infrastructures can present complexities that are inconvenient for consumers and merchants.

“Requirements placed on end users such as managing key phrases, paying gas fees, and the lack of unified front-ends make adopting blockchain technology a major pain for the average consumer and merchant,” the report points out.

Finally, crypto and blockchain are topics that are still in gray areas in different jurisdictions. In addition, regulations developed by regions can vary significantly, which increases the complexity of a global blockchain-based payment network.

This regulatory uncertainty then presents another challenge for blockchain implementation in the payments sector.

Despite these issues, institutional adoption is growing. Visa described Solana as viable for testing payment use cases, and PayPal launched its PYUSD stablecoin on the network. As blockchain technology matures and regulatory frameworks evolve, it has the potential to create a more efficient and accessible global payment system.

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