Research Report: Blockhain Technology Already Disrupting the $100 Trillion Global Payments Industry

  • Blockchain technology and more innovative financial products have already begun to disrupt the traditional global payments industry. 
  • Billions of dollars have been invested into blockchain-related projects to transform the existing payments infrastructure.

Rohit Kulkarni, a Forbes contributor and former financial analyst at Citigroup, recently wrote that blockchain technology has already started “the wholesale disruption of the payments industry.” Kulkarni, who analyzes the “intersection” between venture capital, the initial public offering (IPO) market, and emerging financial technology, argued that “the dominance” of traditional financial institutions now looks “incredibly shaky.”

According to Kulkarni’s research, $140 billion has been invested in developing more advance mobile networks and improving distributed ledger technology (DLT). He predicts: 

fears about customer data and privacy and regulatory changes may impact the industry in unprecedented ways.

SharesPost Research

"Fierce Competition"

Kulkami then mentions what he claims are “five key reasons” why nascent fintech such as blockchain technology will “disrupt” the $5 trillion per day foreign exchange market. His research firm’s (SharesPost) first reason as to why new financial technology will disrupt traditional payment and banking systems is that the $100 trillion global payments industry is now facing "fierce competition" from small and medium-sized companies (SMEs).

According to SharesPost Research, the main areas of competition in the $100+ trillion market include cross-border transactions, peer-to-peer services (P2P), retail, and e-commerce. Kulkami writes:

Blockchain and smart contracts will redefine the relationship between customers, suppliers, and vendors.

He then goes on to the second reason why fintech has already begun the “wholesale disruption” of the payments industry by noting that $40 billion on “1,800 deals” was invested in 2017 to improve payments technology.

Kulkami also pointed out that during the first half of 2018, there were 800 fintech investments and $2 billion was reportedly invested to improve the operations of only four tech companies: Robinhood, Credit Karma (an American consumer reporting agency), OneConnect (a Shanghai-based financial technology solutions provider), and Armor Payments (recently acquired by Payoneer).

Going on to mention how giant venture capital firms such as Y Combinator, the Digital Currency Group, and Sequoia Capital have invested the most in blockchain and related financial technology, Kulkami implies these investments will lead to the development of legitimate products.

"One-Click" Payment Systems

The third reason why new payments technology is disruptive is that consumer behavior is changing. The researchers note that easy-to-use “one-click” payment systems such as WeChat, Alipay, have drastically improved the user experience.

The fourth reason why emerging blockchain-based payment systems are beginning to replace the outdated legacy systems is that they “can bypass financial institutions altogether and allow for direct payments between between parties."

The fifth main reason for a “revolution” in payment systems is rules and regulations related to customer data and consumer protection are changing as traditional financial institutions can no longer “monopolize” their clients’ data. New regulations and requirements introduced in Europe (European Union PSD2) require that banks share their customers’ data (with permission); this allows the merchants or processing companies to directly access customer account information, thereby making payments faster and more efficient. 

Those Banned From Facebook May Not Be Able to Use Its Cryptocurrency Libra

Facebook’s two days of congressional hearings on the social media giant’s cryptocurrency ambitions seemingly revealed that those who have been banned from Facebook may not have access to Libra.

During the congressional hearing Facebook had to answer some tough questions, and one of them came from Representative Sean Duffy, which asked the company’s cryptocurrency head, David Marcus, who’ll have access to Libra.

The Congressman initially asked Marcus who could use the cryptocurrency, to which Calibra’s CEO answered: “anyone that can open a Calibra account, that can go through KYC [know-your-customer checks] in countries where we can operate.”

Duffy then referenced two individuals banned from Facebook for violating its community guidelines, Louis Farrakhan and Milo Yiannopoulo, and asked whether they’ll be able to use the social media giant’s cryptocurrency.

Marcus ended up replying he doesn’t “know yet,” after seeing Duffy hold a $20 bill and ask hin who can use it. His point was that cash doesn’t discriminate, and that anyone who can hold it can use it.

While throughout the hearing Marcus tried to point out the company will follow appropriate regulations and comply with lawmakers, Duffy responded that a proper answer would be “as long as you abide by the law, you can use Libra.” The fact he didn’t get this answer, Duffy said, gave him “great pause.”

Speaking to The Daily Beast Elka Looks, a Facebook spokeswoman, clarified Marcus addressed the Congressman’s concerns later on in the hearing. She stated:

For Libra, anyone who is engaging in lawful activity will be able to transact on the network. Facebook will have no say. For Calibra, there is no policy in place yet, but we will share it when it is closer to being finalized.

The news outlet adds that Calibra, Facebook’s wallet to send, receive, and hold Libra, doesn’t yet have final terms of service or a privacy policy. All of this means that those who’ve been banned on Facebook may not have access to its cryptocurrency.

As CryptoGlobe covered, Congressman Warren Davidson implied during the hearings Facebook’s crypto is a ‘shitcoin’ as it doesn’t have some of the properties bitcoin has. The Congressman made it clear bitcoin has no central authority that can censor transactions or dilute its value, while Libra has the Libbra Association.