World Payments Report: Over 85% of Executives Think DLT is Unsuitable for Financial Transactions

  • BNP Paribas and Capgemini's "World Payments Report" reveals that participation of regulators, public-sector organizations, and third-parties are important in helping to improve the global payments industry.
  • Most executives surveyed don't think distributed ledger technology (DLT) can work effectively in helping to improve payments processing.

BNP Paribas, a French international banking group with nearly $2 trillion in total assets, and Capgemini, a Paris-based multinational professional services and consulting firm, recently published the “World Payments Report 2018” in which they noted that “it will take more than bank-led initiatives to grow the new payments landscape.”

According to the report’s findings, regulatory authorities, “public-sector organizations”, and the third-parties involved in processing transactions represent the “broader financial services community”. The participation, and the emerging new roles, of these entities in the evolving global financial system is just as important as that of central banks and other financial institutions, according to the report.

BNP Paribas and Capgemini’s study and survey of the payments industry determined that “large payments users” require more reliable and cost-effective financial services such as “cash aggregation”, “cash [flow] forecasting”, and “automated treasury” solutions.

Banks Collaborating With Fintechs

Although the report did not specifically mention cryptocurrencies, and their potential role in helping to improve the payments industry, it did note that “new revenue streams” could be created if banks collaborate with fintechs and the broader financial services community.

As CryptoGlobe covered on October 14th, it appears that the demand for the XRP cryptocurrency, which has been developed by Ripple Labs Inc., a San Francisco-based fintech firm, is increasing. This, based on results from a survey by Wirex - which showed that approximately 75% of respondents preferred using XRP to make everyday purchases, instead of other major cryptocurrencies such as bitcoin, ethereum, and litecoin.

Ripple also recently announced the launch of xRapid, which is an XRP-based cross-border payments solution that is now increasingly being piloted by major financial institutions throughout the world.

Other key findings from the world payments report revealed that 74.1 percent of executives surveyed from large organizations believe the world’s “real-time payments infrastructure [is] being inhibited by lack of interoperability.”

"Lack Of Interoperability", Inability To Scale

Meanwhile, 59.3 percent of executives said that “weak data” and the absence of “authorization standardization” in transaction settlement systems is also preventing, or restricting, the growth and development of the global payments infrastructure.

Interestingly, 85.9 percent of executives criticized blockchain, as they think the “lack of interoperability” of distributed ledger technology (DLT) makes it unsuitable for managing payments systems.

Significantly, 83.1 percent of executives said that “lack of regulatory clarity” was a major factor that has limited the adoption of blockchain-based payments systems. Current challenges such as the inability of DLT-based transaction solutions to effectively scale have also prevented them from achieving mainstream adoption, according to survey respondents.

Chinese Yuan 'Inversely Correlated' with Bitcoin, Amidst US-China Trade Wars

Since January 2018, China and the US have been involved in an intense trade war in which both countries have significantly increased tariffs on imported goods and services.

Due partly to the rising tension between the two countries, the Chinese yuan (CNY) has been losing value against the USD. During the same time period, the price of bitcoin (BTC) and other major cryptoassets has been surging.

As noted by the South China Morning Post (SCMP), the value of BTC, the world’s most dominant cryptocurrency, increased by 26.5% to $7,878 during the time period from May 5 to May 17. Notably, US President Donald Trump had announced on May 5 that he would further increase tariffs on goods imported from mainland China.

Chinese Yuan Weakens as Nation’s Government Responds to Increased Tariffs

The SCMP pointed out that the yuan dropped to its lowest level since the past six months after the Chinese government responded to Trump administration’s decision to impose higher tariffs on China.

Commenting on the price fluctuations of both the yuan and bitcoin, Garrick Hileman, a Macroeconomics Researcher at London School of Economics (LSE) and Head of Research at Blockchain.com, remarked:

We are observing a strong inverse correlation between the [Renminbi] RMB’s value and bitcoin, meaning that recent RMB declines over trade tensions have been closely matched by increases in the value of bitcoin.

“Correlation Does Not Necessarily Equal Causation”

Hileman also mentioned that we “cannot be 100% certain” that the bitcoin price has been increasing due to heightened concerns regarding trade tensions and the corresponding decline in the value of the yuan. The blockchain researcher stated:

Trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation.

Hileman, who earned his Phd from LSE, revealed:

This is not the first time we’ve seen significant increases in the value of bitcoin taking place alongside yuan concerns.

He added that there’s “growing recognition of bitcoin as ‘digital gold’ and it being used as a hedge against various macroeconomic risks.”

“This Year, the Narrative Is Bitcoin, Bitcoin, Bitcoin”

According to the SCMP, bitcoin’s price may have surged recently due to the generally positive remarks made about it at the Consensus 2019 conference.

Meltem Demirors, the Chief Strategy Officer at CoinShares, a crypto treasury management firm, has also confirmed recently that the narrative this year has been mostly about Bitcoin. Demirors revealed that both institutions and retail investors are “feeling good” and are “more confident” about the long-term potential of Bitcoin and the evolving ecosystem that supports it.