The World Economic Forum predicts that by 2025, 10% of global GDP will utilize block chains or blockchain-related technology. With so many transactions stored, documented and executed in this way, it’s no surprise that hackers continuously experiment with blockchain crypto-handling in an attempt to break its security. Fintech organizations face a tough decision: divert their IT resources to blockchain platforms and solutions to prepare for the next wave of revolution, or wait for the wave to pass in an attempt to avoid security breaches and the potential bankruptcy that could result from them.
Enterprises that choose to proceed with blockchain as their future of digital payments will make the move for multiple reasons, including:
- No processing fees
- No need to use personal information to complete a transaction
- Faster processing speeds
- Avoiding duplicate spends and false-positive failures
- The technology makes it hard to falsify transactions
- Ledger copies are available across the network, eliminating data loss
Digital payment transaction is applicable to multiple domains and situations. For example, the retail industry’s automated inventory management or manufacturing industry’s stock-management activities require digital payment handling for order processing with multiple vendors. In these situations, decentralized payment processing and digital payments systems like blockchain can reduce manual workflows with payment approvals.
Of course, “transactions” can encompass more than a financial exchange. For instance, in the retail and manufacturing industry examples above, many payment transactions for ordering is often accomplished through manual processes based on stock monitoring and order management. This is a time-consuming process and can lead to duplication of efforts, changes to partner agreements, or even duplicate payment transaction.
Using a blockchain platform and smart contracts, companies can automate this process based on business logic and provide a global handling mechanism to manage resources between suppliers or decentralized networks, reducing the hassle in digital payment processing worldwide between sellers and purchasers.
Smart contracts are executed in a three-stage process:
- Monitor in small, regular intervals (e.g. every 10 minutes) and assess contract fulfillment times based on in-flow and out-flow of stock speed
- Broadcast real-time sensor alerts and assessment feeds to all connected bodies (e.g. store checkpoints)
- Execute the smart contract by adjusting purchase order releases through connected lever sensors (a group of validators and approvers who move the PO-processing workflow automatically)
Typically in the Fintech industry, payment transactions involve various third-party teams (e.g. regulatory bodies, receiving banks, sending banks), each of which can cause a delay in payment processing due to validation and workflows. A decentralized network like blockchain can eliminate this delay by engaging more than one approver across the block. For example, Fintech SWIFT global payment transfers currently take 24 to 48 hours, with SWIFT message approval itself taking at least 24 hours. This can be minimized with a blockchain-based digital transfer in which the entire global payment transfer can be completed as less as 30 minutes.
With hundreds of potential use cases, blockchain combined with IoT can solve many challenges, particularly in the digital payments arena. As companies in Fintech and other industries realize the importance of blockchain, it is critical to research and understand its applicability to specific situations and application development scenarios.