The digital era has brought about rapid globalization, and as a result, the demand for faster, easier and cheaper cross-border transactions has increased. Today, the global payments market is worth a whopping $2 trillion and is estimated to cross the $2.5 trillion mark within the next two years.
With such vast sums involved, you probably won't be surprised to learn that banks make huge profit margins facilitating payments. According to McKinsey & Company, each transaction yields an average of $20 for these institutions. High transaction fees, coupled with the myriad of inefficiencies associated with bureaucratic bank processes, present a compelling need for a robust payment service solution which will guarantee seamless cross-border payments.
Enter PDX Coin.
PDX Coin is a cryptocurrency that is at the core of a powerful new banking and financial services ecosystem based on encrypted and permissionless peer-to-peer (i.e. no middleman) payments and money transfers.
Read on to understand how PDX coin will transform cross-border payments.
The cryptocurrency transformation that has been sweeping across the entire finance sector seems to have some much-needed answers for the issues in the current international payment models. With cryptos, businesses and individuals can finally send funds securely, cheaply, transparently and near-instantly, from anywhere in the world.
Below are four key ways that PDX Coin can transform cross-border payments.
If you are used to sending money overseas, you very well know how expensive the transactions can get. Banks in different countries do not always have direct relationships, and that means they often turn to intermediary financial institutions to facilitate indirect transfers. Intermediary banks charge fees for their services, which are deducted from the total transfer amount, along with the monies charged by the sending and receiving banks. The World Bank places the average total cost of remittances at 7% of the funds transferred.
The primary selling feature for PDX Coin is that it does not need any intermediaries to move from one point to the next. PDX Coin exists and is managed by an autonomous, decentralized ledger called the blockchain, which executes and records transactions among members of the network in near, real-time.
Eliminating third-party facilitators can reduce the fees involved in cross-border payments dramatically. Rather than giving banks at the sending, middle, and receiving points of the process a chunk of the funds in transit, crypto users would only pay the charges levied by the operator of the decentralized ledger technology.
PayPal is another case in point. The service has greatly redefined cross-border transactions but suffers from a number of challenges especially on the consumer side. The high transaction fees charged by PayPal and shockingly bad customer service are some of the problems faced by customers.
PayPal's market cap stands at $127 billion. With $34 billion in debt added, gives an enterprise value of $161 billion, equal to $560 per active customer, for 286 million customers, which grew by 10 million in 2019 Q4 alone.
The opportunity for PDX is obvious, and this is based on just one competitor. 10% of PayPal's business alone drives $110 into the value of each PDX token.
PDX’s key advantages will include:
• Instant settlements for merchants and consumers alike. No annoying holds on funds.
• Vastly superior customer service.
• Fees a fraction of those charged by PayPal.
• Ease of use for mobile payments.
• Better security.
• Ability to transact globally, and instantly.
With sufficient long-term marketing spend; PDX will build its merchant relationships into the many millions. PayPal currently deals with 22 million merchants globally. Merchant adoption is a key driver to consumer use. Build the merchant base, the consumer follows.
A McKinsey survey reveals that cross-border payments can take between three and five days to complete, and sometimes more if multiple intermediaries are involved. Moreover, to settle each currency leg, funds need to be transferred through the sending and receiving banks’ domestic payment systems, whose operating hours can vary across international time zones.
The PDX Coin system eliminates third parties and ensures money goes straight to their recipients, saving a great deal of time. Once a payment is initiated on a blockchain network, the cryptographic validation process called hashing begins, lasting a few seconds, after which the receiving party can instantly access the funds.
The Ripple blockchain, on which the firm's cryptocoin XRP runs, boasts transaction times of as little as two seconds. On the Ethereum blockchain, Ether can be transferred within 15 seconds to four minutes. Even the Bitcoin blockchain, the oldest of the bunch, can confirm transactions within six minutes at its fastest and two hours at its slowest.
The point is, with cryptocurrencies, waiting days to receive cross-border payments can be a thing of the past.
Current cross-border models involve multiple parties to complete payments, most of which have their security problems and different standards to deal with them. The numerous touchpoints create an array of opportunities for cybercriminals to exploit, and the lack of cooperation among institutions makes it less likely for an effective security practice to be applied by everyone involved in a transaction.
The damaging Bangladesh Bank heist in 2016 saw criminals use credentials acquired from the country’s central bank to siphon $101 million via SWIFT. Such an incident is virtually impossible in a blockchain-based cross-border payments system. PDX network is decentralized and distributed across peer-to-peer connections and is synced across all devices at once. Therefore, the network does not have a single point of failure, and it cannot be altered from a single computer.
PDX records on a cross-border blockchain would also be secured via cryptography, Senders and receivers would have unique keys assigned to the transactions they make, and any alteration to the transaction records would render the key used invalid. Any malicious activity would, therefore, be immediately identified and halted.
One of the primary drivers of time and monetary losses in today’s cross-border payment structures is the verification process. Before funds can move from one account to another across the world, the banks involved must perform a series of verifications to validate the payment, a process that causes delays and requires resources.
In a crypto-based cross-border payments system, compliance is significantly simplified. A public ledger like the PDX blockchain allows a user to conceal their identity while keeping their holdings and transactions open for all to view. With an explorer and a public address, anyone can see records of all related transactions and use them to validate a user's legitimacy. In a private blockchain, this access is restricted to the participants of the network.
Analysis from the Bank of International Settlement reveals that, by enabling the open sharing of payment information across participants in a common format, the use of cryptocurrencies can reduce data discrepancies, facilitate quicker reconciliation, and save on costly manpower.
Although the financial sector has made commendable headway towards increasing the speed and reducing the cost of cross-border transactions in recent years, the demand is outpacing development. The good news, however, is that the potential to advance payment systems through cryptocurrencies is real. If cryptos continue their upward trajectory, they could ultimately deliver affordable, quick, secure, and transparent payment models that would shake up the entire banking sector.
As banks and other entities continue to extend their arms towards emerging technologies, the role of cryptocurrencies in shaping the future of cross-border payments is becoming increasingly clear.