The financial industry has been undergoing dramatic shakeups since the 2008 global economic crisis. Institutions in the sector have faced significant challenges regarding trust, reliability, and value, as customers and businesses increasingly seek alternatives for outdated traditional banking models.
As a result, blockchain technology has gained traction in recent years. Thanks to the promise of peer-to-peer transactions without any third-party support, blockchain seems set to transform the finance business entirely. Among the offerings on the table is streamlining the remittance industry.
The remittance industry has been growing exponentially, and it is expected to continue expanding in the coming years. The sector may still be troubled by inefficiencies, but with blockchain, things seem to be heading in the right direction. Individuals and companies are increasingly harnessing the technology for efficient alternatives to current remittance systems, and this points to a future when blockchain will take its place at the core of the global remittance scene.
Remittance is defined as the transfer of funds to a distant location, often a different country, either as payment or as a gift. In most cases, remittances are sent by immigrant workers to their home countries. Today, remittances are a significant part of international capital flows. They represent the largest flow of money into the developing world, even surpassing direct foreign investments and official development assistance.
Until the advent of blockchain, international payments were only made possible by two options: banks and money transfer operators (MTOs). Both of these facilitators have distinctive characteristics but when it comes to transaction fees, they speak the same language.
Banks and fintechs are considering blockchain as the backbone of a new infrastructure for cross-border payments to offer customers more efficient solutions for processing remittances. Already, these traditional finance institutions have great incentives to implement blockchain in their remittance systems. Payments on foreign exchange markets currently average $5 trillion daily, and according to a recent World Bank report, the global remittance market is geared to grow to $746 billion in 2020, up from $719 billion in 2019, and $689 billion in 2018. With numbers like these, even a tiny reduction in transaction fees can result in billions of annual savings. Innovative blockchain technologies such as PDX Coin, therefore, represent a real threat to current interbank payment systems.
PDX, a globally compliant digital currency, has been structured in such a way that it will become a leading safe-harbor tokenized store of value. PDX’s value inherent in a transferable digital token will enable holders to store and preserve wealth, and seamlessly engage in borderless financial transactions.
This innovative digital currency has the backing of underlying tangible assets, that is, physical reserves of crude oil and natural gas, and other energy assets. It offers all of the advantages of blockchain-enabled digital currencies while providing a verifiable asset base to protect its value, stability and security as a medium of exchange.
PDX Coin is designed to enable trustless intermediary-free electronic transactions between two parties. The technology uses cryptography to authenticate transactions and transfer PDX coins and other forms of information almost instantaneously, effectively closing the gap between data senders and receivers without any third-party facilitation.
PDX Coin transactions are typically managed by smart contracts, which are computer codes set to execute automatically when all pre-agree-upon terms are met. Once a transaction is passed, its ledger automatically updates itself with the latest information, which stays transparently yet immutably on the blockchain for as long as the network exists.
For remittances, PDX offers a world without intermediaries, which reduces transaction fees. It also fosters transparency among transacting parties, boosting security and eliminating the lengthy, time-consuming verification processes involved in sending and receiving money overseas.
The market opportunity for PDX and its banking operation in remittances by foreign workers in the Middle East and elsewhere is gigantic. Total current market size exceeding $550 billion with fees typically ranging from 7% to 11%, which frankly, for very poor people, is quite unfair.
PDX could do it for a fraction of that, maybe 2.5%, and share revenue with unions and employers who have their employees all sign up with the PDX system, so everyone gets a cut.
In fact, governments in originating countries will actually want to encourage the use of PDX; because, they are currently sending massive amounts of foreign exchange out of their countries, via their guest-workers, and many of them would jump at an opportunity to curb that. In the case of the UK, it amounts to 8 billion pounds (US$10.4 billion) annually, and much more in some Gulf Cooperation Council (GCC) countries.
Additionally, using PDX Coin for remittances could lower costs for global exchange houses and encourage start-ups to enter the market. Today’s international payment systems rely on a pre-funding model, which means institutions keep pre-funded accounts in the destination countries that they use to pay out a recipient when a customer makes a transfer. Pre-funded accounts are expensive to maintain since exchange companies must predict demand, which can surge around holidays in one country or hedge against currency swings.
PDX Coin can enable transactions to happen directly from end to end, almost instantly. Therefore, facilitating institutions would only need to lock up capital for a few minutes, slashing finance management costs and transferring the savings to transacting customers.
Fraud is a substantial problem in the finance sector. Because one of PDX’s primary advantages is the challenge it presents for hackers to penetrate the system, the technology is a warmly welcome gift for financial institutions. PDX is based on blockchain hence transactions are immutable, which makes fraudulent attempts to alter them futile and easy to detect.
Today, cross-border payments are facilitated through a network of correspondent money transfer providers. The lack of a central clearing system for transactions means each institution follows its procedures, making it virtually impossible to maintain transparency and consistency across the network. Moreover, transactions can only occur during business hours, which often translate to delayed remittances.
PDX Coin addresses these payment issues by recording transactions in a distributed ledger, whose copies are maintained on all computers on the network. The sender, recipient and other authorized parties can know the precise status of a transaction and track the money in real-time. And, because PDX is currently developing a crypto/fiat app for mobile devices, users won’t have to adhere to traditional banking schedules to send or receive a remittance.
Remittances are a central pillar for populations in the developing world. In Asia and Africa, remittances sent by migrant workers in first-world countries make up a large portion of many nations' GDPs. Despite the huge inflow of money, however, analysts believe that a sizeable chunk of annual remittances remains unsent because of the high transactional and regulatory fees associated with cross-border transfers.
Blockchain technology is quickly emerging as an all-around solution for safe, quick and affordable remittances. Some innovations are already taking shape in the developing world, aiming to reduce costs and increase efficiency for international payments. The Hong Kong remittance platform, Bitspark, has repeatedly expressed its desire to use blockchain technology, and the Central Bank of Papua New Guinea is exploring the possibility of using blockchain to overcome previously insurmountable technological hurdles and improve remittance services.
Blockchain application is on the rise in emerging markets, which are known for low banking penetration, high use of mobile devices, strong demand for financial services, and under-developed financial infrastructure. When bundled up, these conditions could form a powerful catalyst for the adoption of PDX Coin which will boost financial growth and inclusion across capital markets globally.
They will contribute to constant buying and selling of PDX, and hence liquidity, making PDX more attractive to the wider market well beyond simple remittances, precisely because it’s so liquid. That in turn will encourage more and more merchants to sign up, and consumers to follow.
Ultimately, this means:
• PDX will make money on the remittance fees.
• PDX will make money on the continual "float".
• PDX will enhance its liquidity profile.
• PDX will gain government support, particularly in countries where remittances represent a large part of GDP and money supply.
• And by slashing the fees and making it easy, PDX will capture huge market share, notwithstanding that all the competitors currently ripping customers off will be forced to follow suit and drastically trim their own fees to stay in business.
Although the advantages that blockchain technology offers the remittance sector are hard to ignore, some industry barriers are prolonging the journey to mainstream adoption. For starters, the worldwide economy is still largely based on fiat currencies, and crypto-fiat conversions are far from straightforward. Peer-to-peer remittances may remove the need for a bank to send money overseas, but users will likely need a third-party facilitator to convert from crypto to fiat so that they can use the funds in the real world.
Equally notable are the lack of clear regulations for blockchain-based currencies in many countries, and the typical volatility of cryptocurrencies, which arguably make them less ideal for people that merely want to transfer money from one country to another.
Nonetheless, PDX adoption will undoubtedly push regulation forward, and could offer a viable solution to crypto volatility. Additionally, PDX is committed to working with domestic and global governmental agencies, financial institutions, traders and users of commodities to develop protocols to help facilitate PDX’s adoption as a leading digital reserve currency.
These characteristics, together with a focus on transparency and regulatory compliance, position PDX Coin to be a top safe haven digital currency capable of transforming the remittance industry.
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