A new report issued by payments giant Ripple is investigating how blockchain technology could improve the efficiency of this lucrative sector.
In a report entitled, Big Opportunity in Small Business Payments, Ripple discusses the ways in which small and medium-sized enterprises (SMEs) could improve their cross-border payments systems by utilizing blockchain technology.
Ripple’s research highlights the lack of infrastructure in emerging markets for SMEs to conduct business-to-business cross-border (B2B) payments, even though it is a $10-$15 trillion market.
“Despite recent growth, the SME B2B cross-border payments market is stunted by lack of traditional financial services. Fees for international payments are extremely high, and in some regions, cross-border services aren’t even readily available.”
Ripple’s report adds that the involvement of intermediaries in current global payments practices makes the process complicated.
“Yet, SMEs are increasingly reliant on cross-border payments for growth, both to access new customers and to tap suppliers and outsourced employees Further, traditional global payments systems involve a lot of intermediaries – not only does this slow down payments, it also introduces more margin for error. Any lag-time between paying these suppliers and employees really impacts SMEs’ ability to maintain their business, and grow and scale.”
SMEs themselves do not believe current methods in place are suitable, with 71% of SMEs reporting that “cross-border payments are problematic.” According to Ripple, business-to-business payments take 2-5 days to settle on average, cost $30-100 or more and have a 4%-6% international payment rate error.
This is where blockchain technology could step in and improve SME cross-border payments structures, says Ripple.
“By cutting out the middlemen in the correspondent banking system, blockchain-powered payments increase speed and reduce costs for providers and SMEs.”
You can read the full report here.