While 2016 was the year of firms and governments experimenting with blockchain technology, 2017 should be the year we see use cases being proven and actually coming to market, according to Abdul Naushad, chairman and founder of PayCommerce.
“So much venture capital money has been pumped into the market that investors, stakeholders and the industry should demand to see meaningful results based on the promises and proof of concepts introduced to the market,” Naushad told Bitcoin Magazine.
According to data from CB Insights, over $1.3 billion has been invested in Bitcoin and blockchain startups since 2012, highlighting the craze surrounding the technology. In 2016, the top five largest Bitcoin and blockchain rounds accounted for $264 million in funding, representing over 60 percent of all funding to companies in the space over the period. These include Digital Asset Holdings’ $67 million funding round, Circle Internet Financial’s $60 million Series C and Blockstream’s $55 million Series A.
“It's time to challenge if these investments actually improve the ecosystem and generate real value to banks, corporates and market participants overall,” said Naushad.
Based in Edison, New Jersey, PayCommerce is a cross-border payments network that leverages distributed ledger technology to provide instant cross-border transactions in the business-to-business payments space. In the last 12 months, the company has processed $400 million worth of transactions and cleared 250 million transactions on the network. It leads a banking consortium counting more than 100 members in 83 countries.
“We are planning to grow our network 20 percent year-over-year,” Naushad said, adding that his company plans to expand in growth markets including the United Arab Emirates and Asia-Pacific.
“We are trying to become the premier global heterogeneous network — a portfolio of banks can connect to PayCommerce’s network and fully leverage the full capabilities of our products and services.”
While there has been a lot of discussion around how distributed ledger technology is disrupting capital markets, little has been said of its use in facilitating cross-border payments.
Cross-border payments represent 20 percent of total transaction volumes in the payments industry worldwide, according to the 2015 McKinsey Global Payments Map. In 2014, cross-border payment flows totaled $160 trillion, generating over $300 billion in revenue from services provided to payers and payees.
“It would be nice to see a payment-focused consortium come together,” said Naushad. “It is the year of cross-border instant payments. We hope that those with a solid, trusted, proven network will lead the way forward. It’s the year where the hype around blockchain [technology] in 2016 must be put to use.”
In this age of digital innovation, banks are paying a lot of attention to new, emerging technologies that promise greater efficiency, especially distributed ledger solutions.
Blockchain technology, a buzzword in the financial services industry, promises to revolutionize the way firms manage and share data, and has the potential to reduce banks’ infrastructure costs by 30 percent, according to Accenture.
Blockchain solutions connect banks directly across the world, allowing them to bypass existing infrastructure while providing alternative sources of settlement. A popular solution is the Ripple payment network, which has also been adopted by the likes of Standard Chartered Bank, National Australia Bank, Mizuho Financial Group, Axis Bank, Santander and UBS.