Binance Research analysis argues that blockchain technology could transform current payments infrastructure by enabling self-custody of digital assets and removing middlemen from transactions.
Seemingly unfazed by its inefficiencies, the payments industry has become one of the largest in the world and is estimated to generate $2.83 trillion in revenue by 2024.
The report highlighted the advantages of using cash for in-person transactions, highlighting the “unique freedom of money” it provides – a feature that modern digital payment systems do not offer.
“Without blockchain technology, there is no way to have self-custody of digital money,” Binance Research said in the report published today, highlighting the limitations of current digital payment methods.
Analysts at the cryptocurrency exchange say the current global payments system relies on a “long chain of banks and other intermediaries collecting rents,” creating inefficiencies and high costs.
Introduced in 2009 by the pseudonymous Satoshi Nakamoto, it was designed as a form of peer-to-peer electronic cash to offer the same freedom as cash transactions for digital payments.
Bitcoin's decentralized approach allows for direct transactions between individuals without financial intermediaries like banks, promoting “financial freedom, transparency, and reduced transaction costs.”
The analysis comes at a time when the cryptocurrency industry has seen major advances, including the rise of stablecoins and advancements in blockchain technology that speed up transactions and reduce costs.
Binance noted that “various Layer 1 and Layer 2 solutions have effectively reduced the bottlenecks that previously prevented the adoption of distributed ledgers for mass payment transactions.”
Despite these advances, Binance believes that the global payments industry still operates on outdated infrastructure. “The payments industry still largely operates on outdated, 50-year-old bank-linked infrastructure,” the report states.
While fintech companies like Stripe, Mastercard (NYSE:) and Visa (NYSE:) have improved the user experience, the cost of involving multiple intermediaries remains.
Binance argues that blockchain technology offers “a new set of globally enabled infrastructure pathways for payments,” which could reduce costs and speed up cross-border transactions. It cited Visa’s pilot projects, which use public blockchains to settle global payments, and products like Binance Pay, which enable peer-to-peer and cross-border transfers with lower fees.
However, Binance acknowledged that the “massive” size of the payments industry means adoption of blockchain technology will likely be gradual.
“This gives the blockchain industry the time it needs to emerge from its adolescence,” stressing the need to deal with challenges such as scalability, better user experience and unclear regulations.
