Remittances of non-resident Indians (NRIs) are vital for the daily livelihood of tens of millions of people in India to pay for things like food , the rent and other needs of the balance of payments in our country and help stimulate domestic consumption levels in India, which in turn supports many different industries and businesses. Yet, the average cost of putting money back in India it is 5.63% of each transaction, well above the Sustainable Development Target objective of 3% If you consider that India is the biggest recipient of remittances in the world (at about 4.6 trillion dollars # 39; year), the need for a more efficient method is evident for incoming remittances.
If the government is serious buildin g The Indian economy and bring prosperity to all its citizens, it needs to solve the problem of remittances. It can do this by adopting blockchain technology and digital resources for faster, lower-cost and efficient remittances.
On the basis of existing cross-border payment tracks, which are slow and outdated, the process of sending remittances to India is expensive, slow and error prone, or even bankruptcy. Payments can take three to five days to arrive and are often lacking. The longer a worker's money is locked in this remittance process, the more their payment is exposed to the volatile Forex markets. We think that people have the right to know exactly when their payment will arrive at their destination, at what exchange rate and at what cost. This is what makes blockchain. It makes international remittances real-time and easy – how easy, in fact, how to send an email.
Restructuring remittances with blockchain
Financial institutions (IFs) and payment providers are aware of the weaknesses in facilitating and receiving remittances in India, with banks such as IndusInd Bank and Yes Bank pioneering in India. adoption of blockchain technology. Blockchain technology in cross-border payments eliminates the need for corresponding banks, essentially intermediaries that help to get a payment from one country to another, allowing a sending bank to interact directly with a receiving bank at the time of starting a payment. Payments occur in real time, with end-to-end visibility in the time it takes to reach its destination, as well as the fees associated with the transaction.
Unlike traditional bank transfers such as SWIFT, payments processed via blockchain can be resolved immediately. If a receiving bank needs more information, the bidirectional messaging and regulation component incorporated in a blockchain solution such as Ripple allows you to ask the sending institution for missing information on the spot. If the payment fails, the sending bank immediately detects it. And since the need for an intermediary is removed, the fees associated with this payment can be paid for at a much lower cost.
Digital resources (sometimes called cryptocurrencies) such as XRP (an independent digital resource) can also transform the payment experience for NRIs by acting as an on-demand liquidity tool for these remittances. Liquidity provision for payments in emerging markets such as India can be both difficult, slow and expensive, while the use of XRP as a bridge resource to convert the UAE dirham into the Indian rupee requires only a few minutes, at a fraction of the cost of a traditional fiat-to-exchange of fiat
Blockchain: a turning point for India
Innovative cross-border payment solutions based on blockchain technology are not here in substitution of FIs, nor try to evade them. But the adoption of the blockchain to feed slimmer and cheaper payments can transform the economy of India. We must embrace the innovation that blockchain technology can bring to our country. The debate surrounding Blockchain as "disruptive" is overcome. Rather, we should look at how blockchain technology and digital assets like XRP can improve and improve remittance payment experience for people across the country, for the sake of our economy and well-being.
Navin Gupta is managing director (South Asia and Middle East and North Africa) at Ripple.