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What is the future of Blockchain in Digital Payments?

The blockchain can be defined as a large distributed database, in which it’s possible to record transactions of all kinds between the parties directly and securely and in real time, without the need for intermediaries and with total traceability. Blockchain is revolutionizing payments, modernizing traditional pay methods and legacy rails with something faster, more secure and decentralized.

Its elements are grouped into blocks, whose integrity is guaranteed by the use of cryptography thanks to hashes, unique alphanumeric codes which, once assigned to the block, allow it to be added to the block-chain in chronological order. Blockchain-based payments enable businesses to grow sales without the risk of costly fraud chargebacks, the expense of legacy pay methods or the complexity of currency exchange.

Enterprises that select to proceed with block-chain of their future for digital payments will make the move for multiple reasons, such as:

• No processing fees
• Faster processing speeds
• The technology makes it hard to falsify transactions
• No need to use personal information to complete a transaction
• Avoiding duplicate spends and false-positive failures
• Ledger copies are available across the network, eliminating data loss

Digital payment transaction is applicable for multiple domains and situations. For instance, the retail industry’s automated inventory management and manufacturing industry’s stock-management activities require digital payment handling for order processing with multiple vendors. In these situations, decentralized payment processing and digital payments systems like blockchain can reduce manual workflows with payment approvals.

Of course, “transactions” can encompass more than a financial exchange. For example, in the retail and manufacturing industry examples above, various payment transactions for ordering is often accomplished through manual processes based on stock monitoring and order management. This is a time-consuming process and can lead to duplication of efforts, changes to partner agreements and even duplicate payment transaction.

Using the blockchain platform and smart contracts, companies can automate this process based on business logic and provide a global handling mechanism to manage resources between suppliers and decentralized networks, reducing the hassle in digital payment processing worldwide between sellers and purchasers.

Smart contracts are executed in a three-stage process:

1. Monitor in small, regular intervals (for instance: every 10 minutes) and assess contract fulfillment times based on in-flow and out-flow of stock speed
2. Broadcast real-time sensor alerts and assessment feeds to all connected bodies (for instance: store checkpoints)
3. Execute the smart contract by adjusting purchase order releases through connected lever sensors (a group of validators and approvers who move the PO-processing workflow automatically)

Typically in the Fintech industry, payment transactions involve various third-party teams (for instance: regulatory bodies, sending banks, receiving banks,), each of which can cause a delay in payment processing due to validation and workflows.

A decentralized network like blockchain can eliminate this delay by engaging more than one approver across the block. For instance: Fintech SWIFT global payment transfers take 24 to 48 hours, with SWIFT message approval itself taking at least 24 hours. This can be minimized with the blockchain-based digital transfer in whom the entire global payment transfer can be completed as less than 30 minutes.

With hundreds of potential use cases, block-chain combined with IoT can solve various challenges, particularly in the digital payments arena. As companies in Fintech and other industries realize the importance of blockchain, it’s critical to research and understand its applicability to specific situations and application development scenarios.